J. W. Mason — The CBO Just Handed Us Two Trillion Dollars

In their most recent 10-year budget and economic forecast, the CBO made a big change, reducing their long-run forecast of the interest rate on government bonds by almost a full percentage point, from 3.7 to 2.9. 

Most directly, the new, lower interest rate reduces expected debt payments over the next decade by $2.2 trillion. It also significantly reduces the expected debt-GDP ratio. Under the assumptions the CBO was using at the start of this year, the debt ratio under existing policy would reach 120 percent by 2040. Using the new interest rate assumption, it reaches only 106 percent. With one change of assumptions, a third of the long-run rise in the federal debt just disappeared....

The narrative shifts.

J. W. Mason's Blog
The CBO Just Handed Us Two Trillion Dollars
JW Mason | Assistant Professor of Economics, John Jay College, City University of New York

Alan Longbon — Good News: The CBO Reports The Federal Government Deficit Will Be Larger Than First Thought And Go On For Decades

Summary

• Contrary to mainstream opinion the CBO report is a positive result.
• The CBO finds that higher deficits will lead to higher and faster GDP growth and employment.
• The governement deficit is the private sector surplus and while the private sector balance remains positive and grows the likelihood of a stock market crash or recession is low.

The purpose of this report is to show the finding of the latest CBO about the Federal deficit is a good thing and should be celebrated. To produce this report an analysis of the national accounts will be used and a sectoral balance model constructed after the work of British economist Professor Wynne Godley.

First a quick review of the newly released Congressional Budget Office report.…

MMT-friendly.

Seeking Alpha
Good News: The CBO Reports The Federal Government Deficit Will Be Larger Than First Thought And Go On For DecadesAlan Longbon

Bob Bryan — CBO report says the GOP healthcare bill could throw many insurance markets into chaos

The Congressional Budget Office on Wednesday released its latest projections for the GOP healthcare bill, and one new detail showed the newest version of the bill could lead to a disaster that Republicans feared under Obamacare.

In every previous CBO score for both Obamacare and the American Health Care Act, the CBO had said the individual insurance market would remain stable.

That means the marketplaces where people who do not receive coverage through their job or a government program like Medicaid would continue to be able to purchase insurance at an affordable price.

But the final version of the GOP's American Health Care Act, the CBO said, would undermine that stability.

Business Insider
CBO report says the GOP healthcare bill could throw many insurance markets into chaos
Bob Bryan

Also

CBO says GOP healthcare bill would leave 23 million more uninsured, undermine protections for people with preexisting conditions

Jon Perr — CBO: GOP Health Care "Plans" May Not Count as "Insurance"

As Vox and The Hill among others have reported, Republicans are trying to reduce premiums by eliminating the ACA's list of 10 mandated benefits insurers must provide. These provisions regarding prescription drug coverage, hospitalization, out-patient treatment, mental health care, pregnancy and maternity care and much more not only set a baseline for insurance offerings under Obamacare, but also help spread the risk for insurers across a much larger pool of policyholders. And that, CBO warned Obamacare repealers in December, is a big problem as far as the agency is concerned...

PERRspectives
CBO: GOP Health Care "Plans" May Not Count as "Insurance"
Jon Perr

Madeleine Sheehan Perkins — The White House's estimate of coverage losses under the GOP's health care plan is even larger than the CBO

The White House ran an internal examination of the potential impacts of the American Health Care Act and found that the number of Americans who would be uninsured within 10 years could actually be closer to 26 million, not the 24 million projected by the Congressional Budget Office (CBO).

Wowsers! That's enough to give anyone political heartburn, and for some officeholders it would be walking the plank.

Business Insider
The White House's estimate of coverage losses under the GOP's health care plan is even larger than the CBO
Madeleine Sheehan Perkins

Brad DeLong — Avi Rabin-Havt: “Why Is the CBO Concocting a Phony Debt Crisis?

Been reading too much of the propaganda from the Peterson people? They are just making stuff up.

WCEG — The Equitablog
Must-read: Avi Rabin-Havt: “Why Is the CBO Concocting a Phony Debt Crisis?Brad DeLong

CBO says deficit going to grow this year as I predicted. What are all those "deficit is too small folks" going to say now?

The Congressional Budget Office is out with its new deficit projections for 2016 and they are now saying that the deficit is going to grow substantially this year.

WASHINGTON, Jan 19 (Reuters) - The U.S. budget deficit will grow sharply to $544 billion in 2016 after six years of declines, largely because of permanent tax breaks that Congress passed late last year, the Congressional Budget Office said on Tuesday. Read more.

This is what I said several times and most recently, about a week ago here.

So the question is, what are all those "deficit is too small" folks/economists going to say now? They've been wrong for 5 years, looking at the shrinking deficit. They won't change their tune, I bet. They'll stick with their stubborn ideology and just keep saying it's "still too small."

We were right the entire time here at MNE. Matt Franko, myself, looking at flows, topline gov't spending, price setting currency markets by exporters etc, and none of this, getting harder to get nonsense.

This is the place to be. By the way, the budget projections were already in my new report, Fiscal Trend Trader. Front page. Even before the CBO released its report

Ari Rabin-Havt — Why Is the CBO Concocting a Phony Debt Crisis?

Weekend reading.

A simple accounting trick is arming austerity hawks with a powerful, phony weapon.

Again the question arises, morons or complicit?

All the serious people in Washington know we have a debt problem. “Rapidly Growing Debt Threatens America’s Economic Future” blared a typical press release from Senate Budget Committee chairman Mike Enzi. “It is clear from [Congressional Budget Office] analysis that rapidly growing public sector debt threatens America’s economic future,” he said.

There’s just one problem. The numbers relied upon by Enzi and far too many others inside the Beltway, including the Congressional Budget Office itself, are completely bogus. The methodology used by the CBO to create these projections exaggerates the federal government’s long-term debt projection by as much as 440 percent, creating a phony fiscal crisis where none exists.

In reality, data provided to The Nation by Stephen Goss, chief actuary of the Social Security Administration, shows that starting in 2032 the federal government’s debt held by the public is on track to rapidly decline as a share of GDP, bottoming out at 40 percent. This is in stark contrast to the CBO’s sharply rising debt-to-GDP ratio, which peaks at 176 percent in 2090.

There’s just one problem. The numbers relied upon by Enzi and far too many others inside the Beltway, including the Congressional Budget Office itself, are completely bogus. The methodology used by the CBO to create these projections exaggerates the federal government’s long-term debt projection by as much as 440 percent, creating a phony fiscal crisis where none exists.

In reality, data provided to The Nation by Stephen Goss, chief actuary of the Social Security Administration, shows that starting in 2032 the federal government’s debt held by the public is on track to rapidly decline as a share of GDP, bottoming out at 40 percent. This is in stark contrast to the CBO’s sharply rising debt-to-GDP ratio, which peaks at 176 percent in 2090.…

The con is on.

The Nation
Why Is the CBO Concocting a Phony Debt Crisis?
Ari Rabin-Havt

I see the Dow trading back to the low, 17,000s, but not doing much after that

The U.S. stock market is in "recovery" after the irrational plunge of late last week/early this week. It's coming back as I said it would, however, I don't see the Dow going much above the low, 17,000s for now.

We're really going to have to wait until the new fiscal year and what Congress decides with respect to the debt ceiling. Failure to raise the debt ceiling will have very damaging consequences so this bounce back in the stock market could be the rally to sell if you are into shorting stocks (which I am not).

If they raise the debt ceiling and continue on the spending path that is forecast by the CBO (spending increases by $250b) then we should have another very decent year for the market.

Don't look at the deficit. It might even be a surplus in 2016. Then what are people going to say?

Fiscal snapshot: April ends with $373 billion in spending. Not bad, but some dark clouds are gathering.

Okay, so here's the end of April fiscal snapshot. It's not great news. It's not a disaster (yet), but it's not great in my opinion.

For the month of April the Federal Government spent $373 billion. That surpassed last April by $3 billion. Year-over-year Federal spending is up by $91 billion. That's the good news. We're on track at this pace to hit, almost, $4.3 trillion in total top-line spending for the fiscal year. That would be the first real increase since 2009.

That's good.

Here's the problem: Spending is stalling. Just about a month ago we were $110 billion over last year. The pace of spending over FY 2014 is slowing. This is not surprising because since mid-March Treasury has been running under  the debt ceiling constraint. These idiots in Congress still have not done anything  on the debt ceiling or the budget and who knows what kinds of measures, if any, Lew is using to pay the bills and that may not be able to last forever.

Furthermore, both CBO and OMB were predicting closer to $200 billion in spending above last year. We're coming in nowhere near that. I'm sure the morons over at Fix the Debt are elated. Jerks.

Now for the bad news (if you listen to other MMT economists). The deficit through the fiscal year so far is a paltry $252 billion. That's only 1.4% of GDP. The freakin' budget is almost in balance. The White House should be popping champagne corks, but they're too stupid to realize and also too stupid to understand that this is unequivocally NOT a good thing. Morons as well.

The top-line stall in spending is worrisome, at least to  me. Without a concomitant increase in non-government indebtedness, then it could mean trouble for the economy/stocks. Furthermore, higher private sector debt accumulation is not anything to cheer about, except maybe if you're a banker. It's just that we can go a while before debt service levels reach the tipping point, like where they were in 2007.

All data from the Daily Treasury Statement, of course. Remember, I teach a course on this, so if you want to learn how to do all this analysis and be able to read that Daily Treasury Statement then sign up for my course. It's well worth it. There's one coming up this Saturday. It's online. If you want to enroll please go to the link below.

Daily Treasury Statement course, Saturday, May 9.

David Lawder — Obama budget would shrink deficits by $1.2 trillion over 10 years: CBO

More or less guarantees the deficits over 10 years will balloon far beyond that unless the US subjected to buckling austerity. Not likely with the boomers retiring and old people vote their economic interests, and the US grand strategy of maintaining  global hegemony through endless war.

More political puffery with Democrats trying to look like more serious people than the GOP.

Reuters
Obama budget would shrink deficits by $1.2 trillion over 10 years: CBO
David Lawder

Yves Smith — Announcing (Actually, Confirming) Our Focus on the CBO’s Dubious Models and Political Bias

We've been writing about abuses of power and process at the Congressional Budget Office and will be ramping up our coverage further now that ranking member Bernie Sanders has a new team at the Budget Committee, which among other things supervises the CBO. And the CBO is going to be the subject of a major political fight over how it prepares its estimates of the economic and fiscal impact of pending legislation. As we'll discuss below, Republicans plan to mandate that the CBO use something called dynamic scoring, which has the effect of making tax cuts look far more beneficial to the economy than they are, by effectively claiming that tax cuts boost growth, which then boosts tax receipts. It would effectively institutionalize the Laffer curve, which has been widely and repeatedly debunked. As troubling as this development is, there's already a lot not to like in how the CBO operates.…

The reason that the CBO matters so much is that its estimates are taken as gospel, as unbiased, accurate, fair, and “nonpartisan”. But as we’ve demonstrated in previously posts, the CBO has repeatedly taken what amount to partisan positions and has skewed its analysis in gross violation of its own procedures to produce results that have had enormous impact on policy debates. The CBO is firmly neoliberal, which in and of itself represents a considerable bias.…

The fundamental beef of Follette and Sheiner with the CBO model is that it naively assumes past growth in health care spending as the basis for its long-term projections. The result is that it shows that trees will grow to the sky. One of the things anyone who has built forecasting models will tell you is you come up with assumptions that look reasonable and then sanity check the output (for instance, does your model say in year 10 that your revenues will be 3x what you can produce given your forecast level in plant and investment? If so, you need to make some revisions). The Fed economists point out numerous ways that the model output flies in the face of what amounts to common sense in the world of long term budget forecasting.…

Jeff Madrick notes:

The problems with the CBO are bigger than this latest brouhaha. First, they have structural and institutional problems.… 

Second, the CBO regularly makes ideological assumptions that take neo-classical propositions at face value.…

And, frankly, they often make preposterous assumptions.…

Yves:

The CBO, much like the Fed, are bastions of hidden power that lie outside democratic accountability. But the CBO’s and OMB’s clout is even less visible than that of the central bank. CBO forecasts are treated by Congress and media as gospel. The CBO is assumed to be above partisan influence. But it is partisan in a manner that is not widely understood. It is deeply neoliberal in its orientation, and often acts as a lobbyist rather than an analyst, for instance, issuing

One of the big reasons that the CBO manages to avoid criticism is that, like the private equity industry and the Fed, it shrouds itself in secrecy. It seldom makes its models public,…

The CBO also too acts too often an advocate rather than the dispassionate analyst that it is mandated to be via statute.…

Naked Capitalism
Announcing (Actually, Confirming) Our Focus on the CBO’s Dubious Models and Political Bias
Yves Smith

WaPo Watch: Dana Milbank hits a trifecta of arrogance, stupidity, and cheese

The occasionally-good Wapo writer Dana Milbank cemented his legacy as a clueless hack today, with a predictable,  awful piece on the federal "debt."  The man somehow managed to stitch together his recent European vacation (wow, glad your job writing useless columns pays you enough for that Dana!), turmoil in the Middle East, the Ice Bucket Challenge, Justin Bieber, and the recent CBO report on debt/deficits.

This guy is clearly a modern day Shakespeare, with all the talent it takes to copy-and-paste tired talking points from any of the half-dozen Pete Peterson websites. If I had tried to submit something so blatantly plagiarized back in my high school days, I'm sure I would have gotten it back with lots of red ink and a 'D-', for lack of creativity and original thought.  The fact that this guy gets paid to be so lazy is an incredible insult to people who actually have to work for a living-- many of whom, tragically, will probably believe much of what he 'wrote' in todays ragsheet column.

If the column does have one redeeming quality is that it should make obvious the outsized influence that the Congressional Budget Bullshit Office has on policymakers in Washington. Despite CBO's appalling record at predicting.....well, anything, it is taken extremely seriously by most people here. CBO also has the added advantage of being perceived as 'nonpartisan', when it is really nothing of the sort. Since its very founding, it has been run by right wing neo-liberals, regardless of what party was in control of the Congress. Both parties are constantly competing to see how low they can bow down to this unelected and unaccountable institution, and in most cases getting a "favorable" score is the overriding imperative of legislative drafting. Case in point is the ACA, which instead of being written to clearly meet a public purpose, was written with all sorts of contortions and machinations to get a "deficit-neutral" score from the Budget Gods.

And of course, I don't mean to suggest that this sort of garbage out of the Washington Compost is anything new. Just that maybe Dana's next European vacation should be permanent. Take our journalists, please!

Anyone Worried Yet? CBO "Warns" That One Indicator of Public Initiative Is Set To Rise Sharply

   (Commentary posted by Roger Erickson, hat tip to Alice Marshall)

Federal "Deficit" Is Set to Rise Sharply, CBO Warns

So? No reason to panic. Just relabel this article as "CBO Says Indicator of Public Initiative Set To Rise Sharply"

Unless taxes rise just as sharply, that also equates to "Net Private Financial Savings To Rise Sharply" - which doesn't sound so scary.

How well that rise in private liquidity is distributed is the bigger issue - which too few are talking about. If there's too much income & wealth disparity, it's very much analogous to generals hoarding all the weapons. On paper they still have an army, but in practice it's toothless. Same for an economy. If too few are allowed to hoard most of the currency, the first thing lost is national agility.

What's really happening here is that the CBO staff are Semantic Weasels and sophists, and they're crying about a nominal wolf at a fictional door. The only question savvy citizens should be answering is "WHY are they crying that."

Scott Fullwiler — CBO—Still Out of Paradigm after All These Years

The Congressional Budget Office (CBO) published its long-term deficit and national debt projections last week. These are the projections most widely cited in policy discussions about long-term “sustainability” of the national debt and entitlement programs. In this post I focus on a small but very important part of the report—the CBO’s discussion of the “Consequences of a Large and Growing Debt,” which can be found on pages 13-15. This section can be found in past reports going back several years, and hasn’t change much if it has changed at all during this time. It is also consistent with the thinking of most economists on these issues. As readers of this blog will recognize, the CBO’s analysis is “out of paradigm” in that it is inapplicable to a sovereign, currency-currency issuing government operating under flexible exchange rates such as the US, Japan, Canada, UK, Australia, etc.

I would not call it "out of paradigm" as much as being just wrong due to ignorance.

New Economic Perspectives
CBO—Still Out of Paradigm after All These Years
Scott T. Fullwiler | James A. Leach Chair in Banking and Monetary Economics and is an Associate Professor of Economics at Wartburg College

David F. Ruccio — A funny thing happened on the way to denying the existence of inequality

CBO numbers and graphics belie the supposed flattening some are claiming.

Occasional Links & Commentary
A funny thing happened on the way to denying the existence of inequality
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Sam Stein and Jeffrey Young — CBO: Obamacare Will Cost Less Than Projected, Cover 12 Million Uninsured People This Year

The Congressional Budget Office has released updated estimates on the Affordable Care Act's impact on both the budget and the health insurance industry. The findings show that the president's signature health care law is actually growing cheaper to implement, costing the government $5 billion less in 2014 than was previously projected. The law also is projected to cover more individuals than previously believed, owing, in part, to some broader workforce trends.

But a significant portion of the population will remain uninsured even with the law fully implemented. And the costs to individuals and employers, while lower than previous estimates, still provide critics of the law with ample fodder....

Even with those gains, a good chunk of the country will still lack coverage. The number of uninsured in 2014 will be 42 million people, according to the CBO. It will fall to 36 million in 2015 and 30 million in 2016 and 2017.

Most of them will remain uninsured because they will have declined coverage, the CBO said. Forty-five percent of them will have access to private insurance through the exchanges or an employer, while 20 percent will be eligible for Medicaid but will not sign up. In addition, 30 percent will be undocumented immigrants, who aren't permitted to use the health insurance exchanges or enroll in Medicaid, and 5 percent will be legal residents eligible for Medicaid but living in states that refused to expand the program under the Affordable Care Act....

The Huffington Post
CBO: Obamacare Will Cost Less Than Projected, Cover 12 Million Uninsured People This Year
Sam Stein and Jeffrey Young

Bill McBride — CBO Projection: Budget Deficit to be Smaller than Previous Forecast

The Congressional Budget Office (CBO) released their new Updated Budget Projections: 2014 to 2024. The projected budget deficits have been reduced for each of the next ten years, and the projected deficit for 2014 has been revised down from 3.0% to 2.8%.

CBO must be planning on increasing exports and domestic investment with declining domestic net saving desire. (snark)
Calculated Risk
CBO Projection: Budget Deficit to be Smaller than Previous Forecast
Bill McBride

Bill McBride — CBO Projection: Budget Deficit to be below 3% of GDP for next four years

The federal budget deficit has fallen sharply during the past few years, and it is on a path to decline further this year and next year. CBO estimates that under current law, the deficit will total $514 billion in fiscal year 2014, compared with $1.4 trillion in 2009. At that level, this year’s deficit would equal 3.0 percent of the nation’s economic output, or gross domestic product (GDP)—close to the average percentage of GDP seen during the past 40 years.

The (sort of) good news: "From a policy perspective and using these projections, further short term deficit reduction is not a priority."

Calculated Risk
CBO Projection: Budget Deficit to be below 3% of GDP for next four years
Bill McBride

With the global economy apparently contracting, NX can't be expected to add much, and it's not yet clear how green the shoots are for I, with demand constrained by stagnant income and a reluctance of consumers to go deeper in debt creating a drag on C. With G contracting that could be a problem with Y for the US and world economies.

Michael Stephens — The 0.2 Percent Solution: Some Advice for Debt Hawks

Pretty clear evidence that the objective of the debt and deficit hawks is not actually either, but rather a push to cut social spending as a matter of ideology. The economics doesn't support it, even the CBO figures.

Multiplier Effect

The 0.2 Percent Solution: Some Advice for Debt Hawks

Michael Stephens