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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: The Fiscal Cliff-Solving the wrong problem||Date: 11/15/2012 9:36 AM|
|Author: MadCapitalist||Number: 408582 of 510649|
Twelve years ago the CBO projected that if no changes to tax code or spending were made, that within 10 years we would have a $6 trillion surplus. At the time the total US debt was about $5.5 trillion.
The CBO was wrong.
The Bush era tax cuts "cost" the government around $2T, $2T not counting any economic activity generated by those tax cuts. Those projections were pie-in-the-sky this-time-it's-different mentality. Shortly after the US got hamnmered by the bursting bubble and associated recession. So much for the CBO projections.
Exactly. CBO projections are not trustworthy.
"A study done by economists Kevin Kliesen and Daniel Thornton published at the start of 2012 found that CBO budget outlooks are not that reliable.
"Using CBO deficit projections over the period 1976-99, we found that the deficit projections beyond a year were unreliable. Importantly, we found that the projections were biased in the direction of underprojecting the size of the deficit or overprojecting the size of the surplus,” the duo wrote in the January/February issue of the Federal Reserve Bank of St. Louis Review."
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