The first page of The Budget and Economic Outlook: Fiscal Years 2013 to 2023 from the Congressional Budget Office contains the following summary charts that tell you quite a bit about how this group sees our future.
What’s interesting about the first chart is that it’s being interpreted in two very distinct ways. Some say, “See there! The debt is stabilizing. There’s no need to do anything more.” while others (including the CBO) conclude, “This high level of debt will restrict policy choices during any future crisis”.
A small minority (including myself) think that the lower two graphics are the more important parts of this report since, for all the wrangling over taxes, spending, and debt that go into the numerator of the debt-to-GDP equation, the denominator gets far too little attention.
There is clearly no recognition that the U.S. has come to the end of a multi-decade credit boom that has goosed both economic growth and employment. Moreover, about the only way we’ll return to “trend growth” and a 5 percent jobless rate by 2017 is to inflate an even bigger (and, ultimately, more destructive) asset bubble than what we’ve seen over the last 15 years and this is clearly not factored into any of this forecast.
