Preparing for Obama’s 2015 Budget with a Chart and a Toy

The goal that was identified by Simpson-Bowles was to reduce the deficit as a percentage of GDP to below 3%, but what our budget projection shows is that over the course of the next ten years (or in ten years) the percentage will actually be below 2%. So we’ve made substantial progress in reducing the deficit.
- White House deputy press secretary Josh Earnest, offering a preview of Obama’s 2015 budget proposal to be unveiled tomorrow

There’s so much wrong with that statement that we won’t even bother to correct it. Nor do we plan to pick through the budget proposal to see just how they cooked the books to show a deficit below 2% of GDP in 2024.

No one really believes the numbers anyway, right?

Rather than analyzing projections that we already know are defective, we’ll try to counter the propaganda with an updated version of “The Chart That Every Taxpayer Deserves To See.”

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The Ominous Message in 2 Centuries of Global Public Finances

After our recent article showing the history of non-defense budget balances for large, developed countries, some readers wondered how our results might change with defense spending included.

Here’s a new chart showing total budget balances:

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Technical Notes for ‘Real World’ Scenario

This is an appendix for our earlier post, “Reviving the ‘Real World’ Scenario That’s Disappeared from Government Reports.”

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Reviving the ‘Real World’ Scenario That’s Disappeared from Government Reports

For 50 years or so the federal government has deliberately and to an increasing extent misstated probable future budget deficits. Democrats and Republicans are guilty. The White House is guilty. And so is Congress. Private firms that deliberately misrepresent their financial statements in this fashion would be guilty of a crime… The magnitude of the misrepresentation is breathtaking.

- Former St. Louis Federal Reserve Bank President William Poole, writing in the Wall Street Journal last April

In the op-ed excerpted above, William Poole harshly criticizes government budget projections, including those published by the Congressional Budget Office.

We’re guessing he was especially miffed with the annual budget outlook released by the CBO on February 5th.

Consider that Poole favored the “alternative scenario” that can sometimes be found deep within CBO reports and spreadsheets. This scenario corrects for at least a few of the absurd assumptions in the primary budget projections (the “baseline scenario”) that receive 99% of the media’s attention. Poole called the alternative scenario “the only truly honest and useful effort in town.”

Alas, the alternative scenario is no more – the CBO removed it from their annual outlook. Taxpayers can no longer find meaningful budget projections anywhere in the CBO’s work.

Let’s see if we can fill in the gap.

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Revisiting the Reinhart-Rogoff Kerfuffle, Part 2

This is part two of an article that was published last month in the POLICY Magazine of the Centre for Independent Studies. We updated our reporting on last year’s Reinhart-Rogoff controversy in the first part. In the second part, we explain that the real transgression in last year’s debate was the attempt by Reinhart’s and Rogoff’s foes to stifle a critical line of research. We then review a study in which we examined 63 high government debt episodes in Reinhart’s and Rogoff’s database and reached a surprising conclusion.

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Revisiting the Reinhart-Rogoff Kerfuffle and the Consequences of High Government Debt

Last September, the Centre for Independent Studies (CIS) asked us for an article updating our commentary on the Reinhart-Rogoff controversy, while combining it with one of our government debt studies.  The article appeared in the latest issue of the organization’s POLICY Magazine, which hit the newsstands in Australia last month (the CIS is based in New South Wales). Kudos to the CIS and editor Stephen Kirchner for excellent editing.  Here’s the first part of the article; we’ll post the second tomorrow.

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Technical Notes for ‘Mr. Smith’

This is an appendix for our earlier post, “Why the CBO’s Mr. Smith Has More Work To Do.”

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Why The CBO’s ‘Mr. Smith’ Has More Work To Do

mr smith

From budget projections released by the Congressional Budget Office (CBO) last week:

CBO now expects that output will fall slightly short of its potential, on average, even after the economy has largely recovered from the recent economic downturn.

Translation:

We’ve thrown in the towel on our long-time assumption that the economy never again falls into recession.

Shocker: the business cycle lives!

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Technical Notes For ‘Why The Next Global Crisis…’

If you like knowing that your faithful blogger scours obscure data sources in dark corners of libraries to bring you analysis you’re unlikely to find in the mainstream media, you’ve come to the right place. As we worked on the budget balance chart for “Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years,” one planned trip to the library became two and then three and four.

Here’s a list of the data we used, followed by some details and comments about the start dates for each country in the analysis:

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Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years

Sometime soon, we’ll take a shot at summing up our long-term economic future with just a handful of charts and research results. In the meantime, we’ve created a new chart that may be the most important piece. There are two ideas behind it:

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