National Public Radio mired its listeners in budget deficits in the "hundreds of billions of dollars" in its discussion of the new Congressional Budget Office (CBO) budget projections this morning. Of course, this tells listeners virtually nothing. By 2017, the end of the 10-year projection period, the GDP is projected to be more than $20 trillion. At that point, a deficit in the "hundreds of billions of dollars" (e.g. $200 billion) could be less than 1 percent of GDP. This would be consistent with a declining ratio of debt to GDP and sustainable forever. On the plus side, NPR highlighted the comment of Peter Orszag, the new CBO director, that their projections show that the cost of government health care programs is projected to take up the entire federal budget by 2050. The key point is that the projected problem in the budget is health care, not an aging population driving up the cost of "Social Security and Medicare." Give Orszag credit for being clear on this, and NPR credit for passing on his comments to listeners. CBO's projections carry enormous weight in budget debates. Their numbers are considered authoritative by both the media and members of Congress. They even carry the weight of law. Congressional budget rules require that new tax and spending measures be "scored" by CBO and then must be offset by cuts and new revenue measures (also scored by CBO). For this reason, they are very important. As a sidebar, at least some readers on this blog apparently have difficulties understanding conditional statements. I often have occasion to point out seeming contradictions in projections, using a phrase like "if these projections prove accurate, then ....." Such a conditional statement is not my endorsement of the projection nor is it my prediction of the implied consequence, it is simply an analysis of the logic of a particular projection. Maybe we can save some electrons if commentators on this blog spend a few moments trying to understand this concept.
--Dean Baker
