Must-Read: : Still Crazy After All These Years: “For the past several years, the Congressional Budget Office has been offering frightening forecasts…
…about government debt growing out of control unless strong action is taken. While these forecasts have played a prominent role in policy debates, the CFE’s Jonathan Wright and Bob Barbera have for several years been arguing that those forecasts are, well, crazy. Or as the headline on Bob’s 2014 FT piece put it: ‘Forecasts of U.S. Fiscal Armageddon are Wrong.’ The key… is that the CBOs economic growth and interest rate projections jointly make no sense…. Under the CBO’s projected tepid growth projection, interest rates were highly unlikely to rise to the assumed levels….
We were glad to read in Greg Ip’s recent column that Doug Elmendorf, the CBO director responsible for those forecasts until recently, now agrees. Elmendorf and Louise Scheiner of the Hutchins Institute make the argument that:
the fact that U.S. government borrowing rates are at historical lows and likely to stay low for some time, implies spending cuts and tax increases should be delayed and smaller in size than widely believed.
It was Elmendorf’s CBO that helped stoke those widely-believed views now labelled as misguided. And as noted above, the CBO is still stoking. For the sake of coherent public policy, we hope that the CBO will listen to Elmendorf and Scheiner.