Source: Sovereign Man, by Simon Black
Recently the Congressional Budget Office published a scathing report that the US government debt-to-GDP ratio will double over the next 30-years.
Few government agencies are as blunt as the Congressional Budget Office.
In fact the agency’s report plainly states that “the prospect of such large and growing debt poses substantial risks for the nation. . .”
Echoing this sentiment, a former director of the Congressional Budget Office called the US debt:
“a serial horror story in which the greatest economic power ever to grace the globe sails directly into self-inflicted crisis, suffering and decline.”
Nearly every major superpower over the last thousand years, from the French Bourbon monarchy to the Ottoman Empire, was eventually crushed under the weight of its debt.
The CBO has been sounding the alarm bells for years warning successive administrations that there will be serious, serious consequences in the future.
The irony is that the CBO is probably being overly optimistic.
I pulled some of their older projections from several years ago, and while they nailed the trend, they totally underestimated how severe the debt crisis would be.
In January 2007, for example, the CBO issued its annual budget and economic outlook in which they made 10-year projections about the national debt.
So, 10 years ago, the CBO estimated that by 2017, the “debt held by the public” would be $4.2 trillion, which they estimated would be 24.6% of GDP.
(Note that the CBO tends to focus on “debt held by the public”, but this number is only a portion of the total national debt.)
Now it really is 2017.
So how much is the actual debt held by the public today?
$14.35 trillion, or 76.5% of GDP… more than three times what the CBO projected back in 2007.
(Bear in mind that TOTAL government debt in the US is $20 trillion, around 106% of GDP.)
In other words, the CBO’s projection was wrong by $10 TRILLION.
That’s not to take anything away from the CBO; as the old saying goes, predictions are hard, especially about the future.
The agency is clearly doing its best to objectively highlight the obvious (and dangerous) trend of rising debt levels in the Land of the Free.
Their math just happens to be off by an order of magnitude.
It’s not just the CBO either.
As I frequently write to you, each year the Board of Trustees of the various Social Security trust funds releases a report detailing the dismal finances of that program.
In the Trustees’ 2005 report, for example, they projected that the trust funds would be “fully depleted,” i.e. completely run out of money, in the year 2043, nearly four decades later.
Read More Here: A polite history of government “predictions” – Sovereign Man