CBO: Don't trust the CBO
It comes right there on the second page of CBO director Doug Elmendorf's presentation on the the long-term fiscal threat. The slide is titled "three reasons that the fiscal challenge is especially acute," and the first is that "current policy as perceived by many people would generate much larger deficits than current law as captured in CBO’s baseline."
In other words, CBO estimates don't tell the full story.
The difference between current law and current policy is the difference between what the government has said it's going to do and what it's actually likely to do. Take the Bush tax cuts. The law says they're going to expire next year. But most everyone believes that the Obama administration will extend the cuts for middle-class families. Similarly, the alternative minimum tax is supposed to hit tens of millions of new families next year. But everyone expects Congress to prevent that from happening.
CBO, however, can only use current law in its official estimates. So its estimates are too low. CBO knows this, and Elmendorf, in stronger language than is customary, is trying to tell people. He follows his warning with a graph showing the difference between current law and expected policy:
As you can see, revenues drop and spending jumps, making CBO's already grim estimates look a lot worse.
November 13, 2009; 11:25 AM ET
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