The problem with CBO projections

In January 2016, the Congressional Budget Office (CBO) projected economic growth for 2018 to be 2.3% and for 2019 to be 1.9%   Now the office projects that GDP will expand by 3.3% in 2018 and 2.4% in 2019, and then it will slow down.  Why would anyone believe these people's long-term projections when they are frequently so far off on their short-term projections?  Why do the media report the numbers as if they were gospel when they are just guesses?

The tax cuts for individuals and corporations are all still in effect until 2025, so why the massive slowdown after just one year of substantial growth?  Won't the extra money flowing through the private sector, being spent, invested, or saved, yield a substantial multiplier effect?

In CBO's projections, real GDP expands by 3.3 percent this year and by 2.4 percent in 2019

The CBO's Obamacare projections have a poor track record:

In 2013 CBO predicted that 24 million would be on the exchanges in 2017, but only 9.5 million are now enrolled.

In 2013, the CBO projected that 201 million would be covered by private health insurance by 2016.  The CBO's people projected that without Obamacare, 186 million would be covered.  The actual number covered in 2016 was 177 million, so why don't the media report that 9 million fewer Americans had private health care under Obama instead of reporting how great it is?  The answer is that facts are irrelevant when pushing an agenda.

Three years ago, on the eve of Obamacare's implementation, the Congressional Budget Office (CBO) projected that President Obama's centerpiece legislation would result in an average of 201 million people having private health insurance in any given month of 2016. Now that 2016 is here, the CBO says that just 177 million people, on average, will have private health insurance in any given month of this year – a shortfall of 24 million people.

Indeed, based on the CBO's own numbers, it seems possible that Obamacare has actually reduced the number of people with private health insurance.  In 2013, the CBO projected that, without Obamacare, 186 million people would be covered by private health insurance in 2016[.]

A few months ago, the CBO said the tax cuts would cost $1.5 trillion over ten years, but in its latest forecast, it is already down to saying it would cost $1 trillion over ten years.  How come these people missed by so much in a few months, and why don't the media and Democrats come out and say they were wrong when they estimated the cost?  The answer  is that they don't want the public to see the truth.

[T]he left is having a field day with the CBO's forecast that deficits under President Trump will average a trillion dollars a year for the next decade. This is supposed to be a result of Trump's tax cuts, but hold on here. The deficit forecast without the tax cuts would effectively be the same. ...

About $1 trillion of the higher borrowing over 10 years is due to the tax cut.  By the way, this is the lowest estimate for the "cost" of the tax cut we've seen: That $1 trillion revenue loss is out of almost $40 trillion of expected revenue.  That's a 2.5 percent tax cut – which is hardly the fire hose of lost revenue that is being depicted. ...

The CBO claims that the economy will experience only 1.9 percent annual growth for the next decade.  (This is up a smidgeon from its 1.8 percent prediction at the start of the Trump presidency.)  To be fair, CBO's growth estimate is in line with most of the blue-chip forecasters' estimates.

But that prediction makes no sense. GDP growth averaged 1.95 percent annually under Obama – and nearly everything he did on the economy was anti-growth.

Now we have a president who is cutting tax rates, chopping down regulations, promoting massive new energy and mineral development, reforming welfare to get people into the workforce, redesigning trade policy to get better deals for American companies and products – and this is going to only give us the measly rate of growth we had under Obama?

No.  The core principle of Trumponomics is to attain at least 3 percent growth.  Every policy is focused like a laser beam on that goal.  It's not a shot to the moon.  The average annual growth rate of the U.S. economy for the past century is about 3.3 percent.

In a recent economic analysis, Rob Arnott, founder of Research Affiliates, and I recalculated the CBO numbers based on 3 percent growth, not 1.9 percent growth.

Guess what? The debt-to-GDP ratio goes down, down, down every year.  Instead of a horrific debt-to-GDP ratio of 150 percent in 20 years, that ratio actually falls to about 50 percent – very manageable.

It is clear from previous tax cuts that the economy will grow much faster over the years when the private sector has more money to spend and invest.  It is clear from previous projections on tax cuts, growth, and big government spending programs on Obamacare that the CBO has always been biased by believing that government is the solution.  The people who work at CBO are government bureaucrats, and it seems to me that they basically forecast based on what is good for them.

It is a shame that most of the media also take the side that it is better for the government to get more money than for the private sector to have more to spend, save, and invest.

My guess is that the government will receive much more revenue because of these economy-enhancing tax cuts, and the deficits will be caused because both political parties like to buy votes with massive spending increases.  The groupthink that exists in D.C. shows how deep the swamp is and how hard it is for an outsider like Trump to fix the big government problem.

In January 2016, the Congressional Budget Office (CBO) projected economic growth for 2018 to be 2.3% and for 2019 to be 1.9%   Now the office projects that GDP will expand by 3.3% in 2018 and 2.4% in 2019, and then it will slow down.  Why would anyone believe these people's long-term projections when they are frequently so far off on their short-term projections?  Why do the media report the numbers as if they were gospel when they are just guesses?

The tax cuts for individuals and corporations are all still in effect until 2025, so why the massive slowdown after just one year of substantial growth?  Won't the extra money flowing through the private sector, being spent, invested, or saved, yield a substantial multiplier effect?

In CBO's projections, real GDP expands by 3.3 percent this year and by 2.4 percent in 2019

The CBO's Obamacare projections have a poor track record:

In 2013 CBO predicted that 24 million would be on the exchanges in 2017, but only 9.5 million are now enrolled.

In 2013, the CBO projected that 201 million would be covered by private health insurance by 2016.  The CBO's people projected that without Obamacare, 186 million would be covered.  The actual number covered in 2016 was 177 million, so why don't the media report that 9 million fewer Americans had private health care under Obama instead of reporting how great it is?  The answer is that facts are irrelevant when pushing an agenda.

Three years ago, on the eve of Obamacare's implementation, the Congressional Budget Office (CBO) projected that President Obama's centerpiece legislation would result in an average of 201 million people having private health insurance in any given month of 2016. Now that 2016 is here, the CBO says that just 177 million people, on average, will have private health insurance in any given month of this year – a shortfall of 24 million people.

Indeed, based on the CBO's own numbers, it seems possible that Obamacare has actually reduced the number of people with private health insurance.  In 2013, the CBO projected that, without Obamacare, 186 million people would be covered by private health insurance in 2016[.]

A few months ago, the CBO said the tax cuts would cost $1.5 trillion over ten years, but in its latest forecast, it is already down to saying it would cost $1 trillion over ten years.  How come these people missed by so much in a few months, and why don't the media and Democrats come out and say they were wrong when they estimated the cost?  The answer  is that they don't want the public to see the truth.

[T]he left is having a field day with the CBO's forecast that deficits under President Trump will average a trillion dollars a year for the next decade. This is supposed to be a result of Trump's tax cuts, but hold on here. The deficit forecast without the tax cuts would effectively be the same. ...

About $1 trillion of the higher borrowing over 10 years is due to the tax cut.  By the way, this is the lowest estimate for the "cost" of the tax cut we've seen: That $1 trillion revenue loss is out of almost $40 trillion of expected revenue.  That's a 2.5 percent tax cut – which is hardly the fire hose of lost revenue that is being depicted. ...

The CBO claims that the economy will experience only 1.9 percent annual growth for the next decade.  (This is up a smidgeon from its 1.8 percent prediction at the start of the Trump presidency.)  To be fair, CBO's growth estimate is in line with most of the blue-chip forecasters' estimates.

But that prediction makes no sense. GDP growth averaged 1.95 percent annually under Obama – and nearly everything he did on the economy was anti-growth.

Now we have a president who is cutting tax rates, chopping down regulations, promoting massive new energy and mineral development, reforming welfare to get people into the workforce, redesigning trade policy to get better deals for American companies and products – and this is going to only give us the measly rate of growth we had under Obama?

No.  The core principle of Trumponomics is to attain at least 3 percent growth.  Every policy is focused like a laser beam on that goal.  It's not a shot to the moon.  The average annual growth rate of the U.S. economy for the past century is about 3.3 percent.

In a recent economic analysis, Rob Arnott, founder of Research Affiliates, and I recalculated the CBO numbers based on 3 percent growth, not 1.9 percent growth.

Guess what? The debt-to-GDP ratio goes down, down, down every year.  Instead of a horrific debt-to-GDP ratio of 150 percent in 20 years, that ratio actually falls to about 50 percent – very manageable.

It is clear from previous tax cuts that the economy will grow much faster over the years when the private sector has more money to spend and invest.  It is clear from previous projections on tax cuts, growth, and big government spending programs on Obamacare that the CBO has always been biased by believing that government is the solution.  The people who work at CBO are government bureaucrats, and it seems to me that they basically forecast based on what is good for them.

It is a shame that most of the media also take the side that it is better for the government to get more money than for the private sector to have more to spend, save, and invest.

My guess is that the government will receive much more revenue because of these economy-enhancing tax cuts, and the deficits will be caused because both political parties like to buy votes with massive spending increases.  The groupthink that exists in D.C. shows how deep the swamp is and how hard it is for an outsider like Trump to fix the big government problem.