BULLETIN >> U.S. FEDERAL DEFICIT SHRINKS TO $53 BLN IN JULY

Your post was well stated. Forgive my picking at it-- we all tend to ignore the all the white milk in the glass and focus on a tiny little black speck in it.

Washington's debt% projections suffer from two problems that I know of. One is that solutions (like approving changes in Social Security) are left out so the need for approval can seem more pressing. Another problem is that the costs of approved measures ("I promise to provide 1,000 new law enforcement officers on every street") are put off for later years so the benefit can be realized now, and the cost can be borne by future administrations ("the new administration has already viciously cut many needed programs...").

I feel much more comfortable with basing my own projections on past experience. Example-- annual stock returns have been 10% for the past 200 years, so I'll invest my life savings assuming that the next 20 years to be similar. It's possible that debt% might hang at 67% for a few years at the end of the decade (re post 320). If that were the only factor then I could reasonably expect the economy of this decade to be like that of the last. Then again, it might fall to 37% (re post 314). I don't know which way it will go but what I do know is that if the American economy can take what got dished out in the twentieth century, it sure as hell ought to be able to handle what's coming up in this one.

You are confusing GNP and GDP.

Your post was well stated. Forgive my picking at it-- we all tend to ignore the all the white milk in the glass and focus on a tiny little black speck in it.

Washington's debt% projections suffer from two problems that I know of. One is that solutions (like approving changes in Social Security) are left out so the need for approval can seem more pressing. Another problem is that the costs of approved measures ("I promise to provide 1,000 new law enforcement officers on every street") are put off for later years so the benefit can be realized now, and the cost can be borne by future administrations ("the new administration has already viciously cut many needed programs...").

Just look at the little black speck as a bit of much-needed protein! In fact, I've looked at enough projections to be aware of many of their shortfalls. For example, the 2003 U.S. Budget (released in February of 2002) projected that the deficit would reach a maximum of 1 percent of GDP in 2002 (see this link). The 2004 U.S. Budget (released February 2003) increased the projected maximum to 2.8 percent of GDP in 2003, one year later (see this link). The 2005 U.S. Budget (February 2004) increased the projected maximum to 4.5 percent of GDP in 2004, again one year later (see this link). Finally, in the 2006 U.S. Budget (February 2005), the projected maximum decreased to 3.6 percent of GDP, remaining in 2004. I don't think that this was a case of purposely bad projecting. I suspect that it was largely a case of just not knowing when and at what speed the eventual recovery would occur. Of course, as soon as the recovery finally did begin, all of the supply-siders came out of the woodwork, claiming that it was due to the taxcuts.

Regarding the projections through 2010, I have heard that these are pretty optimistic projections. They depend on a virtual freezing of non-defense discretionary spending, something that Congress has, to my knowledge, never achieved. That is why I think that we need to reinstate PAYGO (which expired in 2002) so as to restore some discipline to the budget process.

I feel much more comfortable with basing my own projections on past experience. Example-- annual stock returns have been 10% for the past 200 years, so I'll invest my life savings assuming that the next 20 years to be similar. It's possible that debt% might hang at 67% for a few years at the end of the decade (re post 320). If that were the only factor then I could reasonably expect the economy of this decade to be like that of the last. Then again, it might fall to 37% (re post 314). I don't know which way it will go but what I do know is that if the American economy can take what got dished out in the twentieth century, it sure as hell ought to be able to handle what's coming up in this one.

I agree that the stock market is very likely to keep going up over the long run. However, there are some knowledgeable people who think that it's likely to slow down slightly (to about 7% a year, I think) due to the slower projected growth in the workforce. Regarding the debt, every projection that I have ever seen suggests that it will go up during the Boomer retirement. The 37% (re post 314) does not include the monies owed to the trust funds, much of which is likely to be redeemed during that retirement. In any case, I agree that the American economy can likely withstand whatever policies we currently implement. Put another way, our children can likely survive whatever mess we leave them. However, I'm sure that you would agree that that is NOT an argument for purposely leaving them a mess.

With whomever is in power.