The Washington Post and CBPP’s Analysis on Stabilizing the Debt
The lead editorial in yesterday’s Washington Post argues that it’s not enough to stabilize the debt as a share of the economy (i.e., gross domestic product or GDP) over the coming decade. It says we should go farther and lower the debt-to-GDP ratio.
The debt target is certainly the subject of reasonable debate. But, in making its point, the editorial may create a misimpression about a recent analysis by CBPP’s Richard Kogan which showed that, in the aftermath of the “fiscal cliff” budget deal, we need an additional $1.4 trillion in deficit reduction to stabilize the debt over the coming decade. (We would need to do more deficit reduction for the decades that follow, which should become more feasible as we learn more about how to slow the growth of health care costs — the main driver of longer-term deficits — without reducing health care quality or impeding access to care.)
The Post suggests that the Center’s analysis is based on a rosy forecast because the forecast assumes steady economic growth and doesn’t assume the outbreak of new wars. But, there is no CBPP forecast reflected in our analysis; we simply used the Congressional Budget Office’s (CBO) economic and fiscal forecast — as such fiscal organizations as the Concord Coalition, the Bipartisan Policy Center, and the Committee for a Responsible Federal Budget, among others, do. The Post might have informed its readers of that fact.
CBO assumes steady economic growth for much of the coming decade for a sound reason. Rather than try to predict the years in which, over the coming decade, the economy will be stronger or weaker, CBO assumes economic growth rates over a decade that reflect average growth over the business cycle as a whole, including both recovery and recession years. Its forecast isn’t rosy; it’s as likely to prove too pessimistic as too optimistic — just as CBO forecasts have proved over time. (Moreover, by the Post’s logic, every CBO forecast since CBO’s creation in the mid-1970s has been a rosy one, because the forecasts assumed “steady economic growth.”)