The CBO and the End of Deficit-Mania

The Congressional Budget Office hands Republicans a gift – a new projection that theorizes the effects of extendings the Bush tax rates and reversing the sequester.

The economy would be stronger in 2013: Real GDP would grow by 1.7 percent between the fourth quarter of 2012 and the fourth quarter of 2013, and the unemployment rate would be about 8 percent by the end of 2013, CBO projects.

Republicans latch onto it, right away. Majority Whip Kevin McCarthy fires off a series of tweets, warning voters that “today’s CBO report confirms @PattyMurray @SenateDems plan threatens #Jobs, triggers recession.” It’s misleading, of course, because the Senate Democrats don’t actually want to restore all the Bush tax rates. They are merely threatening to do so as leverage; Republicans, still burned from the 2011 debt fight, are characterizing that as Democrats holding the economy hostage.

But that’s the only legacy of the debt deal. No Republican seems to be concerned about the rest of the CBO’s analysis.

Under the alternative fiscal scenario [read: reversing the sequester and keeping all Bush tax rates], deficits over the 2014–2022 period would be much higher than those projected in CBO’s baseline, averaging about 5 percent of GDP rather than 1 percent. Revenues would remain below 19 percent of GDP throughout that period, and outlays would rise to more than 24 percent. Debt held by the public would climb to 90 percent of GDP by 2022—higher than at any time since shortly after World War II.

Maybe I’m just old and cranky, but didn’t we used to be gripped by panic about the debt? And… won’t we have to raise the debt limit early in 2013? Republicans aren’t actually proposing anything that would stave that off. (The Ryan plan, if enacted in full, still gives up a decade of deficits.) The debt panic is over.