AP Headline For CBO's Awful 10-Year Projections: 'Deficit to Dip to $1.1T'

January 31st, 2012 10:03 PM

Oh joy.

Today at the Associated Press, aka the Administration's Press, in response to the Congressional Budget Office's release today of an awful 10-year baseline outlook, Andrew Taylor made sure that his first paragraph was only about the projected "dip" in the fiscal 2012 deficit, and dedicated his second paragraph to the bad things that will happen if "the Bush tax cuts" are extended and Congress fails to live within "tight" spending "caps" (when did those happen?). Towards the end he spoke of the deficit-cutting wonders ending "the Bush tax cuts" might bring about. What follows are the first two paragraphs of Taylor's report, followed by the "Bush tax cut" passage:

Federal budget deficit to dip to $1.1T, CBO says

The government will run a $1.1 trillion deficit in the fiscal year that ends in September, a slight dip from last year but still very high by any measure, according to a budget report released Tuesday.

The Congressional Budget Office report also says that annual deficits will remain in the $1 trillion range for the next several years if Bush-era tax cuts slated to expire in December are extended, as commonly assumed - and if Congress is unable to live within the tight "caps" the lawmakers themselves placed on agency budgets last year.

... The CBO report shows that the deficit dilemma would largely be solved if the tax cuts enacted in 2001 and 2003 - and renewed in 2010 through the end of this year - were allowed to lapse. Under that scenario, the deficit would drop to $585 billion in 2013 and to $220 billion in 2017.

But expiration of those tax cuts would slam the economy, CBO said, bringing growth down to a paltry 1.1 percent next year. However, the economy would quickly rebound in 2014 and beyond.

Really? Taylor does not explain exactly why that would happen, especially given the track record of how tax increases (which is what ending "the Bush tax cuts" really amounts to) fail to bring in the anticipated extra tax collections static analysis (which is primarily what CBO does, assuming no behavior change as a result of higher rates) would predict. The reason they don't is that growth (i.e., the "rebound") ends up being less than what was expected.

Taylor conveys far more certainty about the outcome than is warranted in the circumstances.

Cross-posted at BizzyBlog.com.