Texas Insider Report: AUSTIN Texas We are likely to soon discover that the recent deficit-reduction agreementcutting $2.1 trillion over 10 years $1 trillion of it almost immediatelywont be nearly enough to significantly reduce the debt.
Thats because of one of the key underlying assumptions used to make the debt-reduction projections: the rate of economic growth.
As The Wall Street Journal reports the Congressional Budget Office assumed GDP growth of 3.1 percent this year and 2.8 percent in 2012.
Everyone who thinks the U.S. economy will grow 3.1 percent this year stand up and be counted. Hmmm all of you seated people are correct.
If the economy remains at the current pace the GDP will grow less than 1 percentand we may actually drift into a recession. That means that the governments assumptions about tax revenue are much higher than they should be. And lower-than-projected revenues means much higher-than-expected deficits eating into the debt ceiling much faster than expected.
Thus we could find ourselves right back to square one bumping up against the debt ceiling before the 2012 electionthe one thing the president thought hed gotten from the debt-ceiling agreement.
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Todays PolicyByte was written by IPI Resident Scholar Dr. Merrill Matthews.
Texas Insider Report: AUSTIN Texas We are likely to soon discover that the recent deficit-reduction agreementcutting $2.1 trillion over 10 years $1 trillion of it almost immediatelywont be nearly enough to significantly reduce the debt.
Thats because of one of the key underlying assumptions used to make the debt-reduction projections: the rate of economic growth.
As The Wall Street Journal reports the Congressional Budget Office assumed GDP growth of 3.1 percent this year and 2.8 percent in 2012.
Everyone who thinks the U.S. economy will grow 3.1 percent this year stand up and be counted. Hmmm all of you seated people are correct.
If the economy remains at the current pace the GDP will grow less than 1 percentand we may actually drift into a recession. That means that the governments assumptions about tax revenue are much higher than they should be. And lower-than-projected revenues means much higher-than-expected deficits eating into the debt ceiling much faster than expected.
Thus we could find ourselves right back to square one bumping up against the debt ceiling before the 2012 electionthe one thing the president thought hed gotten from the debt-ceiling agreement.
*****
Todays PolicyByte was written by IPI Resident Scholar Dr. Merrill Matthews.
