New fiscal fiction out from CBO

Science fiction, of course, is a genre of literature mastered by writers such as Jules Verne and H.G. Wells.  Today, there is a new genre I call "fiscal fiction", in which writers fantasize about a better future.  The new CBO report is a prime example of this.  They believe that the deficit will drop to $845 billion in FY 2013, and drop to as low as $430 bn in 2015 before rising again.  This is accomplished primarily by revenues increasing 38% over the next 3 years.  In other words, a pot of gold will magically appear.

The purpose of fiction is 1) to make us feel better, 2) to imagine a different world, and 3) to escape from the harsh reality of the present, and 4) maybe even to provide some laughs.  This fits the bill perfectly.

But I think I could write better fiction than this.  Since we are fantasizing, how about making revenues increase by 55% over the next 3 years, which would make the deficit disappear?

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See also: http://brucekrasting.com/cbo-everything-is-going-to-be-really-really-great/

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Here are some interesting tidbits hidden in the report:

"The interest rate on 3-month Treasury bills—which has hovered near zero for the past several years—is expected to climb to 4 percent by the end of 2017, and the rate on 10-year Treasury notes is projected to rise from 2.1 percent in 2013 to 5.2 percent in 2017.  ... Beyond 2015, CBO expects remittances from the Federal Reserve to decline, falling to zero between 2018 and 2020. That drop reflects expected sales of assets by the Federal Reserve as the economy grows to near its potential, which would generate capital losses as interest rates rise. ... The Federal Reserve’s remittances would not drop below zero. Rather, the net losses that CBO projects for 2018 and 2019 would be carried forward and netted against future payments. ... Debt that is high by historical standards and heading higher will have significant consequences for the budget and the economy: The nation’s net interest costs will be very high (after interest rates return to more normal levels) and rising. Higher costs for interest eventually will require the government to raise taxes, reduce benefits and services, or undertake some combination of those two actions."

So even in this work of fiction, a "crisis point" is predicted in 2018, when short-term interest rates climb to 4%, and net interest increases to more than $500 bn per year.

How convenient.  So we can party for the next 4 years, and let the new occupant of the White House clean up the mess.  But who cares, that is 4 years away, an eternity.  Let's eat drink and be merry, for tomorrow we shall die!