New CBO report good for political posturing, useless for understanding economic malaise
By John Watts
This week, the non-partisan Congressional Budget Office (CBO) released a new report projecting budgetary and economic trends for the next ten years.
The CBO does not officially represent either the Democratic or Republican factions of the ruling coalition in Washington, and thus is considered “non-partisan.” However, by its very nature as a federal agency within the legislative branch, it is biased in that it represents the interest of the central government – whose interests rarely, if ever, align with the interests of the American people.
This bias is also an inherent feature of the mainstream economic methodology employed in the CBO analysis. The report gives a lot of attention to GDP (Gross Domestic Product) – which is a virtually meaningless concept despite the fashionable use of the concocted metric to analyze the health of the economy at a particular point in time.
Pseudo-scientific CBO reports have the effect of promoting what F.A. Hayek termed the “fatal conceit” – that is the belief that planners are capable of ministering to the economy.
The report basically takes current law and boldly attempts to forecast future economic conditions based on an interpretation of the effects of current budgetary measures, spending and debt levels, and tax rates.
The CBO makes a lot of ill-founded assumptions rooted in orthodox, non-Austrian, economic thinking. The result is each faction in Washington gets an official, scientific-looking set of charts and graphs and technical language they can use to further convince themselves of their own correctness.
For example, the left has found that the report confirms their irrational belief that “austerity” will hold back economic growth. Another leftist outlet has taken one paragraph in the report to make the frivolous claim that deficit-reduction has hurt the economy.
The idea that sequestration somehow constitutes “austerity” is patently absurd. The mandated “cuts” are in fact mostly mere reductions in future spending. Likewise, the assertion that reducing the federal deficit could impede economic growth is hokum. The government- any government – can only reallocate wealth to particular individuals or sectors of the economy. It cannot make everybody more prosperous, which the idea of “growing the economy” would seem to imply.
The utter refusal to make genuine cuts in spending now means that future tax increases will be necessary. That will be on top of the massive tax increases and inflation requisite to service the never-before-in-history colossal debt the government has already accumulated.
Taking seriously, the projections of CBO reports is how such inferences so widely divergent from reality can be arrived at in the media and subsequently persist among the population at large.
In reality, the average American will continue to shoulder the burdens of a chronically mismanaged economy. Their standard of living will continue to decrease as the government continues to consume and destroy massive amounts of wealth that it has not created, and the cartelized central banking system perseveres in its quest toward hyperinflation.