In a recent post, Paul Krugman commented on my Wall Street Journal article published this week. He tries to go after two paragraphs in particular, but misses on both. In the next to last paragraph of the article, I argue that growing federal debt, as projected by the Congressional Budget Office (CBO), is a problem, and that it “raises uncertainty about how the debt can be brought under control.” Krugman disagrees, but if you look at the CBO projections you can see that there’s plenty to be concerned about.
Here is a chart of the numbers from the latest CBO report (The 2013 Long-Term Budget Outlook) and accompanying spreadsheet (44521-LTBOSuppData) from CBO’s web page. It shows the CBO projections of debt as a percentage of GDP under the two CBO scenarios. The projection under the extended baseline scenario is shown in red. The projection under the alternative fiscal scenario is shown in blue. (The alternative fiscal projection does not go out as far as the extended baseline for the reasons given below). Both rise well above historical experience.
One might say “don’t worry” because the projected increase is a long way off under the extended baseline. But that is not the case under the alternative fiscal scenario which CBO has been using in recent years to portray a more likely outcome.
More worrisome is that these projections have changed very little since 2009, as shown clearly in the next chart. The only real difference between the 2009 projection and the 2013 projection with the alternative fiscal scenario is that CBO has stopped reporting the numbers once they get very high.
Regarding the last paragraph, Krugman simply misses the point, which is that government policies are becoming more extreme and failing, and that this is the source of the governance crisis, rather than, as is often claimed, increasingly extreme views of the critics. As I said in my previous post on this blog, “it’s extreme policies, not extreme people“