Thursday, February 28, 2013

FINALLY: Sequestration Analysis

CBO obfuscation can't stop Bob Murphy. He has put his exhaustive NYU econometric training to good use and writes:
Man the CBO makes it tough to figure out what absolute spending levels will be. Their analysis of the December/January budget deal–the one that spared us the horrors of the fiscal cliff–is couched as changes relative to the then-current baseline. So I took that as the August 2012 CBO Outlook, and constructed the following:

I hasten to add that the CBO is using very conservative interest rate projections, if interest rates climb much higher than they project, and I expect they will, the deficits will be much greater than depicted in Murphy's chart, even if we make the pretty dangerous assumption that the CBO is otherwise accurate with their outlay projections.

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