Tuesday, January 1, 2013

In 2002, CBO predicted 2012 US debt would be 7.4% of GDP. In reality, it was almost 74% of GDP

Making economic and budget predictions is hard, especially when wars, recessions, and financial crises pop up unexpectedly. Here’s the Congressional Budget Office’s ten-year budget forecast from 2002 (note that this was after the Bush tax cuts were passed):

And here’s what actually happened:

Instead of publicly-held debt as a share of GDP being a microscopic 7.4% this year, it was closer to 74% – or 72.8% to be specific (as of the August update from the CBO.)
In 2007 — the Great Recession is officially dated as starting in December of that year — the debt-GDP ratio was 37%. So a doubling of debt due to the Great Slump — the recession and its slow-growth aftermath.

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