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Expect $21.7 Trillion debt by 2022 if we don’t act!
by Candice Lanier  
February 8, 2012

 Graphic: The Economic Collapse 

According to the Congressional Budget Office (CBO), the national debt will rise to $21,665 trillion by 2022. In a report released last week, it was revealed that current policies, applied by the Obama administration, will result in a 50% increase in debt held by the public and a 40% increase in intra-governmental debt held in the trust funds of entitlement programs. 

The CBO report explains that though the economy will continue to recover over the next few years, inflation and interest rates will still remain low. They predict that the price index for personal consumption expenditures (PCE) will increase by only 1.2% in 2012 and 1.3% in 2013. Rates on 10-year Treasury notes will average 2.3% in 2012 and 2.5% in 2013. The report goes on to say that “as the economy’s output approaches its potential later in the decade, inflation and interest rates will rise to more normal levels. In CBO’s projections for the 2018–2022 period, the annual change in the PCE price index averages 2.0 percent per year, and interest rates on 10-year Treasury notes average 5.0 percent.” 

The CBO’s report indicates, however, that a variety of developments could cause economic outcomes to significantly deviate from these projections. If the forces that have hindered recovery begin to recede, the economy could grow much faster than projected, for instance. Then too, if the European banking and fiscal turmoil increases, the international financial markets would be impacted which could, of course, significantly weaken the US economy. 

The CBO provides an alternative scenario, on their website: 

“Furthermore, changes in fiscal policy that diverge from the path assumed in CBO’s baseline also could have a significant impact on economic growth. Under CBO’s alternative fiscal scenario, real GDP would be noticeably higher in the next few years than it is in CBO’s baseline economic forecast. Over time, however, real GDP under that scenario would fall increasingly below the level in CBO’s baseline projections because the larger budget deficits would reduce private investment in productive capital.” 

Not everyone is convinced by the CBO’s latest projections, however. The Wall Street Journal reports that some GOP staffers, from three different Senate committees, are investigating the CBO’s oversight and disclosure of the role of Wall Street banks, in order to verify whether or not these actions have been adequately executed. The staffers are calling for more transparency, from the CBO, in conducting business with advisers so that the “role of outside interests in shaping the office’s views” can be examined. The staffers are interested in having the CBO reveal how its assessments are compiled and produced. 

This is not, the Wall Street Journal asserts, the first time tension has mounted between Republican Senate Committee staffers and senior CBO executives. There have been a few private encounters which have occured in the past few months. 

The Wall Street Journal reports: 

“Republican Budget Committee staffers are questioning the CBO about disclosures of details related to projected costs of health-care legislation and broader economic policies, say people familiar with the matter. People close to the matter say the CBO in recent months has resisted efforts by Republican staffers to obtain documents and communications stemming from the office’s views on a long-term care provision. Administration officials in mid-October declared the provision not viable, after previously supporting it.” 

In a separate inquiry, investigators working for Sen. Charles Grassley, are looking into allegations made by Lan T. Pham: 

“The ex-employee, Lan T. Pham, alleges she was terminated after 2½ months for sharing pessimistic outlooks for the banking and housing sectors in 2010, according to correspondence and other documents related to the inquiry, reviewed by The Wall Street Journal, and her lawyer, Gary J. Aguirre. Ms. Pham, 40, alleges supervisors stifled opinions that contradicted economic fixes endorsed by some on Wall Street, including research from a Morgan Stanley economist who served as a CBO adviser.” 

While the CBO did not comment on Pham’s allegations, it did provide a response, on the official CBO blog, specifically to the Wall Street Journal article which reported on the concern surrounding the CBO’s statistics: 

“CBO is responsible for providing nonpartisan and thoughtful analysis to the Congress, and we are proud that our success in carrying out that mission, for more than 35 years, is widely acknowledged both on and off Capitol Hill. We have the utmost confidence in the objectivity of our work and devote considerable time and energy to explaining the basis of our findings as clearly as we can to help Members of Congress understand the work that we do.” 

And 

“However, CBO sometimes faces tradeoffs between providing additional information about previous cost estimates and other analyses, and responding to Congress’s pressing needs for additional analysis. In 2011, CBO published multiple economic forecasts and budget projections, produced several hundred formal cost estimates and mandate statements, and released roughly a hundred studies, testimonies, and other analyses. To produce this work, CBO drew on many iterations of dozens of complex models, as well as professional judgments often developed after lengthy deliberations. Conveying the details of all of those analytic processes in a way that would be useful to outside observers is often not feasible during the fast-moving legislative process, but CBO does its best to present and explain the key elements of its analyses.” 

If the CBO is correct, however, and Obama wins a second term, at this rate at the end of that term the national debt will total $18.4 trillion, according to analysis by CNSNews.Com. To break that figure down further, it means that the national debt will have increased by $7.8 trillion during the eight years that Obama will have been president. 

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