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GAO Predicts that the Obama Regime's "Recovery" Actions will Only Make Matters Worse

Written by Subject: Government
GAO Reports Predict that Obama's "Recovery" Actions will Only Make Matters Worse!
The GAO (Government Accountability Office) periodically issues reports titled something like "The Nation’s Long-Term Fiscal Outlook" that attempts to predict the future economic outlook of the USA based on computer simulations. For some details on the assumptions made, see Long-Term Fiscal Simulations.I use the verb, "predict", but to be fair, I note that the government authors make a point in denying these are "predictions", but are explained thusly:  "Long-term simulations provide illustrations--not precise forecasts--of the relative fiscal outcomes associated with alternative policy paths. These simulations are not predictions of what will happen in the future as policymakers would likely take action to prevent damaging out-year fiscal consequences." (my emphasis) OK, not a problem, but I will just use the term, "predictions" for convenience.

Since these reports are updated regularly, we can look at what they predicted "Before Obama" and "After Obama". I have chosen the "January 2008 Update" and the "March 2009 Update" for this review. In both cases, the predictions are grim but the "March 2009 Update", interestingly,  is worse.

But first, let me comment on the two simulations displayed in these reports. One is called "Baseline extended" and the the other is called "Alternative simulation". GAO explains it this way:

Figure 1 shows two alternative fiscal paths. The first is “baseline extended,” which follows the Congressional Budget Office’s (CBO) January baseline estimates for the first 10 years and then simply holds revenue and spending other than large entitlement programs constant as a share of gross domestic product (GDP). The second is an alternative based on historical trends and recent policy preferences. Under these alternative assumptions, discretionary spending grows with the economy rather than inflation during the first 10 years, Medicare physician payments are not reduced as in current law, (Under the sustainable growth rate system in current law, physician payments are scheduled to be reduced by 10 percent in 2008 and 5 percent in each subsequent year through 2016) and revenues are brought down to their historical level.

It seems to me that it does not take a Rocket Scientist to see that the "Alternative simulation" is the more honest of the two. I would suspect that there are political reasons why GAO chose to call these more realistic assumptions (we are going to reduce physician payments? Give me a break!) "Alternative simulation".

One more comment on assumptions and methods of simulation and then we get to the good stuff. Notice that the charts do not show catastrophic failure -- we just smoothly and calmly keep sinking lower and lower but we never drown. Catastrophic failure is difficult to simulate for assumptions always have to be made as to what point do things collapse. This could be somewhat arbitrary. So GAO didn't do it so that leaves it up to you as to when you expect it will be all over.

Let us compare the first two charts, shown above, the first one labeled, "Unified Surpluses and Deficits as a Share of GDP under Alternative Fiscal Policy Simulations" (from January 2008) and the second one labeled, "Unified Deficits as a Share of GDP Under the Two Fiscal Policy Simulations" (from March 2009). Note the -- profound -- change in wording: "Surpluses" is not mentioned in the second label for there aren't any!

Note also that in the 2008 chart, things were starting to get better from 2004 to 2018. Sadly, we see in the 2009 chart that the predicted improvement simply vanished -- it was replaced by a massive drop in 2009 -- and things got worse from there after a brief  "short term" upswing.

For reference as to when things might collapse, let us chose the handy "-20 percent of GDP" line and compare. Before Obama, the "collapse" was about 2047 -- after Obama, it is predicted to be about 2041. Of course these are just relative numbers but are of value for planning purposes :-).

Let us make one more comparison of one more pair of charts and I will leave the rest up to you --  for it is very easy to download and peruse these reports.

Again, the charts are labeled slightly different but I believe they represent the same assumptions. The 2008 chart (labeled Figure 6) and the 2009 chart (in color) show that by 2040, revenue to the Federal Government will be only about half of the spending -- the 2009 chart is very slightly worse. But the point is, it is worse not better as you may have been led to believe. For Obama and his spokespersons claim that the massive hit we take to our fiscal situation is just "short term" -- that in the long term, all will be better. Apparently GAO was not able to come up with that conclusion, using real number and real trends!

As your homework assignment, I leave to you to predict when the country will actually go down the toilet.

Leon Felkins
Major, US Army (Retired)

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