CBO Revises Latest Long-Term Budget Outlook

CEPR Co- Director Dean Baker issued the statement below on the CBO's
revision of its recent budget projections. More on the revisions can be
found here.

"The Congressional Budget Office (CBO)
is widely regarded as an impartial source of sound economic and policy
analysis. Both parties have come to look to the economists and analysts
at the CBO for projections and forecasts devoid of a partisan agenda.
Therefore, it is reassuring that when errors were found in the latest
Long-Term Budget Outlook released on June, 30, 2010, the CBO promptly issued a revised version correcting these mistakes.

"The issue in question concerns the
impact of deficits and debt on private investment. As discussed in a recent issue brief
from the Center for Economic and Policy Research (CEPR), the CBO's
report suggested that projected deficits would greatly reduce private
investment and lower GDP. Advocates of prompt deficit reduction had
already seized on these erroneous projections to advance their agenda.

The revision
to the Long-Term Budget Outlook shows that the effects of crowding out
are significantly smaller than in the projections released in June. As
well, the revision includes the effects of crowding out on GNP, also
discussed in the CEPR issue brief.

"By acting quickly and revising the June
projections, CBO has demonstrated that the agency is committed to
careful and thorough analysis."