Congressional Budget Office Director Douglas Elmendorf published a post on his blog yesterday under the headline, Federal Debt and the Risk of a Financial Crisis. It began with the following two paragraphs and featured the catchy graphic shown below right:
In fiscal crises in a number of countries around the world, investors have lost confidence in governments’ abilities to manage their budgets, and those governments have lost their ability to borrow at affordable rates. With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.
Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States.
After reading the first 140-plus words above, the rest of the piece was hard to take seriously. In fact, it reminded me of a March 5 post in which the CBO revealed that the federal deficit was $1.2 trillion higher than previously estimated. Thankfully, the post ended with a statement listing someone upon whom the director could lay blame if or when he felt the need to throw a subordinate “under the bus”:
This brief was prepared by Jonathan Huntley of CBO’s Macroeconomic Analysis Division.
I’ll end this post with a pair of editor’s notes which I hope will reach their intended recipients:
EDITOR’S NOTE TO JONATHAN HUNTLEY: When I was a college freshman, my guidance counselor mistakenly enrolled me in a senior-level macroeconomics class. Not familiar with the concept of quitting anything I started, I stuck it out and finished the class with the first “D” grade I had ever earned. The difference between me and you, however, is that I didn’t choose economics as a career. Look around! Talk to your neighbor! We’re in the midst of a crisis!
EDITOR’S NOTE TO CBO DIRECTOR ELMENDORF: Don’t listen to this man!
Hat tip: Mark Levin via Facebook