What Happens When Everything That Was Supposed To Doesn’t

Last week, the CBO updated some of its calculations and methods for estimating the effects of “automatic stabilizers” on the deficit. These are Keynesian concepts whereby the government increases spending or redistribution (redundant) without discretion as the economy falls into the downside of a cycle. For the CBO’s purposes, the agency measures automatic stabilizers not on their effects, intended effects or, more accurately, lack of effects, but rather to create a baseline of the federal deficit apart from the role orthodox economics has somehow assigned.

What they find is that the deficit is set to head back to the $1 trillion level by 2022 without any economic justification for it – in other words all the government “spending” on its own. That is itself a concern, and a big one, but the more immediate apprehensions surround what happens in the actual economy long before we ever get that seriously troubled.

The economic assumptions upon which this alarming scenario plays into are all that you have seen time and again. Namely, a big economic hole starting around late 2007 and into 2008 and then nothing, followed by a sharp upturn starting at whatever point the CBO’s estimates take over from current measurements. In

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