This presentation reviews the fiscal forecast from the Obama Administration released within the "A New Era of Responsibility" in February of 2009 and the related CBO analysis released in March of 2009.

1. Fiscal Forecasts: Obama Administration vs CBO Guy Lion 3/23/2009

3. The long term fiscal picture The CBO’s forecast suggests the Administration has greatly understated outlays (expenses). As a result, the CBO shows a far higher and rising Budget Deficit in the out years.

4. Budget Deficits in Out Years The Administration forecast shows Budget Deficits stabilizing at a somewhat sustainable 3% of GDP. The CBO shows Deficits skyrocketing from 4% to nearly 6% of GDP.

5. Federal Debt/GDP ratio While the Administration forecasts the Public Debt/GDP ratio to stabilize at 67%; the CBO forecasts this same ratio to reach 82% by 2019 and remain on a rising trajectory.

6. Net Interest/GDP The Administration forecasts Net Interest Expense/GDP to increase slowly in the out years. CBO foresees a more rapid increase in this ratio. In either cases, this ratio reaches levels much higher than the historical average (CBO: 2.2% since 1968).

7. Economic assumptions Economic assumptions do not seem that different. Both the Administration and CBO foresee a benign long term environment with moderate GDP growth, about average unemployment, and very low inflation. An exception to this statement, is the steady decline in real GDP growth for CBO. Meanwhile, the GDP growth stabilizes at a much higher level for the Administration.

8. Interest rate assumptions CBO sees 10 Year Treasury rates stabilizing 40 bp higher than the Administration. They also see 3 month T-Bills rate stabilizing 80 bp higher. Those forecasts contributes to Net Interest/GDP ratio rising faster than the Administration.