 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. Today we're talking about a recent US News and World Report article that we wrote which took a look at the CBO and its propensity both to underestimate and overestimate certain things so that Congress can legislate financial concerns in the United States. We should jump in here and say CBO stands for Congressional Budget Office. These are the guys who officially come up with projections of what's going to happen to the government's tax revenues and expenses in the future. Right. And seeing as how we're explaining the CBO further, we should also say that the CBO is theoretically a nonpartisan group filled with experts in the matter, right? These are economists. They're not political hacks. So their charge is to make these projections about the federal budget. So when you hear some politicians saying something like, well, you know, the federal debt is going to be, you know, X trillion dollars 10 years from now, those numbers he's quoting are coming from the CBO. Yeah, that's right. And the CBO turns out just like just about every other government entity you can point to is woefully inaccurate when it comes to its forecasting. Woefully inaccurate. It is. To give the CBO its doom, what's going on here is by law, this Congressional Budget Office is required to assume that Congress will make no major changes in policy, taxation, spending going out into the future. So it's kind of reasonable if you think about it because really there's no way to project what Congress or the president are going to do five, 10 years in the future. So CBO just says, let's assume that the government keeps doing into the future what is doing now. And now tell me, what do you think the budget's going to be 10 years from now? Yeah, and it turns out if these are highly trained professionals who are in fact competent to do this sort of thing, that proviso renders it impossible for them. And if you want some proof, you just have to take a look because really we're only concerned with a couple of things that they do. They project on the one hand, government revenues. So how much the government will take in in the form of taxation and other fees and what have you. And then on the other hand, they project what the debt will be given what we're trying to accomplish. And over time, if you take a look at the data, they over predict revenues by 25%. On average, they're saying that revenues are going to be 25% more than they actually are. Yeah, which is just crazy. I mean, that's a math error of epic proportion. But it pales in comparison to how bad the CBO is in forecasting future debt. Because 10 years out, year after year after year, the CBO is 250% behind the curve predicting debt. Yeah. And this gets really scary when you go back and you look historically at CBO projections. So they make projections throughout the year, but let's look at the January projections that they make. Since over the past, whatever it is, 20, 25 years, CBO has made about 170 projections of what the government's debt is going to be 10 years from now. Of those 170 projections, 170 of them under-projected the federal debt. And they under-projected it by a gargantuan sum. So right now, for example, the CBO came out with their latest projection, what, a couple of weeks ago, I guess at the end of January? Yeah, that's right. And in that projection, they said by 2027, 10 years from now, the federal debt will be $30 trillion. And you look at that number, you say, oh my God, that's huge, right? Right now it's $20 trillion, which is big enough, but they're projecting $30 trillion. But here's the question, Ann. If they're wrong by the traditional margin, what will that actually be in 10 years? They say it's going to be $30 trillion, which is ridiculous. What's it really going to be? Yeah, that's the kicker. If you look back at their past projections, on average, the actual debt has been about 2.5 times what CBO projects. So if CBO is off by the same amount that it has been in the past, we're actually looking by 2027 at a federal debt of about $75 trillion. You end up with a story that looks like the following. By 2027, the federal debt is $75 trillion, and fully one-half, 50% of the government's tax revenue is going to have to go to paying the interest on that debt. But wait, there's more. That only stands if interest rates don't go up. Right, right. We're looking at something that's going to be truly catastrophic in 10 years. Yeah, yeah. Interest rates are at the lowest point they have been in the history of the country. When interest rates rise, and they will rise eventually, the question isn't if but when. We could be looking at a situation where by 2027, three-quarters of the federal tax revenue is going to pay the interest on the debt. If we're spending 75 cents on every dollar that the government takes in simply to service a gargantuan debt, that will leave exactly no money to take care of everything else. So one of the things that people are going to ask James is, what's the government practically speaking, what's it going to do? My opinion is that the government will do what governments always do under these circumstances. They'll inflate the money supply, they'll monetize the debt, and we will live with crippling inflation which will devalue everybody's money simultaneously. What if the government does something like it turns to China and says, look, we owe you a trillion dollars, let's renegotiate, let's make it half a trillion? The Chinese will tell them to go pound sand. Well, that's what creditors say. There's no deal here. So this is the good news? It's as good as the news is going to get absent anything approaching fiscal responsibility. I mean, we've said this before and I think it bears repeating. The first question that our government typically asks is what do we want? And then they go about spending money to make that happen. The first question government should ask is what can we afford? And then the government should operate within the parameters that are defined by the world of the possible. And this is something that politicians just simply hate. Well, I think that's all we have time for. Yeah. If you want to read more about this, you can check out our recent US News and World Report article linked below. You can also hit the subscribe button and catch us next week and every week when we do this. And don't forget to stop by at fee.org to see all the things the good people at fee have to offer. Thanks, James. Take it easy.