Debt forecast: U.S. will look like Greece by 2021

As I've repeatedly stated, the CBO is neither independent, nor accurate in forecasting government finances.

And as bad as the official debt calculations are (currently $16 trillion and climbing), they are woefully understated, as I've repeatedly blogged about.  The actual debt, when applying GAAP accounting methods, is actually $222 trillion, according to Laurence Kotlikoff (Google it--I'm tired of blogging about it).

Why is there a huge discrepancy?

1) because official statistics come from the government.  And governments lie, despite claims to the contrary ("CBO is nonpartisan").

2) official debt calculations don't take into account future government liabilities (e.g. entitlement programs, such as Social Security, Medicare, Medicaid, and housing bailouts such as Fannie Mae and Freddie Mac).

http://finance.yahoo.com/news/debt-forecast-u-look-greece-040006789.html

The federal debt crossed the $16 trillion mark this week. What’s more remarkable than the number of zeros in that figure is that Washington somehow didn’t see this coming. The Congressional Budget Office is responsible for predicting the budgetary effects of policy changes. Politicians cite CBO figures when telling us what to expect in the future. But it turns out that CBO forecasts, taken out of a very limited context, aren’t very accurate.

Every January, CBO forecasts the U.S. economy for each of the subsequent 10 years. Since 1997, the agency has underestimated the yearly debt in 85 out of 110 tries.. Almost 80% of the time, the CBO produces (and politicians parrot) a ridiculously optimistic picture of the future.

Ten years ago, the CBO predicted that we’d be $7.6 trillion in debt by now. At $16 trillion, the reality is more than twice as bad. Unfortunately, that’s par for the course. Since 1997, the agency’s forecasts of the debt five or more years into the future have been 40% too low on average — even ignoring the 2008-2009 recession.

This financial house of cards was decades in the making, and it will take years to correct. Correcting the mess requires four ingredients: freer markets, sound money, restricted spending, and time.

When people are strapped for cash, they make tough choices. It’s time the government did too. We need a constitutional amendment restricting government spending to 20% of GDP or less.

As for the last ingredient, we have little time left. If our leaders do not address these matters quickly, the laws of mathematics will force a solution on us.