In a recently released report
the Congressional Budget Office calculated how debt reduction with the House Budget Resolution (which just passed the House today), would affect GNP in the United States. The CBO took the spending and tax parameters from the House Budget Committee staff and computed the resulting deficit and debt. They then compared the debt path under the House budget with the debt path under their “extended alternative fiscal scenario, which is their description of current law and its most likely extensions. They then estimated the effect of the different debt levels on economic output. This is a “little” dynamic scoring in the sense that other positive effects of lower marginal tax rates and other incentives in the House budget plan are ignored.
Nevertheless, CBO reports that the reduced level of debt has large positive economic effects. I created the following “fan charts” to illustrate this.
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