Jamie Galbraith will be happy to know that his resubmitted draft of this reply--which, believe it or not, is considerably less nasty than the one I had already responded to--has forced me to rewrite my reply, leaving out a variety of devastating rejoinders to insults that no longer appear, and taking far too much time for a lazy person such as myself. Now he seems to at least accept the legitimacy of the Congressional Budget Office. The CBO may be wrong (I haven't read Galbraith's case about this--far too lazy) but it is a professional, politically neutral organization whose assumptions surely are not obviously ridiculous.
When I described these assumptions as "reasonable," this was shorthand for a long, somewhat boring explanation I was hoping to avoid. CBO budget projections ordinarily start with a "baseline" that assumes current spending programs will remain the same, except for safely predictable demographic changes. (For example, Social Security's benefit formulas won't change, but costs will increase due to an aging population.) Several policies today, however, are unlikely to continue unchanged. So the CBO produced a second projection incorporating the expected changes. These include extension of most of George W. Bush's supposedly "temporary" tax cuts and modification of the "alternative minimum tax," which happens every year. What I meant by "reasonable" was that I used the second set of projection. When everything is so uncertain, I don't see what is so obviously ridiculous about projecting 2 percent inflation and 5 percent interest rates, as the CBO does. That would make real interest rates of 3 percent.
Yes, the national debt was higher as a percent of GDP at the end of World War II. But it was going down. Ours today is going up, and soon will equal the postwar figure of 109 percent, headed to 185 percent in 2036. At the end of World War II, furthermore, there was a huge reservoir of private savings to be tapped since big-ticket items like cars had been unavailable for several years. Hardly the case today. This is all very well known, even to people whose fathers did not run the economy during the war.