CBO admits a 600 billion mistake in calculating the efect of the tax cuts - so we're talking 4.6 trillion over ten years as the net add on to the ever growing deficits just from the tax cuts ! Once you take into consideration rising interest rates ( note the 26 bps move in the ten year since 12/28/12 ) and you realize in ten years the deficit will be considerably larger than whatever the CBO says today..... Treasury will need to mint a bunch of those trillion dollar coins ! Lol

http://www.zerohedge.com/news/2013-01-04/friday-night-dump-cbo-admits-error-now-expects-another-600-billion-deficits-obama-ta

Friday Night Dump: CBO Admits Error, Now Expects Another $600 Billion In Deficits From Obama Tax Cuts

Submitted by Tyler Durden on 01/04/2013 17:59 -0500

• Budget Deficit
 
• Congressional Budget Office
 
• Gross Domestic Product
 
• Obama Administration
 
• Personal Income
 
• Reality
 
• Tax Revenue
 
• Unemployment

Two weeks ago, when we commented on the biggest farce in financial thinking at the time (promptly replaced by the even more lunatic platinum coin "idea"), namely that one of the main "spending cut" proposals of the Obama administration, amounting to $290 billion, was the assertion that the US will save hundreds of billions because, get this, interest rates are now lower than they were before. We commented as follows: "this is where one's Excel refs out, because the interest payment on Treasuries, at least in a non-banana republic, one set to see 120 debt/GDP in 3-4 years, is a function of fiscal decisions (central-planning notwithstanding), and to make the idiotic assumption that one can control interest rates for 10 years (central-planning notwithstanding), just shows what a total farce this whole exercise has become, and also shows that nobody in the administration, or the GOP for that matter, has even modeled out the resultant budget pro forma for the proposed tax hikes and budget "savings" as that would blow up said excel model immediately." We now learn that one other entity that did not fully model out the last minute Fiscal Cliffdeus ex, and especially not the recursive debt relationship in a country where half the government spending is funded by debt, is the always amusing CBO (whose epic prediction failure rate has been discussed here on numerous occasions).

It appears that they just did... after the close... on Friday. The outcome? Their initial estimate of a $4.0 trillion budget increase was wrong and when one factors in the fact that this incremental spending would have to be funded by, you guessed it, debt, debt which has interest, the full impact of the Obama tax cut rises deficits by 15% to $4.6 trillion over the next decade.

Oops.

But what's $600 billion for a nation that is now discussing idiotic gimmicks involving $1 trillion coins as a means to avoid reality.

Here is the Friday night bomb in all its glory (link):

Relative to what would have occurred under the laws previously in effect, this legislation will increase budget deficits in coming years.

Like all of CBO’s cost estimates, our estimate for this legislation shows the effects of the legislation relative to current law at the time we did the estimate. Relative to the laws in place at the end of 2012, we estimate that this legislation will reduce revenues and increase spending by a total of nearly $4.0 trillion over the 2013-2022 period. (Also like all of CBO’s cost estimates, this estimate’s numbers for the effect of changes in the tax code—which represented the bulk of the bill—were produced by the staff of the Joint Committee on Taxation. They published the details of their tax revenue estimates separately.)

From that perspective, why will the legislation increase deficits? Mostly because, under the laws previously in place, numerous tax provisions originally enacted in 2001, 2003, and 2009 would have expired. As a result, in 2013 personal income tax rates would have gone up for people at all income levels, the alternative minimum tax (AMT) would have applied to many more people, estate and gift taxes would have risen, and a number of other revenue-increasing changes in tax law would have taken effect. This legislation will prevent those changes in law from occurring or reduce their scope; hence, relative to what would have happened without the legislation, it embodies substantial tax cuts. The legislation also will boost deficits by increasing spending, mostly for refundable tax credits and unemployment compensation.

That dramatic widening of the budget deficit will increase interest payments on the federal debt, an impact that is not included in CBO’s cost estimates. The additional debt service will cost about $600 billion. Thus, if we added the estimated cost of the legislation and the related debt service to our previous baseline budget projections (which followed current law at the time), we would show additional deficits between 2013 and 2022 of roughly $4.6 trillion.

And, while tangential, here is something else rather funny: the CBO attempts to predict the GDP in 2022, in both absolute terms and relative to the prior baseline. While ludicrous, at lest they get the general direction right:

What Effect Will the Legislation Have on the Economy over the Longer Term?

Although we expect that the legislation just enacted by the Congress will lead to higher output and income in 2013 we also expect that it will lead to lower output and income later in the decade than would have occurred under prior law. The legislation lowers tax rates for many people—thereby boosting output—but it also expands budget deficits—which will reduce national saving and lower the stock of productive capital, thereby reducing output relative to what would have occurred under prior law. CBO has not estimated the longer-term economic effects of the legislation itself, but we previously estimated the economic effects of the aforementioned alternative fiscal scenario, which embodied the assumption that many policies that were in effect or had recently been in effect would be continued. Under that scenario, as described on page 37 of our Update, we estimated that real gross national product (GNP) would be 1.7 percent lower in 2022 than would have been the case under prior law. .

Remind us to look back on this post in one decade to find just how misplaced that decimal comma truly was.

* * *

Is it just us, or does it really seem like nobody is even trying to mask the fact that the iceberg has been hit head on?

And while we're talking about the one trillion coin malarkey from the Numb Nuts squad........

http://www.zerohedge.com/news/2013-01-04/putting-trillion-dollars-platinum-perspective

Putting A Trillion Dollars Of Platinum In Perspective

Submitted by Tyler Durden on 01/04/2013 14:12 -0500

• Debt Ceiling
 
• Precious Metals
 
• Reality

So you want a trillion dollar platinum coin? Ok: here are some facts:

• Platinum has traditionally been the most valuable precious metal for one simple reason: it is rare.
• It is so rare, that all the platinum ever mined could fit into a 25 cubic foot box.
• The weight of that box comes out to just over 16 tons: this is how much platinum has been mined since the start of time.
• A coin valued at $1 trillion and made out of platinum would, at today's price of $1557/ounce, weigh in at 642.3million ounces.

• 642.3 million ounces is also roughly 18 thousand tons, or about 1100 times more than all the platinum mined.

In other words, putting a coin that is worth $1 trillion in perspective to all the platinum ever mined, would look something like this:

Now, putting the sheer legal idiocy of the proposal aside, and CNBC's John Carney has written a good article about why it is indeed,legal idiocy, the simple reality is that for this retarded idea to work, there has to be some justifiability, or even remote credibility of the "legal tender" backing the value. Sadly as the chart above shows, there can't possibly be such justifiability.

Or can there?

Remember, as we said, the chart above is indicative of reality at today's prices. So if the Treasury plans on literally coming up with ridiculous laws, what is there to prevent it from merely coining a one ounce, or half an ounce, or one gram Platinum coin and assigning it the value of $1 trillion.

Sure it can. There is a problem with that, however: it is called currency devaluation and is also what FDR did with executive order 6102 when he confiscated America's gold - he basically devalued the US Dollar by well over half overnight (which, for all those curious, is the endgame in the current depression also, but we'll cross that bridge when we get to it).

In other words, when one strips away with all the rhetoric, all the advocates of this insidiously stupid idea which gets a new life every time there is a debt ceiling crisis, are doing, is arguing for a massive devaluation of the dollar: because for the trillion dollar coin idea to be even remotely plausible, the price of Platinum, and by implication the entire precious metals complex, would have to go up by a factor of some 1,100.

It also means the value of the paper US currency would have to go down by 1,100.

Which, by the way, is precisely what all those who wish for the Fed to continue funding America's unprecedented spending binge, which can never be satisfied by taxes alone,are hoping for.

And of course, they will eventually get it.