| Submit your comments on this article |
| Home Front Economy |
| Who's Obama Kidding? |
| 2009-03-11 |
| In 2007, the federal budget deficit was $162 billion (1.2% of gross domestic product). For 2009, the budget deficit is projected to be 11 times larger: $1.752 trillion. This World War II-like deficit (12.3% of GDP) is not all on President Obama. Much of it is due to policies put in place by President Bush, Hank Paulson and last year's Congress. President Obama's "stimulus" bill will certainly raise the deficit, but, to be fair, it is not the predominant digger of this year's large fiscal hole. Nonetheless, contrary to the spin of big-government types, these deficits are not just temporary. In fact, the Obama administration uses every trick in the book to convert an understandable and potentially temporary budget lapse this year into a structural lack of fiscal responsibility. Despite the rosiest economic projections we have possibly ever seen, as well as one of the largest tax hikes in history, President Obama's budget fails to achieve balance at any time in the next decade. The smallest deficit (at least as far as the eye can see) will be $533 billion in 2013. This is amazing, especially when the economic growth forecast is considered. Team Obama suggests that real GDP will grow significantly faster in the years ahead than it has in the past. To top it off, that $533 billion deficit in 2013 assumes we have largely withdrawn our military from Iraq. In other words, if we look at just domestic spending, the budget deficit is growing even more rapidly. It is impossible to blame tax cuts for this situation. By 2013, the Bush tax cuts enacted in 2001 and 2003 would no longer be in place. In the Obama budget, tax revenue is expected to be 19% of GDP in 2013--a higher share of GDP than in 2007. It doesn't take a rocket scientist at this point to understand that every dime of the increase in the deficit between 2007 and 2013 is due to higher spending, not excessively low taxes on the rich. One thing to remember about all of these numbers is that they are based on a very "rosy" economic scenario. If the economy falls short of the optimistic assumptions, the deficit will be substantially larger than projected. The forecast is rosy from the get-go. The budget forecasters assumed that the economy would grow at a 3% annual rate starting in April and that real GDP would fall just 1.2% in 2009 from 2008. Then, from 2010 through 2013, the administration assumes that real GDP will grow at a 4% annual rate. To put this in perspective, that is twice as fast as the economy's 2% annual rate of growth between 2004 and 2008. This is not impossible, but the only other periods that came close to this 4% growth rate for such a prolonged period of time were in the late-1990s and mid-1980s. Forgive us for pointing this out, but both of these periods followed major shifts toward freer markets and tax cuts, not bigger government and tax hikes. There is no period in U.S. history where tax rates and the size of government both increased, and yet real GDP growth accelerated as sharply as the Obama team forecasts. If real GDP grows 1% slower on an annual basis, federal spending would be 23% of GDP in 2013, not 22%. The last time government spending was anywhere near this level, was in 1982-1983, in the wake of the worst recession in post-war history, with unemployment at 9.7%. But by 2013, according to the Obama forecast, the U.S. will be in the fourth year of recovery, with an unemployment rate at 5.2%. In other words, it is the Obama team's shift to an expanded government role in the economy and society that is boosting spending, not just spending to stimulate the economy. Deficits will remain extremely large because spending is so much above any historical ability of the economy to pay for it. And the more taxes are lifted to pay for it, the slower the economy will grow, and the less likely any economic data even remotely resembling the Obama Administration's rosy scenario will come to pass. At this point, according to the Chairman of the Senate Budget committee there are insufficient votes to get a bill through the Senate. It will be very interesting to see if enough Senators hold the line on this. If they do, we shall see how politically adept Obama really is. Will he back off and admit again "I screwed up"? Will he try and paint it into some higher enlightenment? Or will it dissolve into allegations of partisanship, another road tour and some more straw men? This is just a massive fraud. A ponzi scheme of unparallelled proportions. |
| Posted by:Omoter Speaking for Boskone7794 |