This parallel world that exists only within the DC beltway and where the laws of economics don’t apply has got to be merged again with the real world we all live in as soon as possible:
Despite new estimates that say President Barack Obama’s budget would generate unsustainable large deficits averaging almost $1 trillion a year, the White House insisted Friday that the flood of red ink won’t swamp its costly agenda.
The Congressional Budget Office figures released Friday predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the administration predicted in its budget just last month.
Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.
Just feast your eyes on those statements. First – 10 years of trillion dollar deficits “won’t swamp” the “costly agenda” of the Obama administration? Really? Or is it just that the administration refuses to acknowledge the reality of the coming deficits and intends to imperil the economy to push its social agenda forward? Which is more likely true?
And how does the administration address the CBO projections?
White House budget chief Peter Orszag said that CBO’s economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve and that he remained confident that Obama’s budget, if enacted, would produce smaller deficits.
Orszag, the former director of the CBO, now finds the CBO just isn’t an entity in which we should put much stock when it comes to budget analysis – especially when it finds such budget numbers “unsustainable”. Nope. Instead we should heed the Fed – which has proven to be such an economic font of solutions in this current crisis – and unnamed “private economists” whose only claim to fame is they agree with the administration’s projections. The organization Orszag previously led suddenly has a credibility problem.
However Orszag did have to admit that if the CBO is right, well, that’s a horse of a different color:
Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama’s budget would produce deficits that could not be sustained. “Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable,” Orszag told reporters.
Of course there have been many economic analysts prior to the CBO projections who have found the administration’s projections to be very optimistic in outlying years, in fact the term “rose colored glasses” seems most apropos.
So which makes more sense to you in this particular time of financial crisis- listen to those who say your projections are too rosy and trim them back (and the deficits they produce) to ensure that should it happen as the more pessimistic projections hold, you don’t chance pushing the nation into a period of unsustainable debt, or waive them off and take the chance that you’re right and they’re not?
“Caution” seems like a very important watch-word at this point, or it should be.
Instead we’re seeing a “damn the icebergs, full speed ahead” attitude from the crew of the economic Titanic.
My favorite line from the other night’s Obama presser:
Now, just in terms of the historic record here, the Republicans were brought in early and were consulted. And you’ll remember that when we initially introduced our framework, they were pleasantly surprised and complimentary about the tax cuts that were presented in that framework. Those tax cuts are still in there. I mean, I suppose what I could have done is started off with no tax cuts, knowing that I was going to want some, and then let them take credit for all of them. And maybe that’s the lesson I learned.
Maybe that is a lesson he’s learned. Always nice to see your chief executive engaged in on-the-job training, no?
But more importantly, I enjoyed the spin. “Republicans were brought in early and were consulted”. That’s a bit of a stretch. In actuality the Republicans and Democrats were in agreement that government had to do something. And they were further in agreement with the broad outline of a stimulus package that would include a large percentage of tax cuts.
Now whether or not you agree that a stimulus package is needed or not, the point to be made here is a bunch of politicians from different sides agreeing that something must be done and one of them being pleased that the other side is considering tax cuts as a major part of that “something” does not equal being “brought in early” or being “consulted”.
That happens when the bill is written and put into final form, and as everyone know, Republicans weren’t brought in at all on that process, much less consulted. So when that final bill was trotted out and placed before the full House, with no debate, Republican voted 177-0 against it. They did so for a number of reasons, but primary among them was they had had no part in writing the bill. But of equal importance, the tax cuts that they were promised would be in the bill and comprise approximately 40% of it total, just weren’t there.
Oh the Democrats had used language to attempt to convince the Republicans and the press they were in there, but the CBO pretty well killed that meme. Look on the huge graphic which lays out the spending proposed by the House and check out the upper right hand corner where the CBO discusses the tax cuts. Its analysis reduces the Democratic claim that the bill contains 26% tax cuts down to 22%. The primary reason the CBO denies what Democrats call tax cuts is because in reality they’re tranfer payments. Approximately 100 billion dollars will go to people who don’t pay taxes in the first place. Other than among Democrats, no other rational person would call giving money to people who don’t pay taxes a “tax cut”.
So when you hear President Obama say that the framework he outlined (which supposedly contained 40% tax cuts) was met with Republican approval, he’s probably right. But when he then says, referring to those tax cuts, “they’re still in there”, he’s wrong and my guess is he knows that. But as was obvious in the press conference, he was interested in characterizing the Republcians in a negative light, again mocking them and denigrating them, while at the same time speaking out of the other side of his mouth with faint praise to escape criticism for doing so.
That is not how I define “acting presidential”.
The fact remains the level of the promised tax cuts are not in the House version of the bill. And while it is somewhat closer in the Senate bill, the reconciliation process may lower that as well. Without the level of promised tax cuts in the bill which passes out of the reconciliation process, Republicans cannot be faulted for voting against its passage. Again, that’s not to say I support a single bit of this – but I cannot fault the Republicans for not voting for it if what they were promised initially isn’t in the final bill.