by Frank James
The optimistic economic assumptions in President Barack Obama's budget overview now seem like a cruel joke after yesterday's GDP report that the economy contracted by 6.2 percent in 2008's fourth-quarter.
The Obama Administration's growth assumptions are significantly rosier than forecasts by the nation's top economists, something many critics pointed out when the document was released Thursday.
The administration envisions the economy contracting just 1.2 percent this year, then growing at rates of 3.2 percent, 4.0 percent and 4.6 percent in the years 2010, 2011 and 2012 respectively.
Maybe the economy will snap back to the degree the administration assumes. But we have clearly entered a hope-for-the-best, plan-for-the-worst period in the nation's, and the world's, economic history.
An interview aired yesterday on National Public Radio's Marketplace program captured the appropriate attitude. Host Kai Ryssdal asked Barry Bosworth, an economist at the Brookings Institution about the administration's economic assumptions in light of the most recent GDP reading.
Not only is the administration probably too upbeat, Bosworth said, but it also needs to catch up with the fact that its agenda has been blasted to pieces by the economy.
The economic ship is in such shallow waters that there appears to be little maneuvering room to do much of anything else but try and navigate before we totally run aground. To that end, Bosworth suggests Obama forget about the deficits.
Of course, doing so would make it easier for Republicans to portray Obama as a fiscal profligate. And Obama is no doubt truly worried about running huge deficits.
But maybe this is one instance where Obama should agree with former Vice President Dick Cheney who once infamously said "deficits don't matter." With the economy facing its worst crisis since the Great Depression, that may be the only appropriate view right now.
Here are the relevant excerpts:
Kai Ryssdal: There is a little piece of Newtonian physics in macroeconomics. I'm thinking here about the part about every reaction having an equal and opposite reaction. Thinking about the president's budget plan too, the one that came out yesterday. The White House is expecting GDP to slow just 1.2 percent for all of this year. And then grow by more than 3 percent next year. I asked Brookings Institution economist Barry Bosworth what happens to the president's economic plan if, as seems plausible given today's numbers, we don't see that.Barry Bosworth: Well, I think that they do have a forecast that assumes that this huge crisis is going to end awfully soon. I think most outside economists would say this is going to be harder than that. If they do, they're not going to have the type of revenue that they're projecting for 2010, 2011, 2012. It's just a period of enormous uncertainty and they really don't know how much resources they're going to have available to them.
Ryssdal: What about the other big part of the president's budget plan that came out yesterday -- his plan to cut the deficit by $2 trillion over ten years. How can we do that if we have negative GDP growth this year and really weak growth next year?Bosworth: You have to have very strong growth to achieve this. I guess I would argue forget about the budget deficit for the next two years, we got to try to save the economy. Once we have a strong economy, I believe history shows it's pretty easy to reduce budget deficits.
Ryssdal: Let me ask you this, though. If we come back to you the next time gross domestic product numbers come out for the first quarter of this year, and they are equally bad or worse, how might our conversation go that day? Would you be more worried?
Bosworth: Yes. I expect them to be very bad for the first quarter. Everything I see -- the economy is still basically in freefall. I think that without an economic recovery, it's hard to go ahead with this agenda that the president had before the crisis. In his campaign he had a very well articulated program and policies that he wanted to do. And then the world got hit with an enormous shock, and everything's changed. They seem to have a bit of trouble understand the extent to which the world has changed on them and how much just dealing with the economic crisis that we're in is going to absorb all of their time.
Comments
BOs whole economic plan is based upon the European Socialist model. The % of gov't spending as compared to the GDP is approaching European numbers.
.
Also, his ten year GDP projection has growth at 4% with no recessions. Anybody want to give odds on no recessions in a ten year period?
.
2010 will look like 1994
Posted by: Terry | February 28, 2009 8:55 AM
President Obama promises to have the most open administration in US history, and promised in his address to Congress this week that he will employ new ideas as he learns them. Well, this week we read in Financial Times (Insight: Time to expose those CDOs) that the Obama team has been wrong in supposing that the nation is suffering from "irrational despondency". It turns out that the mortgage-backed bonds are in much worse shape than anybody thought. What this means is that the bold investment I support ought not to be aimed primarily at collateralizing attitude, as the Obama team has done by shoveling money at banks, but at collateralizing debt by making home mortgages good. Otherwise, up to ten million homeowners face foreclosure in 2009 as their home values fall below their mortgage debt, and plunging collateral will keep banks from extending credit.
The other news this week that can guide our way is that the median national home price fell last month to $170K. Home prices have corrected, measured by both historic trends and median household income. But they haven't stopped their downward spiral because the cause of the price collapse isn't exaggerated value, it's overstock: We have 3.7 million unsold homes, two million more than a healthy 3-4 month supply.
Thus, now is the time to correct the inventory and so end the recession: The US can commit right now to purchasing the two million homes, starting with the 770,000 currently in foreclosure. The $340 billion price tag is serious by any standards, but even if prices drop a bit more before turning, aren't we better off eating that when we sell off rather than living through the Great Depression that will come with ten million more foreclosures?
Kevin Parcell http://twomillionhomes.net
Posted by: kparcell | February 28, 2009 8:56 AM
Frank, did you mention that the costs of Afghan war is projected to remain at current levels (not increase! HOW?) and the savings from Iraq are projected from current surge cost levels to 2018 not winddown figures. Or how about the 640B new energy tax on EVERYONE! Yes I find it ironic that Obama emulates Regan: Voodoo economics with phantom cuts and that most powerful GOP woman, Rosay Scenario on growth. Same old liberal policies abet massive; spend, spend, spend, tax, tax,tax. for the nanny state!
Posted by: bubba Porter | February 28, 2009 9:17 AM
If obama had any economic knowledge or rationality, these arguments might matter. he just wants to redistribute the wealth, even if it means we are all equally miserable and even if it destroys the economy. it's what you would expect from a hard leftist/socialist-wow, maybe this paper could have mentioned that in its endorsement.
Posted by: Ed | February 28, 2009 9:22 AM
He'll keep lying to your face to keep the ether on you, better to ram his socialism down your throat without you even noticing... until he starts to get called on his specious version of reality.
-
The spending-crazed President trying to present himself as some sort of deficit-hawk, while completely ignoring the fact that he's just signed the largest spending bill in US history, is like Stalin giving a speech deploring conditions in his Siberian gulag
-
It's about time Obama got called-out on his incredulous statements and disingenous "goals". He's been writing his own story while the MSM just parrots it for far too long, and very little of it squares-up with reality. Maybe the press could do their job already, we've had enough articles on Obama's puppy-vetting process and how he likes to play basketball.
-
Obama couldn't deliver the type of temporary, targeted, and timely "stimulus" he repeatedly promised. He clearly lacks the the political stature to control Pelosi and Reid... who hit the trough hard, while bickering like siblings. - Now all three of them want to spend more... and soak the job-creating entrepreneurs and small businesses to pay for their socialist binge.
-
One could make the argument he knows his legacy will already be in tatters by 2010-2012.. and is ramming through as much of his far-left agenda as he can before the day comes when people cringe at the mere mention of his name... sure seems like it.
-
http://reaganiterepublicanresistance.blogspot.com/
Posted by: Reaganite Republican | February 28, 2009 9:38 AM
Obama is the one killing the economy with his constant drumbeat of "crisis," "catastrophe," "worst economy since the depression," etc., all of which is patently a lie. By doing so, he has struck fear into the population, causing them to cease shopping, cut spending, and losing hope in the future. Obama is a one-man wrecking crew for this country.
Posted by: Erica | February 28, 2009 10:16 AM
According to Margeret Thacther: "The problem with socialists is that eventually they run out of other peoples money".
The good socialists (liberals) are those that learn to feed off the host without killing it. The bad liberals (parasites) kill the host.
Posted by: Karl Marx | February 28, 2009 10:29 AM
This is no Swamp.
Welcome to Whine Country.
Posted by: Flo | February 28, 2009 11:21 AM
Karl Marx,
.
Here is another great quote from another great Englishman
.
"I contend that for a nation to try to tax itself into
prosperity is like a man standing in a bucket and trying to lift
himself up by the handle."
-- Winston Churchill
Posted by: Terry | February 28, 2009 12:14 PM
Franks heading: Obama's agenda upended by economy?
My heading: Obama's agenda is upending the economy?
Posted by: PG | February 28, 2009 2:19 PM
That 6.2% decline was in 2008, PG.
Posted by: Flo | February 28, 2009 7:45 PM
Flo, my comment is aimed at the present / future.
And yes, that 6.2% happened under a Democrat Congress, with a Republican President.
Remember, Congress writes the bills, not the President.
The future outlook of taxing the people who pay the highest % of the tax bill is stupid.
In these bills are programs that don't help you or me, unless you want to know why pigs smell, or have tattoo's removed etc......
I'm saying policies of fairness, don't work. I want to work (if not for myself) for someone who has taken the chance, mortgaged their home, taken out loans, gone to the venture capitalist on a Business he/she hopes to become a success and make a lot of green backs. But that person has to hire a lot of people to do this. Why wouldn't I want that business to be a success keeping me employed, compared to failing as an employer and I lose my job?
I don't care if this person becomes a million/billionaire as long as I've got my job, making me happy.
If the Gov. makes it more difficult for that business, then why should I take that risk of putting up and losing everything I own because of Gov. regulations by Congress, who haven't run a damn thing. To me Congress are a bunch of losers. They don't create jobs, they have no money. The money they do have to pay civil servants is taxpayer money from the "Private" sector.
I believe the policies that don't help create jobs being implemented in these bills, would be better off not being there.
Do I believe in tax breaks, heck yes, do I believe in responsible spending, heck yes, do I believe in the study of how a pig smells, heck no and these bills - STINK.
Here is a good link, from the 27th.
http://www.cnbc.com/id/15840232?video=1047921840&play=1
Run the Taxing Private Funds video.
What has to be remembered is this isn't about fairness, quotas, black jobs, white jobs, it's about the color of green/money.
I hope I made my point, Flo. Thank you.
Posted by: PG | March 1, 2009 1:25 PM
Well no, not really PG. Your second rant bears no connection to your first post. I thought Frank's headline made far more sense than yours. That's all.
Posted by: Flo | March 1, 2009 5:33 PM
Obama decides to raise the tax rates on the affluent by 5% and all of the sudden he's guilty of being a socialist? That's ridiculous! Raising the tax rates on the wealthy is a proven way to help pay off the national debt, as shown by Clinton's policies. What's so sad is that, although Obama's plan will actually create millions of jobs, make the U.S. more energy independant, and provide health care to millions of Americans that have been neglected, some people are still showing ingratitude. All I'm saying is give the guy a chance!
Posted by: Josh Abraham | March 1, 2009 6:11 PM
Flo, I didn't think I was ranting. I try to be as fair as I can giving you my honest thoughts, while trying not to insult anyone.
Could you please explain to me, your thoughts about my "rant". I'm always ready to be informed/corrected
Posted by: PG | March 1, 2009 6:48 PM
PG, read what Josh Abraham just posted; read some economics, such as Paul Krugman on the stimulus. It's not about creating govt. civil service jobs, it's about funding projects that employ private businesses (such as infrastructure) who then can keep people employed. And find out what's REALLY in the legislation, instead of cherry picking stuff about pigs. Why do you say the govt. is making it more difficult for business anyway?
Posted by: Flo | March 1, 2009 8:43 PM
No rant, and no answers to the question.
Disappointing.
Posted by: PG | March 2, 2009 12:17 PM
I answered your question PG. You apparently don't know how to find answers and read them.
Posted by: Flo | March 3, 2009 10:03 AM
Wow, more insults. Doesn't stop does it.
You want me to read J. A., (which I did) but didn't think it necessary to respond to him. So I will. Line by line like Obama said he would do and lied about it.
Abraham, Raising taxes on the affluent by 5% is killing the golden goose that pays the income tax for well over 60% of the people who don't pay taxes.
Creating the Govt, to take over the roll of private enterprise, is Socialism. Clinton used business and a Republican Congress.
It's sad, Obama will create millions of jobs. Because he says so doesn't make it so, how is he going to do this. Try this, Pres. PG is going to create 10's of millions of jobs. I'm not going to say how tho.
Make the US energy independent, how, again no specifics.
Healthcare to millions of Americans. I'm pleased he said Americans or legal residents, because the way it's being said is healthcare to 40 million people. Does that mean illegals as well? Or the ones who don't want it, the sick on the street that don't care, the young because, their invincible.
You didn't answer anything, you took the "Obama can say anything, and I'll believe it line". He is a Politician. So I guess he's honest.
Is there anything Obama has done, said that you don't believe in. That way I'd at least know who I'm speaking with.
But what the heck, your probably sitting back waiting for someone else to pay your bills. Someone from the top 5%. You have a nice day demanding money for those who are either illegal, or haven't worked for it.
I've tried to and still believe in being neutral, but I guess that doesn't work for died in the wool people who will believe anything. I will say one thing, he does have a nice smile doesn't he.
Oh yeah, I mentioned tax cuts, AND spending, but NOT spending on how pigs smell. You might like that but I think that money could've gone to military pay. Along with lots of other smelly things you seem to like. Give me more money to spend through tax cuts and the Govt, will get more money (right now) not years from now, and then I can pay your mortgage.
Posted by: PG | March 3, 2009 1:15 PM
PG... you said you wanted to learn; I offered some suggestions; you write back "no answers, disappointing." Your long winded posts make little sense to me. And to suggest all Obama supporters are welfare queens is insulting. Democrats work and pay taxes and fight wars. If you don't understand economics, go do some research; I tried to give you some ideas.
Posted by: Flo | March 3, 2009 5:22 PM
Yes, I took you up on your suggestion and responded to that post. I guess you didn't like it, and now I'm long winded. LOL
I can see how my response makes little sense to you because "YOU", called Obama supporters "welfare queens". Not me, and you didn't respond to anything I posted (read it).
Do a search for Democrats in this thread, YOU brought it up.
And for others reading, I understand economics, and stay neutral. Do I follow any President/Politician around without asking questions, hell no.
But it seems there are a lot who do.
To make it more understandable for you and others (who want to attack me), yep, people work and pay taxes, but not all people work and pay income taxes.
And wars, people signup to fight wars. NOT Political affiliations.
Posted by: PG | March 3, 2009 7:49 PM
PG, you said this:
"But what the heck, your probably sitting back waiting for someone else to pay your bills. Someone from the top 5%. You have a nice day demanding money for those who are either illegal, or haven't worked for it."
So you didn't use the term welfare queen; it's the same insult. It's a pathetic stereotype and a lie. As I said, Democrats work, pay taxes and fight in wars too.
I never said to respond to anyone else's post; I suggested you read it.
Posted by: Flo | March 4, 2009 8:03 AM
No your right, I didn't use the term "welfare queen" or "Democrat". You did/do.
I don't insult people like you do.
You don't want to respond to my points, just talk around them. So you enjoy yourself, and when Thanksgiving comes around, you make sure the person who makes the most money pays for everything.
You don't understand.
Done
Posted by: PG | March 4, 2009 11:05 AM
PG, you said this:
"But what the heck, your probably sitting back waiting for someone else to pay your bills. Someone from the top 5%. You have a nice day demanding money for those who are either illegal, or haven't worked for it."
That IS an insult; and a lie.
Get lost.
Posted by: Flo | March 4, 2009 12:08 PM