Tuesday, May 12, 2009

Red Ink Rising

Is is time to hit the panic button yet?

The White House announced that they were adjusting upwards by $89 billion dollars the size of the debt. We are in truly uncharted territory with a bill due equal to the highest debt load our nation has ever previously carried times a factor of 4. On top of that, we have ridiculously optimistic economic predictions from the One, and a budget that, even under his predictions, is going to face huge upward pressure from social security and medicare in a decade.

This from McClatchy:

The White House on Monday projected 2009 and 2010 federal budget deficits far higher than it forecast just two and a half months ago, even as it continued to defy most experts and predict that the economy is headed for a strong comeback starting late this year.

Economists scoffed at the latest administration predictions.

"If they keep playing this game, they're going to have real credibility problems," predicted Brian Bethune, the chief U.S. financial economist at IHS Global Insight, an economic research firm.

The new administration budget said that the fiscal 2009 deficit would reach $1.84 trillion, or $89 billion more than forecast in February, while the 2010 figure now is estimated at $1.26 trillion, or $87 billion above the previous number. The fiscal 2008 deficit was $459 billion.

. . . Budget Director Peter Orszag, writing on his blog, explained that the latest changes, which are the final pieces of Obama's rollout of his $3.6 trillion fiscal 2010 budget, reflect "upward technical revisions" caused largely by lower-than-expected revenues and higher-than-anticipated costs for rescuing financial institutions.

As it has done since it took office in January, however, the administration tried to stay upbeat. Monday it offered new plans for cutting health care costs and in the new budget still maintained its February economic assumptions, which are rosier than nearly any other economists foresee.

The White House still is projecting that the nation's economy will shrink by 1.2 percent this year and increase by 3.2 percent next year. In addition, it projects that "by the end of this year," the economy will be growing at a 3.5 percent annual rate.

The nonpartisan Congressional Budget Office predicts a gross domestic product decline of 3 percent this year, but 2.9 percent growth next year, while the April consensus of 50 blue-chip private economists sees a 2.6 percent decline in 2009 and only 1.8 percent growth next year.

The administration's assumptions, Orszag said, will be revisited this summer, "the traditional point" when an administration makes such revisions.

The biggest discrepancy involves unemployment, which reached 8.9 percent last month. The White House sees the number declining to an average of 7.9 percent next year, well below the CBO's 9 percent estimate and the blue chip 9.5 percent.

"The (Obama) unemployment number is crazy," said Roberton Williams, senior fellow at the Urban Institute-Brookings Institution Tax Policy Center.

. . . Even with its more optimistic economic scenario, the administration projects record deficits for years to come. The annual deficit would drop to $512 billion by 2013, but then would begin to go up again, reaching $779 billion by 2019, as the costs of Social Security and government health care programs soar, the administration projects.

It's a grim picture, analysts said.

"Even using their . . . economic assumptions — which now appear to be out of date and overly optimistic — the administration never puts us on a stable path," said Marc Goldwein, the policy director of the nonpartisan Committee for a Responsible Federal Budget. . . .

Read the entire article. I just don't see how we can possibly overcome this without some severe constraints for many years into the future. All of this mass of spending was not on things that will create permanent jobs. It was money wasted at a time when we could ill afford to waste it. Its gone to pet projects and feeding states that have grossly mismanaged their spending for years. Add cap and trade and socialized medicine on the top of all of this and we will soon be a third world country - albeit one worthy of the third world dictator we seem to have elected.


Dinah Lord said...

It's not looking pretty out there, GW. I have to confess that I am so freaked out about the things that I am reading and seeing that I can't even bring myself to blog about it.

There's too much going on, it's happening too fast and nothing adds up.

GW said...

Yes, Dinah, I am waiting for you to jump in on some of these things, as it is your area of expertise. And yes, I am pretty sure Obama's calculator says 2+2=5. I don't see how we're going to crawl out from under this.