The Biggest Flaw In Obama’s Budget
As is typically the case, the White House’s rosy budget projections rely on getting one thing right that they have very little control over:
Mr. Obama’s budget also assumes annual economic growth of more than 4% from 2012-2014. That’s far more robust than anything this recovery has produced so far, and it is at least a percentage point higher than most private economists or the Congressional Budget Office predict.
If real economic growth turns out to be closer to the 3-3.5% range that some economists predict, or lower, than all those rose deficit numbers you’re hearing from the White House are so much nonsense.
H/T: Andrew Sullivan
It also assumes over 65% growth in federal revenues in the next four years.
“That’s far more robust than anything this recovery has produced so far, and it is at least a percentage point higher than most private economists or the Congressional Budget Office predict.”
I think the CBO forecast is 3.2% but there’s actually a growing consensus among private economic forecasters that the 2011 number will be at or in excess of 4%. So it’s by no means nonsense.
“It also assumes over 65% growth in federal revenues in the next four years.”
Since tax revenues are at the lowest share of GDP for sixty years because of the recession and Bush tax cuts it’s not unreasonable to assume sizeable jumps in revenue since they are making certain assumptions about growth (which you can disagree with but certainly are not nonsense as Doug suggests) and are allowing the Bush cuts to expire. There’s also the closure of a lot of corporate loopholes. These guys can add up.
It’s the old “rosy scenario”. They learned it from Reagan.
Overestimate revenues and underestimate spending. Do it consistently for a long time.
Isn’t there a song that opens with the line “I like dreaming….”