Wednesday, March 10, 2010

Policy wishful thinking

What's good for the goose is apparently not always good for the gander.At least in the world of Obamanomics.I just finished reading thru the 2010 economic report from the White House council of economic advisors.Christina Romer is the council chair and she likes to play the blame Bush game as much as Obama.Here is a statement discussing the inherited problems.

"All told, the Obama Administration inherited a very different budget
outlook from the one left to the previous administration. Figure 5-5
compares the budget forecast in January 2001 (Congressional Budget Office
2001) with the budget outlook in January 2009 described above.3 In 2001,
CBO forecast a relatively bright fiscal future. After a decade of strong
growth and responsible fiscal policy, the budget was substantially in surplus,
and CBO analysts projected rising surpluses over the next decade, even
under their more pessimistic policy alternatives. Rising health care costs
would squeeze the budget only over the long term, and the retirement of the
baby boom generation was still more than a decade away. The intervening
time could have been used to pay off the national debt and accumulate substantial assets in preparation. But policymakers chose a different path.
They enacted policies that added trillions to the national debt and doubled
the size of the long-run problem. Combined with a deteriorating economic
forecast and technical reestimates, the result was a much worse budget
outlook in January 2009 than in January 2001."

She makes a point that Bush should have payed off the national debt.The whole thing.She didn't say pay it down,she said pay it off.According to her,the only reason Bush didn't pay off the entire thing is policy choices.He could have if he wanted to in his two terms.Now,when it comes to Obama,the rules have changed.Quickly paying down the debt is considered unstable and unwise fiscal policy.Lucky for us,Obama has chosen a long term gradual approach.Here is her quote.

"The actions the Administration has taken and is proposing would
reduce deficits by more than $1 trillion over the next 10 years and by even
more after that. These actions are significantly bolder steps toward deficit
reduction than any taken in decades, and they will face serious opposition by
those with vested interests. Even with these actions, however, the primary
budget is forecast to remain in deficit in 2015. And the longer-run fiscal
problem facing the country still centers on the growth of health care costs
and the aging of the population. Thus, barring a substantial and sustained
quickening of economic growth above its usual trend rate, further steps will
be needed to get the deficit down to the target in the medium and long run."

No longer do we see the urgency to address the debt.Particularly from an administration that prides itself on urgently passing every program it creates.We also have a small discrepancy from the non-partisan CBO on those projected deficits.

"(Reuters) - President Barack Obama's budget plans would rack up $9.8 trillion more debt by 2020, or $1.2 trillion more than the White House has forecast, the Congressional Budget Office said on Friday."

Christina Romer makes the point of stating the deficits will be reduced by more than a trillion in the next decade.She doesn't point out that is ANNUALLY and not cumulatively.All in the eye of the beholder.I just wonder why Bush could have completely eliminated the entire national debt with some policy changes,yet Obama can only hope to keep the annual deficits under $1 trillion dollars each year after a decade of his policies.More to come...

No comments: