Deficits & Constraints

Last February I posted on the Administration's unbelievable budget numbers. I argued that the numbers coming out of the White House were, well, not to be believed. In fairness to the President, I pointed out that this was an almost universal characteristic of White House projections in any presidency.

I was right, of course. From the Wall Street Journal:

In their traditional summertime budget review, administration officials acknowledged that they relied on overly optimistic assumptions about the economy when they forecast in March that Obama's budget plans would generate deficits of $7.1 trillion over the next 10 years. After factoring in the severity of the recession and the prospect of a more sluggish recovery, the White House concluded that the budget outlook is significantly worse.

I say "of course" above not because I claim any special accuracy, but because the Administration's earlier projections were so obviously fraudulent. Obama's team is now projecting about $9 trillion in deficit spending over ten years. It is possible that economic growth will surprise everyone, and if that happens then the real numbers will be lower. It is difficult to conceive of growth that would not leave us running unprecedentedly large deficits over the next decade. If growth turns out to be more sluggish than the Administration expects, the deficits will be much larger. I predict that, short of seriously responsible reform (and fairies), we will be seeing at least ten trillion added to the federal debt over the next ten years.

Also earlier this year I was a guest on Dakota Midday with Paul Guggenheimer and retired SDSU political scientist Bob Burns, two thoughtful friends of mine. The question of healthcare reform came up, and both Paul and Bob thought it was high time for it. I had the bad grace to point out that nearly a trillion to bail out the banking system and were about to spend as much on a stimulus package. I think I pointed out (I certainly should have) that Social Security and Medicare were both about to go into the red. For decades these programs have been subsidizing general Federal spending. That is over. From now on they will suck revenue from the budget.

Another way we have been covering the deficit is by selling it to China. They got ownership of future American growth, and we got lots of cheap textiles. But that only worked so long as they believed in future growth. Right now they are looking at the balance sheet, and making a lot of skeptical body noise.

In light of all this, it seems to me that the debate over healthcare legislation and that over the now silent issue of cap and trade legislation (the two key items of President Obama's agenda) have taken place in a bubble. Washington has run completely out of our money. There is not money enough to pay for current obligations, let alone an expansion of the healthcare insurance system.

As for cap and trade, are we really going to adopt legislation that intentionally retards economic growth for the sake of largely abstract environmental ideals? No. I think it very unlikely that any cap and trade legislation will actually pass the Senate.

Maybe it's time to come out of the bubble and smell the sulfur.

Comments

[hsr0601]

Inaction cost, $9trillion over the next decade, can not be compared to the balance between estimate and outcome in a worst case of scenario. Time does not fix endless greed and energy depletion.

When the public health is also one of commodity like a house, we come to a tragic and unthinkable conclusion : As to for-profit business, the more and longer ill patients get, the more profits they make, and it will debilitate the overall economy involving education for the future, not to mention continued bankruptcy of middle class.

Of young adults ages 19 to 29, 13.2 million, or 29 percent, lacked coverage in 2007, and that implies the total of this promising reform will be cheaper than expected, I guess.

[BballLvr]

Conservatives always try and scare the public by throwing "socialism" out there. I believe there is a balance between government involvement and a complete free market. If there was a fire at Bill O'Reilly's house tomorrow and he had to get pre-approved before the fire dept. came out, he would be pissed. Health should be the number one right for Americans -- even before education.

This is why it's good that a govn't option may be discussed again due to the passing of Ted Kennedy. This is his voting record while in the senate - http://www.ranker.com/list/senator-ted-kennedy_s-voting-record/web-infoguy