That’s the opinion of Former CBO director Douglas Holtz-Eakin, according to the Washington Times. Apparently the updated 10 year budget projections, while trending towards the CBO’s $9.1 Trillion deficit estimate, selectively include and exclude the impacts of proposed legislation:
Holtz-Eakin said that said the Obama administration wrongly assumes it will receive $640 billion in revenue from the creation of a cap-and-trade system for polluters, which would rely on the passage of an energy reform bill that many Democrats oppose, plus another $200 billion from a controversial proposal to tax international businesses. The Obama administration is also counting on the idea that health care reform will not increase the deficit, which some believe is impossible.
What’s more stunning about this? Counting in contributions from Cap and Trade, or trying to pass off projections that the proposed health care reform package will actually lower the budget deficit? A public option that extends benefits to uninsured Americans while creating a massive new bureaucracy is simply unaffordable. Targeted incentives to make health insurance more affordable combined with meaningful tort reform would be more practical and lead to more probable deficit reductions over the longer term.
Could future recessions be even worse as a result of Obama’s plans for such a massive expansion of the size and role of the Federal Government? A recent article titled Big Government, Big Recession by the Cato Institute’s Alan Reynolds suggests this possibility. One study has shown that the era of post-New Deal, big government spending and intervention has increased average recession length:
A 1999 study in The Journal of Economic Perspectives by Christina Romer (now head of the Council of Economic Advisers) found that “real macroeconomic indicators have not become dramatically more stable between the pre-World War I and post-World War II eras, and recessions have become only slightly less severe.” Ms. Romer also noted that “recessions have not become noticeably shorter” in the era of Big Government. In fact, she found the average length of recessions from 1887 to 1929 was 10.3 months. If the current recession ended in August, then the average postwar recession lasted one month longer — 11.3 months. The longest recession from 1887 to 1929 lasted 16 months. But there have been three recessions since 1973 that lasted at least that long.
The article points out that economies with the smallest Governmental share of GDP tend to recover the quickest. Several European economies are already recovering form the current contraction. Could a future recession be longer and more severe than the current, resulting in the nightmare scenario of calls for even more deficit spending to prop up an economy that is increasingly dependent on it?
.. if it’s true that the recession is finally ending and the economy starts expanding (however sluggishly) next year, will voters really care about stimulus waste during the midterms? The relief that the tide is turning will be so great, I think, that they’ll be willing to forgive The One virtually any Keynesian mistake. There’s a lesson in that for the GOP, too: Since the economy and unemployment are bound to turn around sooner or later, it pays to start shifting their message now from “where are the jobs?” to “how much of our money have you blown?”
The situation will be different in 12 months, and the rate of unemployment may not be quite the political weapon it appears to be now. However, the quality of those jobs, average wages (especially take home after-tax pay), and the week-in, week-out burden the deficit places on the average family may be more effective.
