Tag Archives: Economics

News

Judd Gregg says Obama’s budget will bankrupt the country

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UPDATE: Welcome visitors from Free Canuckistan! Thanks for the linky, Binky!

Found this post over at Gateway Pundit. You’ll remember that Judd Gregg is one of those fiscally conservative New Hampshire senators, an expert on business, finance and economics. Despite being a Republican, he was nominated by Obama for the Cabinet position of Commerce Secretary. He backed out of it, though. And now we can guess why.

Last month, he warned that the budget would bankrupt the USA:

A new video from CNN is here. Here’s an excerpt from the transcript:

“The practical implications of this is bankruptcy for the United States,” Gregg said of the Obama’s administration’s recently released budget blueprint. “There’s no other way around it. If we maintain the proposals that are in this budget over the ten-year period that this budget covers, this country will go bankrupt. People will not buy our debt, our dollar will become devalued. It is a very severe situation.”

“Your listeners have to understand how staggering the numbers are. We’re talking about a deficit in the trillion-dollar range for as far as the eye can see. We’re talking about deficits which are 4% to 5% of GDP – which is not sustainable under any form of government. We’re talking about a public debt – this is a debt that people own of the federal government – that will be around 80% of GDP. Historically, it’s been around 40% of GDP in the out years. The practical implication of this is bankruptcy for the United States. There’s no other way around it.”

I know people who denounced Bush, McCain and Palin. They voted for this ACORN lawyer. As if Obama was God’s gift to small government conservatism. They wouldn’t read a single economics book. I remember showing them numbers from Citizens Against Government Waste and American Taxpayers Union, which they rejected.

Here’s one more interesting piece from the always wonderful IBD (editorial, podcast). I include the details of the Bush and Reagan budgets, for comparison with Obama’s budget.

Excerpt:

According to the CBO, the Obama administration lowballed its deficit forecast by $482 billion over the next four years and $2.3 trillion over the next 10. In other words, the CBO says that 10-year deficits will be 33% higher than the president claims, should his plans get enacted.

This makes Obama’s budget one of the worst accounting jobs ever put forward in modern times by a new administration.

When the CBO reviewed George W. Bush’s first budget, for example, the difference between what Bush said his budget would cost and what the CBO said it would cost was minimal.

…Reagan’s first budget, which was widely panned for allegedly employing rosy scenarios to cook the numbers, differed from the CBO by just 1.2% in projected revenues and 5% in spending over the first four years.

So why the huge gap between Obama and the CBO?

Obama’s team employed one of the oldest budget tricks in the books — exaggerating economic growth — to hide the true cost of his tax and spending plans. Budget forecasts are hugely sensitive to predictions about GDP growth, inflation, unemployment and interest rates. Even slight differences can have a huge impact on projected outlays and revenues.

And in his budget, Obama is positively Pollyannaish about the economy, predicting 3.2% real GDP growth next year, compared to the CBO’s 2.9% and the Blue Chip consensus forecast of 1.9%. While the CBO and Blue Chip think unemployment will be 9% in 2010, Obama claims it will be only 7.9%. And so on.

Here’s an image I stole from IBD:

IBD: Publically-held debt
IBD: Publically-held debt

Read the whole editorial! And don’t foget to subscribe to IBD’s podcast feed. It’s FREE!

Michelle Malkin has more details on Obama’s “public-private partnership” plan for economic recovery.

Excerpt:

News

CBO: Budget adds 4.8 trillion to national debt, China worried

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Hot Air has this:

In a new report that provides the first independent analysis of President Obama’s budget request, the nonpartisan Congressional Budget Office predicted that the administration’s agenda would generate deficits averaging nearly $1 trillion a year over the next decade — $2.3 trillion more than the president predicted when he unveiled his spending plan just one month ago.

Tax hikes are mentioned here at the Competitive Enterprise Institute’s Open Market blog:

Obama’s budget would explode the national debt while increasing taxes. That’s the conclusion of the Congressional Budget Office, controlled by lawmakers who support Obama. “The President’s proposals would add $4.8 trillion to the national debt,” increasing “the cumulative deficit from 2010 to 2019 to $9.3 trillion.” The budget also adds $1.9 trillion in tax increases.

And the stimulus bill Obama claimed was needed to avert “disaster” and “irreversible decline“? It will shrink the economy over the long run, since its “increase in government debt is expected to displace or ‘crowd out’ . . . private capital.”

…The CBO’s conclusion confirms its earlier findings that the stimulus package will cut wages and the size of the economy in the long run, despite costing $800 billion. The stimulus package also gutted welfare reform.

The Heritage Foundation blog The Foundry has more. Here are just a few of their bullet points:

• He raises taxes not just on upper-income taxpayers as he promised, but on all Americans through his misnamed “climate revenues”, and as his budget indicates, this is just a starter program.

• The President calls for enormous increases in government spending on health care and climate change, but on a great many other programs.

• The CBO saw through perhaps the greatest chicanery ever in federal budgeting when President Obama first assumed the full costs of the operations in Iraq and Afghanistan in perpetuity, and then claimed he is cutting spending when he asserts a change in policy and those spending amounts disappear.

The more he spends, the more it looks like he’s going to have to print money to get out of this, or raise taxes on producers and destroy the economy completely. And all that makes China very, very worried. Here is an article from the leftist New York Times, headlined “China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries”.

Excerpt:

The Chinese premier Wen Jiabao expressed concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that its investment would keep its value in the face of a global financial crisis.

…Mr. Wen said he was “worried” about China’s holdings of Treasury bonds and other debt, and that China was watching United States economic developments closely.

If Obama prints more money, this would raise inflation and devalue the US currency, including the Treasury Bonds held by China.

But economists have cited several possible threats, led by the prospect that the dollar’s value will depreciate over time, lowering the value of China’s holdings.

“In the short run, the dollar is appreciating” because global investors see the American currency as a safe haven at a time of crisis, Bai Chong-En, who heads the economics department at Tsinghua University in Beijing, said in a telephone interview. “But we don’t know what’s going to happen in the long run. If the American stimulus package is financed mainly by borrowing, then that may affect the future value of Treasury securities.”

Some specialists also say that high inflation could erode the dollar’s value. Finally, some believe that China’s investment in American debt is now so vast that, should it need foreign exchange in some emergency, it would be unable to sell its Treasury securities without flooding the market and driving down their price.

“The only possibility, really, is that China will have to hold these bonds until maturity,” said Shen Minggao, the chief economist at Caijing, a Beijing-based business magazine. “If you start to sell those bonds, the market may collapse.

And Heritage Foundation is reporting that they are even talking about switching out of the US dollar as their reserve currency.

Sigh. I found an article by Victor Davis Hanson (H/T Stop the ACLU) where he explores why Obama is destroying the economy. He has three possible solutions, and he analyzes each of them.

  1. Clueless
  2. Not so clueless
  3. A mean streak

Personally, I vote for 1). And that goes for anyone voted for him. And I’ve read David Freddoso’s book, so that’s where I am coming from. But you can read the VDH article and make up your own mind.

Commentary

When all else failed, Republicans will try conservative ideas

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Jennifer Rubin over at Pajamas Media writes that the GOP has had enough with the Democrats’ big-spending socialist agenda, and they are ready to try something completely different: small government conservatism. Instead of just being the party of “NO”, the GOP intends to market a series of common sense conservative policies directly to Americans.

Rubin writes:

Minority Leader John Boehner has a new video out listing a number of Republican themes and promising a Republican alternative budget from reformer Rep. Paul Ryan. The themes are simple: lower taxes, restrain the growth of government, a market-based health care plan, domestic energy development, and ending bailout mania. Boehner’s video does not have many details, but its core message is clear: Republicans are tired of being the punching bag for an administration that wishes to paint itself as the only source of ideas capable of solving the country’s problems.

But I didn’t like John Boehner’s video as much as this one from Rep. Paul Ryan:

He can make the case in the House of Representatives:

And look, he can take on the leftist news media, too:

Fun! Rubin continues with some links to wonderful policy ideas:

Truth be told, for months, Republicans inside and outside of government have been throwing out ideas on how to revive the economy.  Americans for Tax Reform has ten ideas to help small business. Newt Gingrich has twelve ideas to promote job growth and recovery. And budget draftsman Paul Ryan has had “A Road Map for America’s Future” for some time. But the mainstream media is uninterested in reading through all of this, much of the conservative blogosphere is too invested in carping about the shortcomings of elected leaders and in fighting among themselves, and the president, of course, has made a habit of disparaging his opposition’s lack of creative ideas.

…the task here is to capture the public’s dissatisfaction with the Democrats’ bailout and pork-laden approach to governance and remind voters that Republicans in fact do have ideas — ones that favor lower taxes and less spending.

As soon as I read this, I rushed over to the Cato Institute to see their take on Ryan’s plan, and I found an article by Michael D. Tanner.

He likes Ryan’s plan:

Health Care: Ryan would reform our employment-based insurance system by replacing the current tax exclusion for employer-provided insurance with a refundable tax credit of $2,500 for individuals, and $5,000 for families. This would encourage employers to take the money they currently spend providing health insurance and give it directly to workers, who could then use it to purchase competitive, personally owned insurance plans. That would be insurance that met their needs, not those of their bosses, and people wouldn’t lose it if they lost their jobs.

Ryan would also allow workers to shop for insurance across state lines. That would mean residents of states like New Jersey and New York, where regulation has made insurance too expensive for many people, could buy their insurance in states where it cost less. And increased competition would help bring insurance costs down for all of us.

Since I am a clean-living, never-married single guy, this would basically add a bunch of money to my take home pay. More money for donations to Reasonable Faith and the Discovery Institute! So far so good!

Tanner continues:

Social Security: Like Medicare, Social Security is hurtling toward insolvency. Rep. Ryan would preserve the program unchanged for current recipients and workers older than age 55, but he would allow younger workers to invest part of their Social Security taxes privately through personal accounts. Unlike the present system, workers would own the funds in their accounts, and when they died, they could pass any remaining funds on to their heirs.

Taxes: Rep. Ryan would radically simplify today’s hopelessly complex, cumbersome and bureaucratic tax code. He would give filers a choice: They could pay their taxes under existing law, or they could choose a new simplified code, with just two tax rates (10 percent on the first $100,000 for joint filers; $50,000 for individuals, and 25 percent above that).

Human Events has some more details on the tax policy:

The tax reform aspect of the bill is appealing, offering a simplified tax system that has only two rates and eliminates the alternative minimum tax (AMT) and the death tax. The bill also abolishes taxes on interest, capital gains and dividends among other aggressive tactics that will make a noticeable, long term change.

And this interesting quotation from Ryan:

“Our fate is not inevitable…we can change it,” he said. “I want to be the Paul Revere of fiscal policy in this country.”

Now, that two-tier tax plan was one of the reasons why I preferred for Fred Thompson in the primaries… but the rest of my party wanted style, instead of substance. You blithering toadies! Who cares how warm his belly is? He opposes taxes and abortion, you hamster-brains! Oh, well. There’s always 2012, where we can try to run Mark Sanford, Bobby Jindal or maybe even Michele Bachmann!

For more on Ryan’s plan, here is an article in the Wall Street Journaltat he wrote. (H/T Western Standard Shotgun Blog)