Tuesday, July 11, 2006

From Abysmal To Just Terrible

And that means progress? LATimes (07.11.06):
"When President Bush releases the traditional midsummer update on the budget today, he is expected to announce that federal revenue has soared above predicted levels and that the deficit is headed for a welcome decline from earlier estimates — as much as 30%, or $125 billion, below the level projected just five months ago." But the apparent good news will not strike some economists as surprising: This will be the third year in a row that the administration put forth relatively gloomy deficit forecasts early on, only to announce months later that things had turned out better than expected." Deficit's Good News Less Than Meets the Eye
And that's the game. You issue an absolutely horrible economic forecast. The hope is that when the hard numbers come in, they won't be as bad as predicted. If that happens, you're looking really good. Even if the numbers really do suck, your fallback is that you can then assert your forecast was accurate. Either way, it looks like you know what you're doing. Even if you don't. It's a dangerous game too. "Even economists who hesitate to accuse the White House of playing games say the claims of good news on the budget are unfortunate because they make people unjustifiably sanguine about the government's current fiscal health." Specifically, focussing on one year's budget "will distract attention from the real budget crisis, which will begin in two years as the eldest of the baby boom generation become eligible for Social Security benefits." Make no bones about it; our economic outlook is sobering. "'Our problem is our large long-term deficit, and the sooner we deal with that the better,' said Comptroller General David M. Walker. Walker, who is head of Congress' Government Accountability Office, warned of 'a false sense of security. We're in much worse shape fiscally today than we were a few years ago.'" Where did the revenue come from? Washington Post (07.11.06):
"But the favorable news about the money rolling into the Treasury stems largely from shifts in the economy, including fatter corporate profits, executive bonuses and stock market gains, that reflect growing inequality, the administration's critics contend." Smaller Budget Deficit Projected
In other words, a good chunk of the revenue came from guys cashing in their stock, and from one-time events like executive bonuses. So how are things going, really? This should give us some clue: "(E)ven the White House acknowledges that in the long run, the nation's fiscal outlook remains bleak."


Post a Comment