From the Dept. of Potentially Questionable Assumptions
From the NyTimes on Obama’s new budget proposal:
“Having inherited a trillion-dollar deficit that will take a long time for us to close, we need to focus on what we need to move the economy forward, not on what’s nice to have,” Mr. Obama said. The budget plan projects the deficit falling to $1.17 trillion in 2010 and down to Mr. Obama’s goal of $533 billion in 2013, then increasing again to $712 billion by 2019. Mr. Obama takes credit for $2 trillion in deficit reduction over 10 years, three quarters of which comes from lower expenses in Iraq and Afghanistan and most of the rest from tax increases on the wealthy and revenues from a market-based cap on greenhouse gas emissions.
The forecasts are also founded on optimistic assumptions that the recession will end by next year and quickly produce stronger growth than was seen in the last decade. After the economy shrinks this year, the Obama team assumes that the gross domestic product adjusted for inflation will increase by 3.2 percent next year and then 4 percent or more the following three years, a rate nearly twice the average of the Bush years. (my italics)
The recession end by next year and growth stronger than the last decade? Uh oh spaghetti-o I say to that one. I hope so, but I’m not betting on it. He might be able to pull off the military reductions (might), but the climate change legislation is going to be a bear. Harry Reid is talking about it for this summer, but I gotta think health care is going to come first and cause a ruckus. If the situation is deteriorating economically still by the summer (like say housing prices are still only at best halfway down their slide in value…at best), I think Obama & The Dem Congressional Leadership are going to have serious trouble passing a carbon cap/permit regime.
Ross is certainly right that it’s the most ambitious liberal platform laid out since LBJ–the Democrats have to sense this is their moment and they might never get another one. Ross further argues that the lone obstacle in Obama’s way is how to pay for it. I’m not so sure about that one. I can imagine a scenario in which Obama could (though with serious difficulty) get most of it not all of these big-ticket legislative items passed and does nothing but further balloon the deficit and more importantly the actual debt, especially if the budget has to assume the ending of the recession next year, in order to halve it by 2013.
The obstacle or rather unstoppable force then would be the potential loss of the creditworthiness of the US Treasury and the Dollar. Fiscal obstacle or no, my sense is that events might move so quickly as to overtake their agenda. Who knows though, I think we may be headed (or already are) in very uncharted waters. Needless to say if Obama does pull off that miracle, the Democrats will be in power for a generation. No matter the intra-GOP fights over the talk radio-ists versus the new majority, the joe-the-plumber cons versus the next right. If not, who knows.