The White House and Congress surely do want to bury this report.
On the same day that Ben "Throw Cash Out of Helicopters to Stop Deflation" Bernanke was reappointed by Mr. Obama to another term at the Fed, the Congressional Budget Office announced its report on the U.S. national debt.
It is going to DOUBLE over the next ten years due to excessive spending.
As the article reprinted below makes very clear, no one on Pennsylvania Avenue wants the public to focus on this grim statistic, let alone Mr. Bernanke's prime role in causing it.
It is impossible to sustain such deficits without massive inflation and the resulting double digit interest rates. IMPOSSIBLE.
I remember 21% interest rates in the late 1970s as stagflation took its toll on the Carter Administration. The fundamentals for the U.S. economy are now actually worse.
We have a deeper recession.
With virtually no job growth leading us out of it.
And a tidal wave of new government spending with more on the way. Take a close look at Mr. Obama's health care initiative if you have any doubts.
Consumers can't lead the way out of this mess either by spending their savings or taking on additional debt. All their money is gone. U.S. residents are likely to experience DECADES of declining living standards due to this current recession and its consequences on real estate values, stock portfolios, job losses, and other financial calamities.
Investors need to keep one clear fact in mind. The substantial and grotesque mismanagement of the U.S. economy means that the capital gain business models that worked so well from the end of World War II through 1990 are obsolete, as dead as the proverbial doornail.
You can't count on continuously rising real estate prices to bail you out of overleveraged positions.
You can't rely on index funds to make you rich in the stock market.
You can't expect your children to have a higher lifestyle, larger home, or more prosperous future than you did. The days of parents passing on a better economic future to their offspring are long over.
The days of American economic hegemony are gone, sold off to the highest bidders like so much used scrap metal. American workers now compete for jobs against third world laborers working in abysmal conditons for poverty wages but are expected to keep up with the Joneses using VISA cards to fill in the monetary gaps.
All the rules have changed, all the rules written long ago when financial markets around the world from London to Tokyo and back again looked to Washington for leadership and new ideas, and we have buffoons like Ben Bernanke to thank for that.
At least he won't be applying for unemployment anytime soon. One less mouth to feed on the dole. Be grateful for small blessings.
Robert J. Abalos, Esq.
White House, CBO debt forecasts challenge Obama
The White House midsession budget forecast and the non-partisan Congressional Budget Office both forecast that government revenues will be crimped by a slow recovery from the worst recession since the 1930s Great Depression, while spending on retirement and medical benefits soars.
The White House projected a cumulative $9 trillion deficit between 2010 and 2019, while the CBO took a more optimistic view, pegging the deficit at $7.1 trillion because it assumed higher revenues as tax cuts expire.
The spending blitz could push the national debt, now more than $11 trillion, to close to $20 trillion. The debt is the sum the government owes, while the deficit is the yearly gap between revenues and spending.
"The alarm bells on our nation's fiscal condition have now become a siren," said Senator Mitch McConnell, the Republican leader in the Senate.
"If anyone had any doubts that this burden on future generations is unsustainable, they're gone," McConnell said, adding that economic stimulus funds should be diverted to pay down U.S. debt.
However, both the White House and CBO estimates anticipate that the deficit, now at its highest level as a percent of economic output since World War Two, will decline relatively swiftly in the next three years as growth resumes and federal bailout programs shrink.
White House budget director Peter Orszag said the deficit was too high and cited this as a reason to pass Obama's healthcare overhaul plan, which is in trouble with lawmakers while opinion polls show it losing popular support.
"I know that there will be some who say this report proves that we cannot afford health reform. I think that has it backward," Orszag told reporters on a conference call.
"The size of the fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now."
Obama's healthcare plan, his policy priority, has run into opposition from critics who complain its $1 trillion price tag is too high and who worry it will limit consumer choice.
The debate is gaining steam as Republicans seek momentum for next year's mid-term elections, where they hope to chip away the dominant position Obama's Democrats enjoy in both the House of Representatives and the Senate.
NEAR-TERM FORECASTS SIMILAR
The White House forecasts a record $1.58 trillion deficit in fiscal 2009, matching the numbers of the CBO, while it shows the deficit at $1.5 trillion in 2010, a touch higher than the $1.48 trillion projected by CBO.
But both estimates show annual deficits staying above $500 billion every year until 2019, compared with a then-record $459 billion last year. The White House shows the gap averaging 5.1 percent through 2019, compared with 3.2 percent last year.
By 2019, it estimates that the ratio of national debt to gross domestic products will rise to 69 percent from 48 percent in 2009.
"The administration has always said that you have to get deficits under 3 percent of GDP to be safe. They now admit that they will not in the next 10 years," said Douglas Holtz-Eakin, a CBO director under Bush and chief economic adviser to Republican Senator John McCain for his 2008 presidential bid.
The budget news was overshadowed by Obama's surprise announcement Tuesday to renominate Ben Bernanke to a second four-year term as Federal Reserve chairman, a move seen as aiming for continuity at the central bank during a tentative stage of recovery.
"I'm stunned at how hard they have worked to bury this," Holtz-Eakin said of the White House's budget estimate timing.
One reason CBO and OMB can end up with different numbers is technical. The CBO employs a baseline method which only takes into account policies that have already become law.
On the other hand, the administration's forecasts can reflect the economic impact of policies it hopes to implement, even if they have not yet been approved by lawmakers.
For example, the CBO assumes the there would be no "patch" for the Alternative Minimum Tax, meaning millions more Americans would have to pay higher taxes, even though Congress has agreed to a temporary reprieve every year to prevent this happening. In addition, CBO assumes the tax cuts delivered by former President George W. Bush will expire at the end of 2010.
Orszag said that the White House numbers also assumed that some of the Bush tax cuts would be extended. Obama has pledged not to raise taxes on U.S. households earning less than $250,000 a year.