Standard & Poor’s historic downgrade of the U.S. credit rating is an attempt to bring adult oversight to the political squabbling over out-of-control government spending. But rather than “eating his peas,” President Obama is throwing a tantrum.
The day after the S&P action, the White House took aim at the messenger. Administration officials launched a blistering attack on the agency’s integrity, accusing S&P of employing flawed methodologies and making basic math errors in its analysis. When the bureau acknowledged and corrected one of the problems, chief White House economic advisor Gene Sperling pounced, saying that the credit downgrade “smacked of an institution starting with a conclusion and shaping any arguments to fit it.”
Well, look who’s talking. A review of White House budget proposals from 2009 to present reveals a series of long-term economic assumptions that torture credulity in service of Mr. Obama’s big-government agenda.
According to the fiscal 2010 budget proposal, released in February 2009 and modestly entitled “A New Era of Responsibility,” prosperity was just around the corner. The projected gross domestic product for 2009 was almost zero, but in 2010 the Obama administration foresaw 3.43 percent growth, followed by 5.23 percent in 2011 and an astonishing 6.26 percent in 2012. By 2015, this would level out to a comparatively modest but objectively unrealistic 4.45 percent, which was the default assumption out to 2019. These growth dreams were laughable. Without credible rationale, the White House posited that the U.S. economy would grow at a record pace for almost 20 years. This red-hot growth projection was necessary, however, to justify and cover the record levels of government spending Mr. Obama was planning.
White House long-term deficit projections were wrongly rosy as well. According to Mr. Obama’s first budget, the projected $1.2 trillion deficit for 2010 would be sliced in half to $533 billion by 2013. This red ink would creep slowly up to $712 billion by the end of the decade but would still be around 3 percent of the mammoth projected GDP.
Two years later, the economy isn’t producing the benefits Mr. Obama promised. Growth has been anemic rather than robust, and deficits have skyrocketed rather than receded. Never mind, the fiscal 2012 budget proposal gives the impression that everything is going according to plan. The administration still projects almost 4 percent growth this year, when most economists who aren’t in Mr. Obama’s employ predict 1 percent to 2 percent growth. The Obama budget predicts the economy will surge in the out years, growing between 4.36 percent and 6.15 percent per year for the rest of the decade. And through some inexplicable numerical magic, the projected yearly deficits for the period after 2017 are even lower than the absurd numbers offered in the 2010 budget. These outlandish figures are an insult to the national intelligence.
The projected job impact of the budget-busting “stimulus” plan, issued two weeks before Mr. Obama took office, is another important document revealing the haplessness of White House economic assumptions. According to this study, the unemployment rate with the stimulus plan in the third quarter of 2011 was supposed to be 6.5 percent, instead of the current 9.1 percent. Doing nothing would have yielded 7.7 percent unemployment. Even by their own economic estimates, doing nothing would have been better for America than what the Democrats did.
The White House’s baloney growth and deficit projections are the type of politically motivated numbers that caused S&P to question the ability of the United States to end its orgy of deficit spending. Rather than waging political war on the ratings agency, the White House should come clean and submit a budget proposal with honest assumptions that better reflect the damage Mr. Obama has wrought on the economy.