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"because this recession turned out to be a lot deeper..

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Apr 12, 2008
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real world
"because this recession turned out to be a lot deeper than any of us realized."

Sounds like a tall tale, OT would tell.

Obama Budgets Show Weak Recovery Behind Big Deficits

Posted 08:05 AM ET


President Obama told an Atlanta TV station this week that the reason he's unable to live up to his campaign promise to cut the deficit in half is "because this recession turned out to be a lot deeper than any of us realized."

"Everybody who is out there back in 2009," he went on, "everybody underestimated it," adding that "the die had been cast, but a lot of us didn't understand at that point how bad it was going to get."

It's a convenient excuse, and one that, if true, would help him escape blame for a deficit that will exceed $1 trillion for the fourth year in a row this year, and will still be a sky-high $901 billion next year.

But Obama's own budget documents show that this excuse doesn't hold up very well. Among the revelations:

Not everyone was surprised by the depth of the recession.

A table in a little-read section of Obama's first budget — released in May 2009 — shows that the Congressional Budget Office was predicting at the time that the economy would contract by 3% in 2009. That's not far from the actual 3.5% decline. And the CBO was spot on in its 2010 forecast for a 2.9% gain in real GDP. The actual figure was 3%.

Nor were economists wildly off on their unemployment forecasts. The Blue Chip consensus in early 2009 — also listed in Obama's first budget — predicted unemployment for that year would average 8.9%. The actual number was slightly above 9%. It pegged unemployment for 2010 at 9.5%, just below the actual result of 9.6%.

Meanwhile, a memo drafted by Obama's economic team in December 2008 that recently came to light makes it clear that they were fully aware the economy was performing far worse than the official numbers at the time suggested, noting that "forecasts have become decidedly more pessimistic in recent days" and that "further negative revisions seem more likely."

Everyone was surprised by the weakness of Obama's economic recovery.

While the CBO and the Blue Chip consensus weren't too far off in their predictions about the downturn, neither expected the recovery to be so sluggish. The CBO forecast 4% growth in 2011. So did the White House. The Blue Chip consensus was 3.4%.

Nor was there any reason for them to expect anything less. Under normal circumstances, the deeper the recession, the faster the recovery, a point made in a February 2010 budget document, which noted that "there is evidence that the strength of the recovery is linked to the depth of the preceding recession."

But Obama's own economic policies — a huge stimulus spending splurge, ObamaCare, an avalanche of costly new regulations — appear to have broken this link, producing the worst recovery in modern times. Rather than the 4% growth everyone expected in 2011, the economy eked out a mere 1.7% that year. And this year threatens to be subpar as well.

The sluggish recovery, not the recession, is contributing to the ongoing massive deficits.

Buried in the "Analytical Perspectives" section of Obama's budget is an explanation of how economic performance greatly affects deficits, by cutting into tax revenues while increasing spending.

And a table in his first budget shows that if Obama's economic recovery had matched the average pace of other recoveries since World War II, the deficit in 2013 would be under $600 billion, even with Obama's huge run-up in spending.

His second budget — released in February 2010 and well after the administration was fully aware of the downturn's size — again showed that if the economy were to recover at an average historic rate from that point on, the deficit in 2013 would be $565 billion.

Obama's current budget, however, puts the 2013 deficit at a sky-high $901 billion.

In other words, Obama's slow recovery, not previous recession, is largely to blame for driving next year's deficit up by a third.

In that same interview, Obama also claimed that he's now "setting ourselves on a path where we can get our debt under control."

But that's not likely to happen so long as the economy continues to underperform.


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