Economic Assumptions of Mass Destruction

Obama Says His Budget Would Put Economy on ‘Firm Foundation’
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By Hans Nichols
March 21 (Bloomberg) -- President
Barack Obama said that the budget he’s submitted to Congress would wean the American economy from boom-and-bust cycles by building a “firm foundation” for growth with spending on alternative energy, education and health care and chipping away at federal debt.
The president used his weekly
radio and Internet address to continue a weeklong campaign to build public support for his $3.6 trillion spending plan before lawmakers begin a debate that likely will result in many of his proposals being rewritten.
The fiscal 2010 budget is “ an economic blueprint for our future -- a vision of America where growth is not based on real estate bubbles or over-leveraged banks,” Obama said.
Congress will take up Obama’s first budget next week, armed with fresh figures from the non-partisan Congressional Budget Office projecting a $1.85 trillion
deficit for the fiscal year ending Sept. 30. That’s $100 billion more than the administration’s estimate. The CBO says next year’s deficit will reach $1.38 trillion, about $200 billion more than Obama’s forecast.
The CBO figures will likely make it harder for Obama to win approval of major items on his agenda, including plans to expand health-care coverage and rein in greenhouse gas emissions.
Republican Response
Mississippi Governor
Haley Barbour, delivering the Republicans weekly response, said that Obama’s “budget spends too much, taxes too much and borrows too much.”
“Governors are preparing a wide variety of significant spending cuts to balance our budgets,”
he said. “With the federal government it’s just the opposite.” He said Obama’s spending priorities “breathtaking” and calling the president’s proposals a “massive government spending spree.”
Obama’s proposals to reduce greenhouse gases will amount to an energy tax that will “drive up both electricity and gasoline prices for families and for businesses,” he said.

Commentary: Say a prayer for Mr. Obama. He appears to be going down the same path as George W. with faulty assumptions. Rather than a war based on bad information, we have fiscal policy based on discredited Keynesian notions. Mr. Obama can no more stop the "boom and bust" cycle than he can stop the arrival of spring. A $3.6 trillion budget means spending DOUBLE the annual tax revenue. How can this possibly chip away at the federal debt? Again, we have the false notion that it is possible to spend our way to prosperity. Further, this notion implies that governments can allocate capital more efficiently than markets. Remember the old Soviet Union with its collective farms and grain rotting in the fields? Not very efficient from what I recall. How is it possible for intelligent people to repeatedly take the same actions that have been historically faulty? Does Mr. Obama believe his team is wiser than 400 years of market history?

Like George W. and his economic team, Mr. Obama’s team are using Post Modernist thinking. Budgets require absolute measures, not relative ones.

As for the Republican response, they were the party with massive military spending over the past 30 years that drove the country into a huge fiscal imbalance. Not much credibility there in my view.

What is the way out for the Democrats? I my view, they will devalue the dollar and deflate the debt making American exports cheap and imports expensive. No wonder the Chinese are starting to balk at buying more treasuries.