And Deeper in Debt

Paul Greenberg

3/21/2011 3:19:41 PM - Paul Greenberg

If there is one number from the vast jumble the Obama administration calls a federal budget, it's this one: The American economy is projected to grow at the rate of 5 percent a year.

That's the figure at the basis of the president's assurances that the country can dig its way out of debt and still afford a full panoply of social entitlements and more to come.

If there were any question that (a) the country is deep in debt, and (b) its chief executive is even deeper in denial, then that fanciful number should remove all doubt. Talk about unrealistic: The only period in recent history when the country's economy grew at 5 percent a year was half a century ago.

The country's rate of economic growth has been hovering below 4 percent a year for decades, and took a sharp drop when the Panic of '08-'09 hit. But our president tells us the economy will now grow 5 percent a year. Maybe his Nobel Prize should have been for a work of fiction.

Despite all glib assurances to the contrary, the laws of classical economics have not been repealed. Higher taxes and more government borrowing do still act as a brake on private investment, costing the economy growth and all that goes with it, like jobs. And tax revenue for government itself.

One of the consequences of living in a free country is that people can still make their own economic decisions, and they may not be inclined to spend and invest when hard-pressed. Adam Smith remains a better guide to the economy than the glib assurances of an Alan Greenspan in a past decade or Ben Bernanke today. Or the pie-in-the-sky projections you'll find in the federal budget as President Obama drives ever deeper into denial.

Who in this administration, do you think, came up with that 5-percent-a-year growth rate -- the well-known Washington statistician, Rosy Scenario? Or has David Stockman, the erratic budget director at the beginning of the Reagan Years, come back and started writing under the name of The Hon. Timothy Geithner, secretary of the treasury?

According to the administration's own projections, the federal deficit at the end of this fiscal year will be $1.6 trillion, will drop below a trillion in 2013, but will never get below $600 billion a year between now and 2020. Which means cumulative national deficits for the years 2012 to 2015 should total some $3.7 trillion.

Add that amount to the current national debt of $14 trillion, and the total national debt soars to more than $18 trillion by the end of fiscal 2015. And to more than $25 trillion by the end of 2020.

And these are the optimistic projections out of this administration. Wildly optimistic.

For most of us, astronomical numbers like these might as well be in light years as in U.S. dollars. They're hard to grasp. But it's clear enough they mean nothing good.

All of us -- maybe even the federal government's own economists, the ones who have to rationalize the president's funny figures -- must know that a day of reckoning must come, the piper must be paid, or whatever phrase you prefer. Every culture has such a proverb as surely as it has profligates.

Payment for our excesses can be deferred only so long, Even if the payment is made in devalued dollars, the price for our free-spending ways will be high, the consequences painful, and the pretense that this administration knows what it's doing harder and harder to maintain.

The administration's current budget, from which all these figures were mined, is a recipe for crippling stagflation, the kind that seized the country during the Carter years, or even worse. Like a full-scale recession slipping into a decade-long depression like Japan's, aka the Lost Decade.

The time to avoid such a result is now -- by recognizing the danger and acting to remove it. Instead of pretending everything's going to be just hunky-dory if we'll leave all these matters to our community organizer in the White House.

Any resemblance between the course of the American economy in recent years and a diver going off a steep cliff is not coincidental. There's a clear reason for the whale of a bellyflop these figures portend for the national economy. That reason is our out-of-control spending -- and leaders who act as if the day of reckoning can be put off indefinitely.

The downturn of the last few years now known as the Great Recession could prove only a foretaste of the pain that lies ahead if Congress and the president don't get the country's fiscal house in order, which won't be easy.

However abstract a row of figures in a budget table may seem, these numbers translate into ever higher interest rates, growing unemployment, and an economic model that's unsustainable even in the short run. Somebody needs to turn this ship around. It's headed for the falls.

Not all this president's funny figures can disguise what lies ahead if we don't change course. The funniest of them may be that projected 5-percent-a-year growth rate. Or maybe that's the saddest part of the president's assurances. For it indicates just how out-of-touch he is with the economic realities. Or pretends to be in order to make his budget seem realistic.

It's hard to believe that someone as intelligent as the current president of the United States can't read these figures and understand their import: He's diving into the Grand Canyon of budget shortfalls. And taking the country with him.