By Robert Romano — “This is nothing more than Obama’s economic humbug, just in time for the holidays,” remarked Americans for Limited Government (ALG) President Bill Wilson in response to the Bureau of Economic Analysis’ downward revision of economic growth in the third quarter.
“First at 2.5 percent, then 2 percent, and now revised downward to an anemic 1.8 percent, the economy in the third quarter has once again fallen way short of the government’s rosy projections,” Wilson said.
That means the Bureau had “initially exaggerated the actual growth number by 38 percent,” which Wilson warned would have serious ramifications on the government’s projected revenues over the next decade.
The White House Office of Management and Budget (OMB) has said that revenues will more than double the next decade, from their current level of $2.1 trillion to more than $4.8 trillion by 2021.
Much of that hinges on the robust growth that is projected. In 2011, OMB had said growth would top 3.1 percent. In 2012, it claims it will rise as high as 4 percent.
It will be very telling how OMB takes current economic data into account when it publishes its next budget in February. If it does, then it will likely show revenues growing by a much slower rate, and, particularly, that the debt growing much faster.
But, it being an election year in 2012, and in essence being a White House operation, in reality one should expect next year’s numbers to be as exaggerated as this year’s numbers.
Which tells the American people everything they need to know about what government statistics have become — they are nothing more than a propaganda tool to prop up elected administrations.
To put the problem into perspective, right now OMB projects the national debt to grow to $26 trillion by 2021. If it is wrong about economic growth and thus the growth of revenues, and those only grow to, say, $3.5 trillion instead of $4.8 trillion over the next decade, then the national debt will be $7.4 trillion greater than is currently projected — to roughly $33.4 trillion!
Wilson said the problem of the government’s rosy economic projections “reveals once again that the only way out of our mounting debt problems are dramatic spending cuts, because the growth everyone was hoping for is simply not there.”
Ironically, part of the reason for that may be the slowing effect that excessive debt that has on the growth of an economy. Now at $15.123 trillion, the national debt is already at 99.65 percent of the $15.176 trillion economy. Economists Carmen Reinhart and Kenneth Rogoff have found that gross debt levels above 90 percent tend to have a draining effect on economic output.
Which reveals the fallacy of unbridled government spending to address a recession. Excessive spending, borrowing and printing by the government, under a Keynesian formula, are supposed to boost economic growth. But now, it is revealed that they are slowing it down.
All of which underscores the failure of Barack Obama’s leadership headed in 2012. This is not what the American people signed up for three years ago. Instead of the V-shaped recovery Obama promised, his policies have led the nation into a valley of despair, with an economy that cannot grow robustly and a debt that can never be repaid.
Merry Christmas.
Robert Romano is the Senior Editor of Americans for Limited Government.
