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March 12, 2010

Special Report: Obama's Economic Team Strikes Out Again!


My blog on the myths of the Great Depression has been rescheduled for Monday.
On Wednesday, the National Association of Business Economists entertained keynote speaker Christina Romer.  She is the head of President Obama’s Council on Economic Advisors.  She did not hesitate in her speech to keep the Keynesian propaganda machine going.  You can read the entire speech here and see the entire speech here.
She did notice that we have an unsustainable deficit by stating No one can look at these numbers and not be concerned. The deficit is large today, primarily because of the recession. It is expected to decline as the economy recovers. But over the long haul, it is predicted to grow tremendously, largely due to the effect of rising health care costs on government health expenditures. By 2040, given the current path, the Federal budget deficit will be 17 percent of GDP—a level that is obviously unacceptable and unsustainable.”
Glad to see we are all on the same page, BUT then she said:
“It is not, as some have suggested, due to actions taken this past year. As large as it was, the Recovery Act contributes less than a quarter of a percentage point to the budget deficit in 2020.”
Okay, so apparently the White House is totally immune from accountability due to the deficit.  Let’s ignore the fact that nearly $4 trillion of the $12 trillion in debt was borrowed in the last 2 years.  The only thing left from this speech is to blame President Bush.  Oh, by the way, it gets better.
“It would be penny-wise but pound-foolish to deal with our long-run problem by tightening fiscal policy immediately or foregoing additional emergency spending to reduce unemployment.”
So, let’s not tighten fiscal policy at all? So, deficits are a problem but let’s not stop spending.  With all due respect, this is the same B.S. the Democratic Party has been spewing for decades.  We have a problem, but we can’t stop Medicaid, Medicare, Social Security, the gravy train, etc.  Who cares if entitlement spending accounts for 70% of the budget in 2014?  By the way, it gets better.
“Immediate fiscal contraction would inevitably nip the nascent economic recovery in the bud—just as fiscal and monetary contraction in 1936 and 1937 led to a second severe recession before the recovery from the Great Depression was complete.”
Monetary contraction is not the federal government’s concern, it is the concern of the Federal Reserve, which until lately is supposed to be independent of the government, so let us focus on this “fiscal contraction.”  Let’s take a look at federal receipts and outlays from 1933 to 1939.

Now, let’s take a look at GDP.
So, because we cut spending by $2 billion dollars or around 0.2% of GDP in the late 1930s, that explains the drop in GDP?  I’m not buying it.  If that’s the case, then we better watch out because according to the latest GDP release that had the economy growing 5.9% in the 4th quarter, government spending actually fell.  Also, government spending is set to decrease in 2011, following the path of the 1936-37 fiscal output.  I wonder if this means the government will take accountability if we fall into a second recession.  I doubt that, as they are more likely to shift the blame to the private sector, which is the engine for economic growth.
And President Obama is considering Christina Romer for the Federal Reserve!
This is not the first time Christina Romer has “slipped up” and hinted that the Obama administration is rewriting the rules of economics.

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