How do we define ‘fiscal responsibility’ left and right?
OMB Watch suggests looking at projections first for talk on fiscal responsibility. Hence instead of talking idealogy first, go for the numbers. It is not BDS to use this years budget, in that the projections have been manipulated for decades. We are just better at manipulation after decades of experience, and the supplementals simply throw out the bathwater, baby, and soap so far in making sense of the budget.
So what were the economic experts saying when OMB were making their assumptions for the FY 2009 budget request? In testimony before Congress on Dec. 5th, CBO Director Peter Orszag told Congress that the Blue Chip forecast was for 2.4 percent GDP growth in 2008 and that the Federal Reserve Board were predicting growth of 1.8 to 2.5 percent. Applying the administration’s economic sensitivity data (p177) – a 1 percentage point reduction in GDP growth results in a $13.8 billion drop in revenue and a $2.6 billion increase in spending – to the Fed’s high-end 2.5 percent estimate, the projected deficit would be $413.3 billion in 2008 – a tie for largest nominal deficit.
A budget that predicts a record-high deficit would be terribly inconvenient for a president who wishes to be remembered as “fiscally-responsible.”
FY 2008 Deficits Under Various Economic Assumptions
GDP Growth Rate (percent)
Projected FY 2008 Deficit (billions of dollars)
Noted in President’s Budget
OMB 2.7 410
CBO 1.7 426
Blue Chip 2.2 419
Assumptions Cited by Orszag in December Testimony
Blue Chip 2. 415
Fed (low) 1.8 426
Fed, high 2.5 413
So the first order of the day is to think citizen ground rules.
1. What is a reasonable number for growth expectations?
2. Given current ways of dealing with taxes, what is expected revenue. This is federal revenue. State and local revenue is a whole lot messier in many places.
3. What contributes to the deficit?
4. What are the difficulties in getting beyond an idealogical argument between slightly left and slighty right? (Social Security being the first for revenue, since this revenue has balooned so dramaticly, and the second being?)