Obama's Budget Pie in the Sky: Opinion

Obama's budget assumes that real GDP grows at better than 4% a year from 2011 to 2014 and that the economy does not encounter a serious recession.
By Peter Morici ,

President Obama released his proposed 2011 budget Monday, which forecasts that the federal deficit will fall to $706 billion by 2014 or just 3.9% of GDP before rising again in 2015.

To accomplish this feat, he proposes letting the Bush tax cuts expire and other spending cuts the Congress has rejected in the past. More extraordinary, though, the document assumes that real GDP grows at better than 4% a year over the four years from 2011 to 2014, and the economy does not encounter a serious recession.

If your staff economist tells you that is realistic, fire him.

Rosie Scenario wrote this budget.

The U.S. is facing deficits greater than $1 trillion for the foreseeable future, and investing in long-term U.S. government bonds is a very risky proposition. It is not that Washington won't pay, but longer term, an international run on the dollar and inflation are real risks.

Investing in U.S. bonds now entails considerable political risk. A populist government, similar to those that drove Latin American republics into bankruptcy during the 1970s, is in charge.

Obama's strategy: low growth policies and assume away the consequences.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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