I Hate To Say "I Told You So . . ."

by Pejman Yousefzadeh on August 25, 2009

But . . . well . . . recall this piece, which I wrote immediately after a White House press conference back in March, and the following excerpt contained within it:

Called out on his fiscal irresponsibility, the President did not hesitate to fish out his old line about having “inherited” all of the fiscal problems we are about to be beset with. That’s funny; whatever the state of the budget deficit handed over to the President, he has done nothing in his latest budget to tighten the nation’s belt. Quite the contrary; the President followed up a nearly $800 billion stimulus package with a budget that, according to the Congressional Budget Office, will increase the deficit to $9.3 trillion. At some point, blather about the fiscal problems “inherited” by Team Obama must give way to the serious realization that the Administration has done nothing to ameliorate the fiscal challenges the country faces. Instead, it has come out swinging for the fences with a budget replete with programs designed to fulfill the fantasies of just about any Democrat, regardless of the fiscal consequences. Responding to the bleak CBO numbers, the President argued that growth in the out years would be higher than what CBO claims. Perhaps it will. But when it comes to budgeting–and not just budgeting–the Administration, while hoping for the best, must prepare for the worst. Instead, President Obama and his team have opted to prepare for the best, and hope really, really, really, really, really hard that their fondest fiscal and economic dreams come true.

Needless to say, I have no influence over how this White House conducts economic policy. But of course, they could have listened to people far more famous than yours truly and prepared for the contingency that the rosy scenario the White House has clearly been banking on, may yet not come to pass.

Alas, the White House did not consider that contingency. And we are left with the consequences:

The federal government faces exploding deficits and mounting debt over the next decade, White House officials predicted Tuesday in a fiscal assessment far bleaker than what the Obama administration had estimated just a few months ago.

Figures released by the White House budget office foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. Moreover, the figures show the public debt doubling by 2019 and reaching three-quarters the size of the entire national economy.

Obama economic adviser Christina Romer predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, the average unemployment will be 9.3 in 2009 and 9.8 percent in 2010.

“This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter,” Romer said.

The grim administration projections came on a day of competing economic news. The Congressional Budget Office, which has predicted less economic growth than the White House in the past, was also scheduled to announce revised budget projections on Tuesday.

[. . .]

The revised estimates project that the economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year. Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.

This is, to say the least, horrifying news. Despite the many people who called shenanigans on the White House’s economic projections and how they may impact the budget deficit and the national debt, the Obama Administration put its fingers in the airs, announced “lalalalalalala I CAN’T HEAR YOU!!!!!!!” and closed itself off to the possibility that by overestimating growth, it might implement policies that would lead to a truly awful fiscal calamity. That calamity is now upon us. To be sure, as the linked story mentions, ten-year budget projections can change with events, and often do, but we have to think the worst now concerning the fiscal situation; something the Obama Administration clearly failed to do as it planned out its economic policies, and prepared its forecasts.

Not that the White House is willing to accept this, but the following observation seems so obvious, so entirely on point, that I would be shocked if we actually spent valuable time arguing about it:

“[The new economic forecast] throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview before the report was released. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.”

Indeed, they are, but we really don’t need the new numbers to be dubious about the Obama Administration’s plans for health care reform. Throughout the health care fight, the Administration has expressed the hope and expectation that reform would lead to savings, which would lead to the ability to reduce the deficit over the long term. Unfortunately for the Administration–and for the rest of us–Team Obama’s analysis simply does not pan out. Health care cost savings are a myth. While policies like preventive care are medically desirable and a worthy investment, the Obama Administration is simply wrong to suggest that preventive care will save us money. As scary as the Administration’s new figures are, it is even scarier to consider that they may yet be understating the gravity of the fiscal and unemployment problem ahead of us, especially when we consider the costs of health care reform, costs that the Administration has not factored into its latest fiscal and economic projections.

With an ever-worsening fiscal situation, a change in outlook is required from the Obama Administration. To start with, perhaps the Administration would do well to finally acknowledge reality, and admit that its excessively optimistic forecasts of a few months back concerning the deficit and the economy in general was completely without foundation. In addition, the Administration should finally come clean about the costs associated with its vision of health care reform, and fundamentally alter its proposed health care policies in light of the fiscal crisis. Team Obama has been given the benefit of the doubt for far too long when it comes to the fiscal and economic outlook. Either it will accept responsibility for its mistakes and alter its forecasts and expectations to more accurately reflect the economic facts on the ground, or the White House will not and should not be considered a player with any credibility whatsoever when it comes to crafting fiscal and economic policies.

  • HSR0601

    Inaction cost, $9trillion over the next decade, can not be compared to the balance between estimate and outcome in a worst case of scenario. Time does not fix endless greed and energy depletion.

    When the public health is also one of commodity like a house, we come to a tragic and unthinkable conclusion : As to for-profit business, the more and longer ill patients get, the more profits they make, and it will debilitate the overall economy involving education for the future, not to mention continued bankruptcy of middle class.

    Of young adults ages 19 to 29, 13.2 million, or 29 percent, lacked coverage in 2007, and that implies the total of this promising reform will be cheaper than expected, I guess.

  • HSR0601

    Inaction cost, $9trillion over the next decade, can not be compared to the balance between estimate and outcome in a worst case of scenario. Time does not fix endless greed and energy depletion.

    When the public health is also one of commodity like a house, we come to a tragic and unthinkable conclusion : As to for-profit business, the more and longer ill patients get, the more profits they make, and it will debilitate the overall economy involving education for the future, not to mention continued bankruptcy of middle class.

    Of young adults ages 19 to 29, 13.2 million, or 29 percent, lacked coverage in 2007, and that implies the total of this promising reform will be cheaper than expected, I guess.

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