In other words, if you are going to rely on the CBO projections of aggressive GDP growth here at home then Erskine Bowles and Alan Simpson are right: Either go big on cutting spending or go home.
It’s clear we won’t “grow” our GDP sufficient to outstrip sending.
As we highlighted this week on Ransom Notes Radio, Bowles and Simpson, the chairs of President Barack Obama’s bipartisan commission on deficit reduction, are so disgusted they have been proposing bigger reductions in government spending than originally recommended -- now that it looks like Obama will try to get away with no reductions at all.
"We learned the hard way with our commission, the harder we made (the proposal), the more support we got. It's either go big or go home. This is pathetic," Simpson said on CNBC of the government’s inability to cut spending through any means other than an across-the-board budget cut, known as sequester.
It’s also stupid -- at least according to President Bill Clinton’s former chief of staff, Erskine Bowles.
"When this really stupid, stupid, stupid sequester goes into effect, we're going to start to feel how this government is really dysfunctional. People will see it really quick and get really angry with these people in Congress and the administration." Bowles told CNBC. "We are operating our government on a month-to-month basis right now."
Thanks for the sequester Mr. Obama. And make no mistake, sequester is a product of the White House.
“The President’s part of the sequester,” said Sen. Max Baucus, D-Mont., “the White House recommended it, frankly, back in August 2011, so now we’re feeling the effects of it.”
And here’s the really bad news: The CBO report is predicated on spending cuts that most likely won’t happen if Obama has his way. If you combine it with GDP growth, that’s not very likely, historically speaking, and, well, uh-oh.
Since 2000, the economy has only enjoyed two years of growth in excess of 3 percent. And the long-term trend line for economic growth since 1970 is still downward for the country. Since Obama has become president, quarterly GDP has only come in higher than 3 percent on an annualized basis three times.
The idea that, suddenly, after our current year, we are going to realize growth rates around 3.5 percent is only a magician’s trick designed to downplay the size of the deficit from 2014-18.
So, the deficit will be larger than the CBO predictions if the economy doesn’t grow at the sunshine and roses rates the CBO has forecast. It will be larger if spending cuts don’t happen. And the economy can’t and won’t grow by the GDP growth rates forecast by the CBO.
Forget history. In this case just consult common sense.
Now that we’ve seen the effects on the economy of the several Obama tax increases since the first of year, what happens when further tax increases replace spending cuts?
I give you a three-word answer that happens to be the smartest thing coming out of Washington right now: Stupid, stupid, stupid.
This article orginally appeared at IBTimes.com on February 20th, 2013.
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