Magical thinking seems to abound in the Obama administration’s version of how businesses and economies work.

For example, it is a near certainty that the US economy will not be expanding at 4% a year in the 2010-2013 time frame as recession aftereffects and deleveraging continue to dampen growth. Yet the Obama administration uses this super-optimistic case as the base case for calculating the deficits from its outrageous budget. It is an open declaration that the Obama administration does not intend to let obvious economic facts stand in the way of its plans. Stephen Moore discusses this in the Weekly Standard:

There are three ways that the Obama administration is understating the spending and debt levels embedded in the president’s budget policies.

First, Obama uses highly optimistic assumptions on how fast the economy is going to grow and how many jobs are going to be created over the next five years. I’ve worked in a presidential budget office before. Believe me: If you manipulate the economic assumptions on unemployment and GDP growth, you can make the budget deficit in the future be whatever you want it to be. You can even, as Obama claims to do, magically cut a deficit in half without cutting a single program. From 2010-13, the head of the OMB, Peter Orszag, predicts that the U.S. economy will grow at a 4 percent annual pace, when the blue chip-economic forecast is closer to 2.7 percent. Of the 51 blue chip-economic forecasters, the OMB’s forecast is more optimistic than all but two…Republicans on the Senate Budget Committee recalculated the OMB budget deficit assuming the average blue chip-economic forecast. It found that the Obama deficit will be $2.2 trillion higher over ten years.

Next is the hard-to-swallow assumption in the budget that all of the new spending in the $800 billion democratic “stimulus” bill that Obama signed in February will expire after 2011. “We are supposed to believe,” says Paul Ryan, the ranking House Republican on the Budget Committee, that “Nancy Pelosi, Charlie Rangel, Henry Waxman, and Ted Kennedy are going to allow spending for programs ranging from education for disabled kids, to Pell Grants, to Head Start, to child nutrition programs to fall off a cliff two years from now.” Not likely. When Ryan asked the Congressional Budget Office what happens if the spending for about two dozen of the most politically popular programs is continued, not cancelled, the CBO reported back that the deficit and federal outlays would be $3.27 trillion higher over the next ten years.

Finally, there is the crown jewel of the Obama-Pelosi-Reid domestic agenda: universal health care. This is at the top of the “to do” list of the Obama administration and is unlikely to get pulled back or postponed, as the president made clear in his press conference. Obama has not been specific about what plan he favors or about how much a national health care system will cost, but his budget allocates a $634 billion “placeholder” for that purpose. The consensus opinion, though, is that the lowest possible cost of universal health care is $1.2 trillion, with many estimating closer to $1.5 trillion. So team Obama is off by roughly $600 billion

Obviously the plan is to spend whatever they like and then raise taxes. Whether a majority of the American people will embrace such a plan is unknown at this time. We said just the other day that the Obama act is wearing thin, but observers who watch him on TV say he remains a plausible and convincing fellow. How this tug-of-war will end is anyone’s guess at this point.

This entry was posted on Monday, March 30th, 2009 at 2:52 am and is filed under business, Democrats, General, Republicans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.