White House officials told
the Washington Post that they believe
federal deficit will end the year at $1.3 trillion. While still
extremely high, this would be a significant improvement over the $1.6
trillion originally projected for 2010. The federal deficit remains a major long-term economic challenge and a rallying point for Republicans. But the White House's prediction, made anonymously, is
getting a skeptical reception. Is it true?
- This Is A Political
Gamble The Washington Post's David Cho warns, "by suggesting
the deficit may have peaked, administration officials are taking a
political gamble. If the favorable number does not hold up in coming
months and the budget shortfall surpasses the $1.4 trillion recorded
last year, voters in the November midterm elections could punish the
Democrats for offering false hope. No official statement on the deficit
is scheduled until the release of a late-summer review."
Unemployment Could Overturn This 24/7 Wall Street's Douglas McIntyre cautions,
"Tax receipts may be improving now, but high unemployment, which could
plague the workforce well into 2011, means that each taxpayer may not
contribute as much to the IRS as expected in the original budget. While
the costs of TARP and other financial programs created due to the credit
crisis may have saved money, American businesses, especially small
ones, are struggling with a lack of credit that will stymie their
- 'This Is Bad News' EconoBlogger Brad Delong writes, "This is
bad news: unemployment is higher than it was a year ago, and so the
deficit ought to be higher: a lower deficit means that they have gotten
fiscal policy off." Delong fumes at the Washington Post story, which he
says misunderstands the situation. "It would have been much better to
just let Peter Orszag grab the mike and publish what he said. ... Why oh
why can't we have a better press corps."
- All Based On A
Statistical 'Blip' EconoBlogger Andrew Samwick
contextualizes the piece. "The proper report on the economic news is that the
cumulative deficit since the start of the fiscal year is -- for the
first time in the fiscal year -- lower than the corresponding number in
the prior fiscal year. That this has finally happened in the sixth
month of the fiscal year should indicate to all involved, whether David
Cho as the author of the story or the anonymous administration
officials, that this event cannot be claimed to be the start of a trend
any more than it can be claimed to be another blip."
'Premature and Irresponsible' White House Office of Management and
Budget spokesman Kenneth Baer tells Reuters, "While the positive news is
welcome, it is premature and irresponsible to
be making deficit projections for the fiscal year as a whole."
White House Not Seeking More Stimulus EconoBlogger Stan Collender says, "by
leaking this story at this point in the year (budget numbers are not
officially updated until the midsession review is released over the
summer), the White House is clearly signally several things." It doesn't
believe more stimulus is needed, it doesn't believe Congress can pass
more stimulus, and now it wants to focus on selling its efforts at
securing economic recovery.
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