Annie Lowrey's Economix blogpost on President Obama's budget concludes by telling readers:
"But it is worth noting that perhaps the single most important factor when it comes to deficits is largely out of the White House’s hands: economic growth. Mr. Obama’s budget assumes that there will be no recession for the next decade – indeed, he sees a moderate but strengthening recovery. History suggests those might be the most unrealistic numbers in the document."
Actually the lessons of history on this point are less clear than this comment implies. Historically we have gotten recessions for two reasons, either the Fed raises interest rates to slow the economy in response to a rise in the inflation rate, or a bubble bursts throwing the economy into a tailspin. While both scenarios are in fact possible (if the Fed lets another bubble grow, can we exile these doofusses for the rest of their lives?), at the very least they would imply more rapid growth in the period leading up to the recession.
In other words, if we get a recession it is likely to be preceded by a period of faster than projected growth. The net effect on the deficit, compared to the Obama administration's projections cannot be known in advance. Anyhow, it is remarkable how much time ostensibly intelligent people spend speculating about events 6-10 years in the future when all the historical evidence shows we don't have a clue.
Take a look at the CBO projections of budget surpluses for 2014 from back in 2008 or the projections of large budget deficits in 2000 from back in 1996. I'm fine with make work jobs in a weak economy, but let's not imagine these projections for are worth anything more than the cyberspace they are printed on.
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