Chief Treasury Economist Says White House Economic Forecast is 'Smoother' than Can Be Expected in Reality
Even with this smoother-than-reality economic forecast, the administration is predicting that the federal government will run up an additional $905 billion in deficit spending over the next decade, almost doubling the national debt.
Krueger, speaking to reporters at a Friday briefing, said that while the administration’s Gross Domestic Product (GDP) growth forecasts were largely in line with private estimates, numerous factors could affect and alter those estimates.
“It’s the nature of forecasting that forecasts typically are smoother than the realizations,” he said. “Your hope is that the ups and downs balance out and, on average, are on the forecasted path.”
What Krueger did not mention is that, while the administration’s projections are close to those of private economists, known as the Blue Chip Consensus, those private forecasts only extend through 2010, while the White House’s extend through 2019.
When asked by CNSNews.com if the fragility of the administration’s projections meant higher budget deficits in the future, Krueger said that deficits were inevitable during bad economic times.
“Deficits are inevitable when you’re trying to recover from such a steep recession,” he said.
Krueger also said that, because of that steep recession, it was impossible for the administration to produce a balanced budget in the short term, saying such an idea was not “advisable” for Obama.
“In fact, it wouldn’t be advisable to have a balanced budget at this point or anything close to a balanced budget at this point,” he said.
In the longer run, however, Krueger said that the administration planned to put the budget back on a path toward fiscal responsibility, saying that the country relies far too much on borrowing and not enough on public investment.
“One has to draw a distinction between the short run and the long run,” he said. “Certainly in the longer run the administration plans to put the budget on a path that’s fiscally responsible.”
“In the U.S., I think that we rely too much on borrowing and short-term consumption at the expense of longer-run investment, public infrastructure,” he said. “The president has said that it’s very important that when we emerge from this recession that we build a stronger foundation, one that’s less susceptible to these kinds of boom-and-bust cycles.”
However, the Obama administration’s projected budgets rely on what Krueger criticizes: borrowing to finance short-term consumption.
For example, the Obama administration projects that, as a result of its 2010 budget, the federal government will run a cumulative deficit of $9.05 trillion by the year 2019. In total, the government plans to spend $43 trillion during the next decade while taking in only $34 trillion in tax revenue.
In no year between now and 2019 does the administration plan to balance the budget. In fact, the smallest single-year deficit Obama plans to incur is $739 billion in 2015, after which time the deficit will begin climbing again until it hits nearly $1 trillion ($917 billion) in 2019.
However, Krueger claimed that it was a “very important” part of Obama’s budget to move the country toward “responsible budgeting” and a “more sustainable” path.
“That’s why it’s very important, in the administration’s budget, that we make the critical investments in human capital and physical infrastructure, responsible budgeting, health care reform, clean energy, to move the U.S. to a more sustainable economic path,” he said.