Lawrance G Lux, click
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Blogs by Lawrance G Lux
Construction of Fantasy 7/31/2004 11:52:42 AM
I have just reviewed the White House statements on a revision of the size of the deficit downwards. I will try to put it in prospective.
The White House claims the deficit will be no more than $445b by the end of the fiscal year on September 30th. They claim this is a revision downward from the January forecast of a $522b deficit. They base this estimate on the Economy maintaining a 4.7% growth rate, and higher than expected taxes. Here is a list of comments:
1) Second Quarter growth was 3%, much less than the 4.5% of the First Quarter. Even if the final two Quarters equaled 4.5%, which they won't, the downturn of the Second Quarter means a loss of an additional $11b.
2) The Government somehow avoids putting military expenditures of all types in the Budget, which would functionally increase the deficit by $80b.
3) Consumer spending was down in the Second Quarter, while Business Inventories increased, so there should be an additional loss of some $7b in tax revenues.
4) We are 30.000 Jobs a month short of meeting the entrance of new Job Seekers from School and training. Parental Household costs assure a reduction in Consumer spending by the Households, and additional tax deductions for the Households--bringing a loss of an additional $9b in tax revenues.
Let's add it up:
$445+$80+$11+$7+$9b=$552b. Hmmm, this is even higher than the January forecast, the highest Dollar deficit in history, if the Social Security payments were not used to pay general expenses as they are, would put the deficit at around $680b. By the way, the White House projections of the deficits through 2009 are pure horsecrap. Inflation, higher Energy costs, and continued military expenditures would insist on an economic growth over the entire Period in excess of 6% per year to meet the White House projections. lgl
