Archive for February, 2005
What did the Delphic Oracle mean on the current account? Reading Greenspan’s Tea Leaves. And a modest appeal to the Chairman to speak up on our reckless fiscal policy.
Last Friday Greenspan gave a speech on the current account arguing that the US current account deficit will soon shrink as the US fiscal deficit will improve and as the J-curve effects of delayed adjustment of import prices following the dollar fall work their way into import and export quantities. Following his speech the dollar appreciated continuing his recent rally relative to euro and yen. The speech also seemed to be an implicit endorsement of the view that the Bush administration will tackle the fiscal deficit as in the budget announced on Monday.
But today John Berry (leading Fed Watcher and Bloomberg columnist) says – in his latest column – that markets and commentators got it all wrong on what Greenspan meant.
Bush Damned Budget Lies and Voodoo Budget Magic: it will be a $600b deficit, not $233b by 2009…and over $1,100b by 2015!
The dishonesty of the administration about budget deficits has reached levels unheard of. These folks have absolutely no shame. Bush presented today a budget that claims that he will achieve his goal of reducing the deficit by half by 2008 (from a false 2004 baseline of $521 billion rather than the actual 2004 deficit of $412b) and will achieve a deficit of “only” $233b by 2009. Even better news, the administration claims today: the “halving” of the deficit will be reached by 2008, a year earlier than original 2009 target for it.
Who are these accounting scam artists trying to deceive? Do they think everyone in America and around the world is a mathematically challenged total idiot or an accounting moron?
The reality is, that based on realistic scenarios outlined last week by the non-partisan Congressional Budget Office, the deficit by 2009 will be close to $600b (or 4.0% of GDP) rather than falling to $233b; and the deficit will reach over $1,100b (or 5.5% of GDP) by 2015.