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Friday, June 17, 2011

International Monetary Fund Downgrades U.S. Forecast

Via Washington Examiner we see the International Monetary Fund has downgraded their 2011 and 2012 growth forecasts for the U.S.

The IMF now forecasts U.S. gross domestic product of 2.5 percent in 2011 and 2.7 percent in 2012, yet Obama's budget proposal anticipated growth of 2.7 percent and 3.6 percent, respectively. While that may not seem like a big deal, small fluctuations in GDP can make a huge difference on deficits because economic performance has an effect on both sides of the budget ledger. Greater growth means more revenue because more people are employed and earning higher incomes, but it also means less spending on so-called "automatic stabilizers" such as unemployment benefits.

Obama's growth compared to Reagan's:

Reagan recovery saw GDP surge by 4.5 percent and 7.2 percent in 1983 and 1984,and the Obama economy isn't going to achieve that in anybody's wildest dreams.

Here are a few differences between Obama's policies and Reagan's:

* Reagan cut income tax rates. Obama spent his first two years promising to increase tax rates on “the rich,” mostly small business owners and investors. In December he signed legislation that schedules his tax increase to take effect two months after the 2012 Presidential election

* Reagan cut “discretionary” spending. Obama dramatically increased it.

* Reagan reduced regulation and government intervention in the private sector.

* Obama has implemented waves of new regulation and under his leadership Congress passed legislation that will require new regulations of health insurance and virtually every detail of banking and finance – even ATM cards.

BTW, it has been a year since Obama's much lauded "Recovery Summer" as Speaker of the House John Boehner explains:

The “stimulus” was all about big spending and big government — not jobs. That was obvious on the day the “Recovery Summer” began in my home state of Ohio. Local construction workers on a nearby site in Columbus were forced to take the day off, without pay, so the White House entourage could roll through and tout all the taxpayer dollars they were spending. But all that spending got us was more debt and fewer jobs.

Approximately 1.5 million jobs have been lost since the “stimulus” was signed in 2009 — roughly 300,000 of them as administration officials hopped from town to town promoting the “summer of recovery.” The national unemployment rate was 9.1 percent in May — far above the 8 percent promised by the White House — and has averaged 9.5 percent throughout the Obama presidency.

The president can call this a “bump in the road,” or blame ATMs, or joke that those “shovel ready” jobs that were promised “weren’t as shovel ready as we expected.” But there’s nothing funny about policies that keep workers on the unemployment line and drive us deeper into debt. Those aren’t the kinds of results — and this isn’t the recovery — the American people deserve.

There has been no recovery. Obama and the Democrats who controlled the House and Senate at the time, poured almost a trillion dollars into the economy and slowed down the bad news, but using an analogy I have used before, that was nothing more than putting a band-aid on a gushing wound and claiming the wound was healing just because less blood visibly flowed.

Slamming money into the economy will not fix the underlying problem. If the root cause is not addressed then it does no more than throw good money after bad to watch it get sucked up before everything starts collapsing again.

In the meantime, all that money thrown at the problem adds to our debt/deficit.