(Wikimedia Commons)
Perhaps inadvertently, the Office of Management and Budget has provided a quick little lesson in macroeconomics. As reported by the
New York Times on Thursday:
The White House budget office forecast on Thursday that unemployment would remain at 9 percent through the 2012 presidential election year, an outlook that it said calls for the sort of the job-creating tax cuts and spending President Obama will propose next week.
Curious that the OMB would mention tax cuts as job-creating, given that tax cuts do little to create jobs, but the more interesting part of the story was this:
The Office of Management and Budget, in its annual midyear update of the nation’s fiscal and economic picture, also said federal budget deficits would be lower for this year and next. The decline stems from spending cuts that the White House and Congress agreed to this year, in particular their August deal to find up to $2.4 trillion in reductions over a decade. The Congressional Budget Office similarly revised its fiscal forecast in its midyear report last week.
And this:
That is down $329 billion, or 20 percent, from the administration’s deficit estimate at the beginning of the year, reflecting higher-than-expected revenue and lower-than expected spending. A $1.3 trillion deficit is equal to 8.8 percent of the economy, as measured by the gross domestic product, which is far above the 3 percent level that economists generally consider the maximum level desirable.
Of course, economists also generally agree that deficit spending during a severe recession is the best way to jump start an economy, but let's not quibble over details. The real tell in this one story is that unemployment is expected to remain high while deficits are falling. Which maybe suggests that cutting deficits isn't the way to cut unemployment. Which maybe suggests that if unemployment was the primary concern, wasting a year focused on deficits might not have been the best idea. Just as Paul Krugman warned in January. January of 2010.
Whether President Obama gives his big speech on John Boehner's Rush Limbaugh's timetable or John Boehner's Rush Limbaugh's birthday, it will be neither the timing nor the rhetoric that will matter most. It will be the content. Trade deals won't create jobs. Patent protections won't create jobs. Market-based games won't create jobs. Direct government spending on jobs creation will create jobs. The president needs to go large.