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Sunday, August 27, 2006

Cheers to Jeers

The cheerleading for the administration is mostly over. The Washington Times reviews recent statements on the budget, employment, and wages that undermine the administration's credibility:

The budget (credibility) gap, Editorial, Washington Times: Ever since the White House Office of Management and Budget (OMB) issued its Mid-Session Review last month, the administration has been doing cartwheels celebrating the fact that the budget deficit for fiscal 2006 ... will be less than $300 billion. ...

[T]he Bush administration has been a bit too disingenuous as it rounds the corner in its unearned fiscal victory lap. For example, in his July 15 weekly radio address..., President Bush hailed the "tremendous difference" between "our original projection ... [of] $423 billion" and OMB's July forecast of $296 billion. In fact, the "original projection" of the 2006 fiscal balance was provided by the administration's fiscal 2002 budget, which incorporated a 10-year tax cut ... roughly equal to the sum of the 2001 and 2003 tax cuts... In the 2002 budget, the administration projected a budget surplus of $305 billion for fiscal 2006. It wasn't until February, when the 2006 fiscal year was more than a third over, that the $423 billion deficit was forecast. Thus, the real "tremendous difference" between "our original projection" of the 2006 deficit and the OMB's July projection is a deterioration of more than $600 billion, not the $127 billion improvement ($423 billion vs. $296 billion) that Mr. Bush was gloating about. ...

For all the fiscal grandstanding over the CBO's deficit projection of $260 billion, it must be noted that the on-budget deficit (which excludes the massive annual surplus currently being generated in the Social Security trust funds) will be $437 billion in 2006 (or 3.3 percent of GDP). The $177 billion difference roughly reflects Social Security's $75 billion cash-flow surplus (the amount by which Social Security tax revenue will exceed Social Security benefit payments in 2006) and $100 billion in trust-fund interest income (which the federal government must pay to service the debt it incurred by borrowing previous Social Security cash-flow surpluses).

At the same ... press conference, Council of Economic Advisers Chairman Edward Lazear said "[l]abor force participation was up last month primarily because jobs are available and because wages are growing." In fact, the seasonally adjusted labor force participation rate, 66.2 percent in July, was unchanged from June. (OK, before rounding, it moved from 66.174 to 66.197.) Moreover, the labor force participation rate ... has actually declined by a full percentage point during the Bush administration... If the labor force participation rate were 67.2 percent today, then the unemployment rate would be 6.2 percent, not the reported 4.8 percent... Regarding the claim that "jobs are available," fewer than 300,000 private-sector jobs were created during the second quarter, according to the nonfarm payroll survey. Compared to the quarterly average of nearly 483,000 jobs during the previous six quarters, private-sector job creation was down nearly 40 percent in the April-June period. (Even the 483,000 quarterly average during the preceding year and a half ... was 27 percent below the 661,000 average quarterly increase in private-sector employment throughout the entire eight years of the previous administration.)

As for Mr. Lazear's claim that "wages are growing," it is true that the seasonally adjusted nominal wage "grew 0.4 percent in July," as a White House fact sheet asserted in early August. But it is not true that this growth was "faster than inflation," as the same fact sheet claimed. In fact, inflation-adjusted wages actually declined in July, as the Labor Department reported two days before the ... press conference. ...

Responding to a question about why "polls show that the public doesn't give the president more credit for managing a good economy," Mr. Lazear replied: "[I]f we look at the behavior rather than the responses to polls, the behavior is consistent with a strong economy." As proof, he said, "We see consumption being high. In fact, the [personal] saving rate is negative right now." When did negative personal saving become a hallmark of a great economy? ...

I'm glad that the Washington Times is finally figuring out the administration isn't credible, but what took them so long? That the administration has misled people on a variety of issues isn't news, so, I think this is part of the attempt to separate Republican candidates for office who will be touted as promoting "core Republican values" from the Bush administration who, it will be claimed, have shown they do not. That way, both sides can run as the "I'm not like Bush" candidate. Too bad Bush is, and always will be, one of their own -- one of the chosen few. In any case, one conservative in the hand is worth two not like Bush.

    Posted by on Sunday, August 27, 2006 at 02:34 AM in Budget Deficit, Economics, Politics | Permalink  TrackBack (0)  Comments (2)


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