Tags: Former | Fed | Official | Deficit | Far | Worse | lindsey

Former Fed Official: Deficit Far Worse Than Thought

Tuesday, 28 Jun 2011 03:41 PM

Lindsey Group CEO and Bush administration economic analyst Lawrence B. Lindsey says the deficit is far worse than most people realize.

"There is no way to raise taxes enough to cover these problems," Lindsey writes in The Wall Street Journal.

"The tax-the-rich proposals of the Obama administration raise about $700 billion, less than a fifth of the budgetary consequences of the excess economic growth projected in their forecast," writes Lindsey, a former Federal Reserve governor and assistant to President George W. Bush for economic policy.

A total of $700 billion collected over 10 years would not even cover the difference in interest costs in any one year at the end of the decade between current rates and the average cost of Treasury borrowing over the last 20 years, says Lindsey.

In addition, official growth forecasts are much higher than what the 2.5 percent economists believe we should expect after a financial crisis.

"But the president's budget of February 2011 projects economic growth of 4 percent in 2012, 4.5 percent in 2013, and 4.2 percent in 2014 — and estimates that the 10-year budget cost of missing the growth estimate by just one point for one year is $750 billion," Lindsey says.

"If we just grow at trend those three years, we will miss the president's forecast by a cumulative 5.2 percentage points and — using the numbers provided in his budget — incur additional debt of $4 trillion,” Lindsey notes.

“That is the equivalent of all of the 10-year savings in Congressman Paul Ryan's budget, passed by the House in April, or in the Bowles-Simpson budget plan."

Democrats are holding fast on the tax issue, at least for now. “You have to have revenue on the table, and you have to make cuts,” House Minority Leader Nancy Pelosi told CNN.

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Lindsey Group CEO and Bush administration economic analyst Lawrence B. Lindsey says the deficit is far worse than most people realize. There is no way to raise taxes enough to cover these problems, Lindsey writes in The Wall Street Journal. The tax-the-rich proposals...
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