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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Barack Obama’s fiscal 2013 budget projects a fiscal 2012 deficit (that’s the fiscal year ending in September) at $1.3 trillion–up from less than $1.0 trillion a month ago. However, like all presidents with lots of red ink he is promising to dramatically reduce the deficit by the time his successor takes office.

The budget projects a $612 billion deficit in FY2017–if Congress follows the president’s prescriptions to raise taxes on the wealthy and if we buy the president’s growth assumptions.

The budget assumes Mr. Obama will have a second term that astounds economists–his budget assumes 3.9% growth from 2014 to 2017. That is well beyond what most private economists would concede is likely.

If you believe that one, New York Mayor Michael Bloomberg is selling shares in the Brooklyn Bridge.

The author can be reached at pmorici@rhsmith.umd.edu and followed on Twitter at @pmorici1.

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Whether the Joint Select Committee on Deficit Reduction reaches a deal to reduce the federal deficit by at least $1.2 trillion or stalemates on Nov. 23, Democrats appear intent on handicapping the national economy with higher taxes and imperiling national security by cutting defense. Those are the wrong places to solve the nation’s budget woes.

In 2007, just prior to the financial crisis and when Democrats took control of Congress, the deficit was a manageable $161 billion. Wars in Iraq and Afghanistan were ongoing, and Bush tax cuts and prescription benefits for seniors were in place.

In 2011, two years after the recession ended, the deficit is $1.3 trillion. Spending is up $847 billion, and additional temporary tax cuts–such as the payroll tax holiday–account for the rest. Of the $847 billion, only $62 billion was necessary to accommodate inflation, and social security, health care and other entitlements account for 78% of the rest.

Repeatedly, Democrats President Barack Obama and Majority Leader Harry Reid have exhorted Social Security is not contributing to the deficit, but the program began paying out more than its receipts in 2009, and the Trust Fund will be entirely depleted by 2036. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Barack Obama faces three daunting challenges–jobs, deficits and re-election. His actions reveal he places a second term ahead of fixing the economy and federal finances.

If Obama runs on the economy, he loses. Too many voters are unemployed, underemployed, standing discouraged on the sidelines, or watching their paychecks dwindle for Obama to win. And most voters recognize, had President Obama’s economic policies permitted the economy to grow as it should, deficits in Washington and state capitals would be much more manageable.

If he runs on handling the financial crisis, he loses. He inherited a mess, but trillions in bailouts for Wall Street, Chrysler and GM rewarded the best-paid white collar and blue collar workers for lousy management and worse, while the other 98% watch their paychecks shrink in value. Now charges of fraud in his solar energy program and revelations about White House management dysfunction cast a president lacking judgment and leadership qualities.

On both jobs and the deficit, the president seeks to present a sharp contrast with his eventual GOP rival premised on “fairness”–presenting himself as guardian of the working family, and his prospective Republican opponents as champions of privilege.

An additional $447 million in stimulus and tax cuts, over two years, if spent smartly, could create about 2.5 million jobs for that period. However, he proposes paying for teachers by cutting aid to states for health-care workers and that won’t create many jobs. Extending the payroll tax holiday for the middle class by taxing those who earn over $200,000 only adds marginally to new spending and few jobs. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

As President Obama campaigns for more government spending–a.k.a. his jobs plan–new unemployment claims provide fresh evidence the economy is stalling and in danger of slipping into a second recession. Big government could easily take unemployment above 15% and create a hole too big to ascend.

New jobless claims for the Sept. 10 week rose to 428,000, up from a revised 417,000 the previous week. Having slipped below 400,000 last spring, these are trending upward. Generally, weekly jobless claims below 350,000 are associated with a healthy economy and above 450,000 with recession. Recent data indicates the economy is at the precipice of a second Great Recession–perhaps worse.

Recent data on car sales and broader retail sales, personal consumption and consumer attitudes indicates Americans are scared. Other than high-income folks in the luxury category, a general lack of confidence in the president to adequately get the U.S. economy going is becoming a self-fulfilling prophecy of economic decline.

Bad leadership equals bad outcomes. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

America is in crisis.

The new normal is not good enough. The unemployed can’t find jobs, the old can’t retire and those in between live in constant fear of being tapped on the shoulder and thrust into the abyss.

Property values are lower than a snake’s belly, stocks are diving and gold–the “fear asset” seems the only sound investment.

Thursday the President addresses Congress and is expected to propose ideas that only maintain the status quo, or perhaps do worse.

Infrastructure spending, payroll tax holidays, and unemployment benefits will only replace monies now running out from the $800 billion stimulus package and subsequent initiatives. Job training is the biggest folly–the economy is not creating many decent openings for trainees to fill.

New tax breaks to encourage hiring and investment won’t work, because domestic sales are not growing fast enough to occupy new hires at most businesses.

Americans are spending and businesses are investing a lot more than two years ago, but too much of what they spend is going into higher priced imported oil and more consumer goods from China.

The $600 billion trade deficit oil and China create are a tax on domestic demand too heavy for the economy to bear. Simply, dollars that go abroad for gasoline and coffee makers that don’t return to buy U.S. exports destroy millions of jobs.

If the trade deficit were cut in half, the economy would grow by some $500 billion and add 5 million new jobs.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

In his State of the Union Address, President Barack Obama will ask for political comity. Quite a switch from two years ago, when he pronounced elections have consequences and used his majorities in Congress to push through new regulatory and spending initiatives with few concessions to Republicans.

Now that the tables are turned in the House of Representatives, the president is asking Congress to limit budget cuts and focus on creating jobs.

With unemployment hovering above 9%, this might be good counsel, but President Obama will propose more spending on education, transportation and technology that is not going to fix what is broke.

The schools don’t need more money to implement No Child Left Behind. Instead, they might do better with less federal meddling and money, and profit more from the opportunity for cultural change that could accompany making do with less.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The U.S. government is broken, failing under promises it can’t keep.

From Medicare and Medicaid to fixing the environment and potholes, governments face huge deficits. Taxes must go up and services curtailed dramatically, or massive borrowing will create hyperinflation.

The private economy is growing too slowly for taxes to keep up with spending. Innovations in product design, customer service and problem solving that swept through most private industry in recent decades have largely bypassed private health care and government agencies, much as they did General Motors.

In the trenches of writing budgets, health-care reform, environmental regulations and policies to create jobs, Democrats and Republicans remained hued to ideology. They spend ever more on failed programs and tax breaks, and impose burdensome rules rather than embrace radical renewal in the spirit of Alexander Hamilton, Franklin Roosevelt or Ronald Reagan.

The U.S. can’t turn to prescriptions that worked for another age, but it can adopt the mindset retired British Prime Minster Tony Blair called finding a “Third Way.”

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Government is broken. Nothing demonstrates this better than health care.

Federal, state and local governments are broke because spending on Medicare, Medicaid and other health programs is rising faster than the economy is growing and than politicians can raise taxes.

Health care is too expensive.

In the U.S., health care swallows 18% of the $15 trillion GDP, and the government foots nearly half the bill. In nations with comparable per-capita incomes–France, Germany and Canada–health care eats 12%.

The U.S. system, emphasizing a regulated private market, does some things better–quicker access to specialists, for instance–but other systems, with more state participation, have strengths, including better access to general practitioners and citizens that don’t fear losing their homes to illness.

The even bigger, hidden costs are the high-quality jobs businesses can’t create.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Obama’s budget and deficit projections don’t reveal the sick state of U.S. finances, casting serious doubt on the safety of U.S. bonds.

Obama plans significant initiatives in health care, the environment, education, and jobs creation. Yet, the private sector, which must be taxed to finance government, is likely to grow slowly, resulting in too much federal borrowing.

To create jobs, businesses need customers and capital; without those they can’t sell what new employees make or buy equipment workers need.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

For Democrats, the chickens are coming home to roost. Badly conceived efforts to rescue homeowners facing foreclosure, regional banks and the unemployed are failing.

Bureaucracy and corruption are to blame.

The president’s program to restructure mortgages for homeowners facing payments too large for their incomes or who owe more money than houses are worth has only helped several thousand, not millions as expected.

The Treasury now proposes to shame some banks and invasively monitor, nag and cajole mortgage servicing companies–much like autocratic Beijing abuses Chinese financial institutions.

Continue reading…