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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.)

Federal finances are in shambles, and Americans should be amused if not disgusted by the explanations and solutions both political parties offer.

President Obama’s budget plan issued in February projects a $1.6 trillion deficit for 2011 and a cumulative shortfall of $11 trillion through 2021.

Things may get worse, as additional revenue and cost savings from health care reforms don’t materialize and the 4% growth assumed by the president’s budget for the next four years proves Pollyanna.

Time and again, Obama and House Democratic leader Nancy Pelosi have demagogued the problem, blaming two wars and tax cuts instigated by President Bush and the Great Recession.

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(Following 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.)

With the new tax cuts, rating agencies should downgrade U.S. government debt to junk.

Economists, pundits and politicians had little choice but to endorse the tax deal between President Barack Obama and congressional Republicans because snapping back to pre-Bush tax rates would crush the economic recovery. But Washington exhibited not even the shadow of self-restraint and cut taxes far beyond what is needed or smart.

Newly emboldened Republicans demanded all the Bush tax cuts be extended. Obama argued the country couldn’t afford those for families in the highest tax brackets, but failed to apply such reasoning to temporary benefits bestowed on Democratic constituencies by his 2009 stimulus program.

Instead of compromising, with each side getting half of what it wanted, Washington feasted; everyone got everything they wanted and more. Business got its R&D tax credit and a temporary tax holiday on new investments. The wealthy got Bush-era tax rates and even lower rates through temporary elimination of income-triggered phaseouts on deductions and personal exemptions. The poor and middle class got a temporary 33% cut in Social Security taxes.

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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:

Economists expect a strong jobs report for May, but the unemployment rate is expected to ease only slightly.

Friday, the Labor Department will release May employment data, and forecasters expect something north of 500,000 new jobs; however, many are in the public sector reflecting stimulus spending. Manufacturing is expected to add a respectable 30,000 new positions.

Unemployment is expected to only fall to 9.8% from 9.9% in April, because many sidelined adults, sensing improved conditions, started looking for work.

The big challenge is to keep gross domestic product growing at least 3% to pull down unemployment.

Much recent growth has been inventory adjustments, and sustainable growth, reflected in real consumer and business investment demand, has been only about 2%. As stimulus spending tails off, new sources of demand will be needed.

If the economy keeps growing at 3% the balance of 2010, demand for new capacity–improved rental housing, better located new homes, and commercial construction for retail and factory improvements–should accelerate in 2011. Auto sales, currently a bit above 11 million a year, should move up to 12 million plus with noticeable multiplier effects in the Midwest and Upland South.

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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:

Friday, the Labor Department will release April employment data, and economists are optimistic the economy will show stronger jobs creation.

The consensus forecast, based on surveys of economists taken at the end of last week, is for a 180,000 jobs gain in April, after adding 162,000 jobs in March. The unemployment rate is expected to remain at 9.7 percent. My forecasts for April likewise are 180,000 jobs added and 9.7 percent unemployment.

The Great Recession destroyed 8.4 million jobs. To bring down the unemployment rate, the economy must add about 150,000 jobs a month to accommodate adult population growth, reentry of discouraged workers, part-time employees who would prefer full-time work, and marginally-occupied self-employed workers. Including these three groups, unemployment is closer to 20% than the 9.7% headline figure. 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:

Friday, the Labor Department will release March employment data, and economists have been optimistic the economy is finally gaining jobs and the recession has ended.

The consensus forecast, based on surveys of economists taken at the end of last week, is for a 200,000 jobs gain in March. The economy shed 36,000 jobs in February. The unemployment rate is expected to remain steady at 9.7%.

The ADP estimate for private sector jobs creation, released Wednesday, indicated a 23,000 loss, but that estimate does not include government workers and does not always track more comprehensive Labor Department estimates of private employment. 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 deficit task force is clever politics but poor leadership.

Instead of drafting a responsible budget, he seeks to force Republicans to endorse wasteful spending and higher taxes, or be cast as obstructionists.

President Bush was no model of austerity. He inherited a $263 billion surplus from Bill Clinton. By fiscal 2007, the year before the Great Recession, the deficit was $161 billion.

Bush’s foolishnesses started with unnecessary increases in farm subsidies and ended with a TARP that bailed out the banks without imposing needed reforms.

Bush and a Democratic Congress instigated economic collapse by appeasing China on trade, neglecting the cost of imported oil and permitting Americans to borrow profligately to finance a resulting trade deficit exceeding $700 billion.

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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 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.

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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 Obama announced he wants to prohibit banks from forming hedge funds, private equity funds and trading securities on their own accounts, and he wants to limit the size of banks and financial institutions generally.

Hedge funds, private equity funds and proprietary securities trading did not cause the banks to get into trouble, and the size of banks did not cause the credit crisis.

Banks, small and large, failed or required bailouts because of poorly considered loans, and the kinds of engineered products that were created from those loans by non-bank entities.

Collateralized debt obligations and swaps created and marketed by non-bank financial institutions, such as Lehman Brothers and Goldman Sachs, compounded the errors of foolish bankers. Later, Goldman Sachs and other financial institutions became banks to access inexpensive credit from the Federal Reserve, but those decisions could be reversed if bank holding companies are not permitted to trade on their own accounts.

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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:

Scott Brown’s Massachusetts victory serves notice that Americans don’t want big government policies championed by liberal Democrats.

It is not a mandate for Republican tax cuts and deregulation. Rather, from health care to the economy, Democrats should stop accusing critics of deceiving the public and ask what voters would embrace.

To cover the uninsured, Americans would support reforms that made Medicaid and similar programs less expensive and lowered health insurance premiums for the middle class.

Real reform would reduce drug and administrative costs to those in other advanced countries, like Germany or Holland, and end waste imposed by malpractice suits those countries don’t endure.

Reform should not impose higher taxes but rather lower costs–the president should apply that yardstick, not budget neutrality.

Regarding unemployment, the $789 billion stimulus package will not deliver the 4 million jobs promised. Fanciful dreams of creating million jobs in green industries are just that–fanciful dreams.

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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:

Whoever is declared the winner, the outcome of the Massachusetts senatorial election is neither a mandate for President Obama’s liberal agenda nor a license for a return to status quo ante of George Bush.

The fact that a conservative put Ted Kennedy’s seat at play is a repudiation of Democrats recent partisan governing style, and an agenda that is simply out of step with the real change Americans want.

From health care to jobs to the banks, it’s time for Democrats to stop accusing critics of deceiving the public and to step back ask what voters will accept. Continue reading…