Honest Lies

The President's new budget has a special feature - truth in advertising - at least, that's what we're told by the White House and its spin team.
"President Obama is to be commended for sending Congress an honest budget that doesn't play hide and seek with the government's revenues and expenses. This isn't the "Fudget" we've seen in the past, with gimmicks that left out such expenses for the wars in Iraq and Afghanistan, the Alternative Minimum Tax and spending on natural disasters.
The new budget offered up by the White House, is, of course, all based on a lie. So sings the Obama choir, the New York Times, at least.
A sense of disconnect between the projections by the White House and the grim realities of everyday American life was enhanced on Friday, as the Commerce Department gave a harsher assessment for the last three months of 2008. In place of an initial estimate that the economy contracted at an annualized rate of 3.8 percent — already abysmal — the government said that the pace of decline was actually 6.2 percent, making it the worst quarter since 1982.
That budget is based on optimistic projections of economic growth that the Times reports are an utter fantasy.
The fortunes of the American economy have grown so alarming and the pace of the decline so swift that economists are now straining to describe where events are headed, dusting off a word that has not been invoked since the 1940s: depression.
The word conjurs vivid meaning, yet, we're told, it has no dictionary definition. Depression is in the eye of the beholder.
Mark Zandi, chief economist of Moody’s Economy.com, now places the odds of “a mild depression” at 25 percent, up from 15 percent three months ago. In that view, the unemployment rate would reach 10.5 percent by the end of 2011 — up from 7.6 percent at the end of January — average home prices would fall 20 percent on top of the 27 percent they have plunged already, and losses in the financial system would more than triple, to $3.7 trillion.
Others are less pessimistic - but still...
Allen Sinai, chief global economist at the research firm Decision Economics, sees a 20 percent chance of “a depressionlike possibility,” up from 15 percent a week ago. “In the housing market, the financial system and the stock market, we’re already there,” Mr. Sinai said. “It is a depression.”
Even so, the White House pretends its excessive spending plan will be supported by a growing economy.
Yet, in drawing up the budget, the White House assumed the economy would expand by a robust 3.2 percent in 2010, with growth accelerating to 4 percent over the next three years. “It’s a hope, a wing and a prayer,” Mr. Sinai said. “It’s a return to a sanguine view of the economy that is simply not justified.”
How about unemployment? Fed Chair Ben Bernanke predicts 8.8% next year.
“That forecast just doesn’t seem realistic,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, “and I don’t think it helps the Fed’s credibility to make these sorts of forecasts right now.”
So, what should we expect?
By Mr. Baker’s reckoning, the unemployment rate may exceed 12 percent — the highest level since tracking began in 1948. “We continue to see across-the-board numbers coming in worse than we expected,” Mr. Baker said.
Getting ahead of the downturn continues to be an elusive goal.
As the gruesome data accumulates, this much is already clear: Transparency is not for the squeamish. Mr. Levenson (Alan D. Levenson, chief economist at T. Rowe Price in Baltimore) noted that the weakening economy was destroying demand for goods and services even faster than the $787 billion stimulus program could replace it.
A phony budget doesn't help.