City Journal Winter 2016

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Winter 2016
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Josh Barro
Pawlenty’s Fuzzy Budget Math « Back to Story

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Why do you insist that we NEED economic growth, when we all know that living on a finite planet with fixed resources, we can't have our cake and eat it too?

Why do you throw your arguments into doubt at the very end with unreasonable expectations that growth can- let alone should- continue as it has been for the future?

You are conflating projections for growth in real GDP and nominal GDP. Pawlenty called for a 5 percent real GDP trowth target. The OMB projections are for nominal growth, and include approximately a 2 percent inflation assumption, meaning they are projecting real growth a bit above 3 percent. Maybe a little aggressive, but not nearly as aggressive as Pawlenty.
I agree. All the talk has to be about what can we afford. Clearly we can't afford all we want. We can only afford what we can pay for WITHOUT borrowing another dime. Once we stop borrowing we can start paying down; what a concept. To our surprise we will discover we can't afford 40% of what we are buying; think America before Woodrow Wilson.
Mr. Barro, I couldn't agree more that Pawlenty's speech used an unrealistic future GDP number.
However, Pawlenty is a piker. If you want to see unrealistic numbers, check out the Office of Management and Budget projections. Table 1.2
The executive branch office projects the 2011 GDP to be $15.0796T, and the 2016 GDP to be $19.7905T. By my calculation, that would require an average GDP growth of 5.21% per year over that six year period.
Since the revised 1st quarter figures for this year (the first year of the OMB's projected figures) is 1.8% annual growth, even if the actual figure at the end of the year is 3.1% as projected by the Congressional Budget Office, it would require future growth to exceed 5.64% on average for the following five years. I don't know of anyone other than the President's people who is suggesting that the GDP growth in the next five years will be anything like that. Certainly that's far in excess of what the Congressional Budget Office is saying.
Why don't you do an article on the Obama projections?