Guest Post: Obama's Budget Is A Fantastic Comedy

Tyler Durden's picture

Submitted by Chris Martenson

Obama's Budget is a Fantastic Comedy

Fantasy or comedy?  I couldn't decide which way to label the Obama budget, so I went with both.

The bottom line is that the Obama administration has brought forth the most unbelievable revenue increase that I have ever seen proposed in a budget, a whopping 65% increase in revenues in just four years, which will - miracle of miracles - drop the deficit as a percent of GDP from nearly 11% to just 3.2% over those same four years.

The only problem with this scenario is that it stands virtually no chance of actually happening. Revenue will be far lower than projected and the deficit correspondingly higher.

One of my abilities is spotting bogus numbers quickly, and another is to make reasonably accurate projections without a staff of hundreds. For example, in 2009 I called for the Social Security fund to soon begin dipping into negative territory when the CBO was clinging to the illusion that 2017 was the 'below zero' date. Turns out I was right, and it wasn't a terribly difficult call to make. A little trend projection here, some assumptions about early retirement there, a higher and more realistic assessment of peak unemployment, and - voila! - a reasonably accurate projection was made.

Let's look at the recently released Obama budget, which is so far off the mark that no special abilities are required beyond the ability to suppress the urge to chuckle:


The green circles show the rosy deficit-reduction estimates, while the red arrows indicate the incredible 65% increase in federal revenues over a single four year period.  65%! How likely is that? Is it realistic?

Perhaps a little history is in order here. Let's start by asking a question: In any other four-year period, have federal revenues increased by 65% or more?

The answer is yes, but it’s a very qualified yes.

In the first chart below, the red bars show the proposed revenue increases on a rolling four-year basis. That is, each year is compared to the revenue period four years prior. The blue bars are the same, only they represent actual history, not projections while the red bars are the Obama team projections.

The second chart is a comparison to CPI to make a point.

Over the past 60 years, there have only been three other years with a similar or higher rate of revenue growth to the one estimated to occur in 2015: 1979, 1980, and 1981.

There are two things we might note about those prior three years ('79-'81) of rapid federal revenue growth. The first is that those same years represent the second, first, and fourth highest rates of yearly inflation in 50+ years of data, coming in at 11.3%, 13.5%, and 10.4%, respectively.

Does the Obama budget assume similar enormous rates of inflation? Nope. It assumes 2% or less inflation in every year of its projections out through 2015.  So it's not inflation that will be driving the enormous revenue growth.

Another reason we might anticipate extremely strong revenue growth is because of a rapid expansion of GDP.

Here again in 1979, 1980, and 1981, we saw something very unusual in the data: Those years clocked exceptionally robust GDP growth at 11.7%, 8.8%, and 12.1%, respectively.  Out of 65 years of data, those were the 4th, 5th and 17th fastest years of economic expansion.

Could that be the driver behind Obama's optimism? Is his team calling for double-digit GDP growth over the next few years?  Do they envision 'top ten' like performance for a couple of those years?

Not according to their published data.

So we can't really defend the projected increase in revenues on the assumption of massive economic expansion either. The Obama team does predict a pretty decent expansion - but on a relative basis, it's nothing spectacular and is less than half that which drove the revenue expansion in the 1979-81 period. 

So the 65% revenue increase will not be driven by either inflation or GDP expansion.

What if we compare the projected increases historically on an inflation-adjusted basis - would that put them in a better and more believable light? 

In this next chart, we simply chart each year's federal revenues after correcting for CPI (we used the Obama budget CPI assumptions for the years 2011 - 2015 to discount the future so everything is in 2010 dollars).

Are these numbers any less fuzzy? Nope. Even on this basis the proposed revenue increases are the largest on record, bar none.


There is almost no chance of the Obama revenue projections coming to pass, unless massive tax increases are part of the deal, and as far as we know, they aren't.

The only other alternative is that the United States might enjoy some pleasurable combination of quite rapid growth, a fall off in unemployment to match, tidy increases in wages, and a low CPI.  But the probability of all of these coming to pass is very, very low (although I will admit that they must be very appealing to an incumbent. Appealing? Yes. Likely? No.)


Here's my prediction; we'll have sub-par growth in 2011 and relatively weak growth in 2012, with a 50% chance of a double-dip appearing in one of those years. As such, revenue growth will be slightly below average between here and 2015.

Using these assumptions, and generously assuming that things more or less carry on as normal and even more generously that the economy magically grows to $19 trillion as the Obama team has assumed, the actual budget deficit will be no less than 8% of GDP each year between here and 2015.

My estimates translate into a roughly $1.5 trillion cash deficit each and every year -- give or take a little -- digging our national debt hole deeper by another $7.5 trillion by 2015.  

This, however, is merely my starting bid. I can easily envision deficits that are far higher in both aggregate and percent-of-GDP terms, due to some combination of rising energy prices and debt overhang dragging the GDP figure downwards, and rising interest rates driving federal costs higher.

The bottom line is that either this budget is a fantasy, or I am completely wrong and we somehow set historical records for revenue growth during a time of low inflation and below average GDP growth.

It is against this backdrop that you should be especially dismissive of any and all partisan rhetoric that proposes to reduce the deficit by trimming this or that program by a few billion here and there. Until and unless you hear about cuts to the big four - Defense, Medicare, Medicaid, and Social Security - you can be certain you are merely listening to partisan talking points aimed at posturing for the next election, not credible plans for attacking the root of the problem.

The US is facing a deficit pattern (deficits higher than nominal GDP growth) that has ruined many a country before. A failure to legitimately address this condition before being forced to do so by global or market circumstances will lead to a far rougher period of adjustment than necessary.  Such a failure even risks it all: a sudden loss of reserve currency status for the US that leads to a sudden repatriation of some $7 trillion in US-dollar-denominated assets currently held off-shore.

Said simply: The risk is a massive inflationary event that forces the Fed to choose between defending the dollar (by raising interest rates) or defending the US economy. It can't do both at the same time.

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nope-1004's picture

You have to be a comedian to be able to relay a "fantastic comedy".

So it is with Obummer.  He's a joke, really.  No substance, just all talk.


IBelieveInMagic's picture

"Deficits don't matter" - Dick Cheney

Enough said.

Red team or blue, the policy is the same.

MJ's picture

Maybe he just told us massive inflation is a sure thing.

Rule of 72's picture

Fantasy or comedy?  I couldn't decide which way to label the Obama budget, so I went with both.

I'm going to go with tragedy.  Of the Shakespearean variety, where we all end up dead in the end.

Obeyme has revenue-shitting unicorns to get him to his projections.  Little-known fact.

blindfaith's picture

chances are he will balance the budget by dumping 50% of the government workers and saving salaries and pensions in one giant leap into greener pastures.

Seems to me all the unicorns have left and new ones are warming their own electric chairs.


But seriously...why do we need any government employees when we can make up numbers and 'facts' on the fly without them.

Alcoholic Native American's picture

Are governments that allow multinational corporations to litterally suck billions in profits out of a country on a daily basis for a global investor class supposed to die?  Seems like they would.

DaveyJones's picture

Like most criminals, they should suffer deprivation first

Buckaroo Banzai's picture

In a related story, massive tax increases proposed by CT's new Democrat Governor Malloy. What a surprise!,0,...

IBelieveInMagic's picture

This is fair -- has to be applied on spend. Income tax need not be changed dramatically. /s

Freddie's picture

Well the people of CT vote for shit like Lieberman and that ass Bluemnthal - I hope they enjoy.  Idiots.   America is a lot like what happened to California.  We had paradise (or as close as you can get) and we had to destroy it.

Vergeltung's picture

excellent article.

DaveyJones's picture

Was gonna give everyone the link in a comment on another thread, glad Tyler posted it. He may not be as witty as Tyler but he has excellent teaching skills and the ability to translate and condense complex subjects  

overmedicatedundersexed's picture

with inflation anything is possible..rising taxes, and growing GDP sure ,thats why benny can't see inflation.

of course mcd's big mack will cost $15.00 and PM's will skyrocket.

blindfaith's picture

I just bet all these bankers and folks like warren buffert are going to pop out of the woodwork and say " here ya go, we'll give ya the money to pay off the debt'.  Shoot, that is chump change to them, sofa money.

topcallingtroll's picture

The troll is getting very scared and pessimistic now, which means the economy is about to boom and stock market to da moon!

walküre's picture

They were lying ever since the scam of 2008. It was too obvious and it was too easy to expose with the internet and a few good analysts. Numbers don't lie. The green shoots line was touted which turned into the recovery line and now we're up, up, up and away with a 65% increase in government revenues.

Outsourcing jobs hasn't slowed down or stopped, it has actually increased and China and India are the main beneficiaries. There isn't much the US is producing that the world actually wants and cannot get anywhere outside the US. The US corporations are only in the US by virtue of registration but the bulk of their business is done overseas.

You have a US market with 330 million people of whom a vast majority is simply broke, unable to get up and running again and has no savings. A few at the top are richer than ever.

China's and India's economy are exactly the opposite. There's a growing middle class with a growing appetite to be a consumer of goods and services AND their credit is increasing because their banks can ask for collateral.

This budget is beyond stupid for those that have more than a 5th grade comprehension level.

IBelieveInMagic's picture

Outsourcing is the sacrifice that America (lower rung America to be precise) has to be make for keeping this reserve currency based financial system going -- no outsourcing, game over. Back to bilateral trade, the great game, etc.




walküre's picture

I'd like to believe .. in magic ... as well.

Just can't do it anymore.

Rainman's picture

I see a big fat VAT in our, of course.

Logans_Run's picture

Is that how we will rid ourselves of this crop of incompetent leaders? Boil them all to death? lol

Judge Judy Scheinlok's picture




rookie's picture

OT - Clinton delivering major internet freedom speech at GWU today.  Can someone ask her why ZH servers have to be outside US and why I received so many Error 503 messages while trying to read last year?


Azannoth's picture

Try living in Germany I receive an 'Page Blocked' from my ISP on every 10th page I visit and 1/3 of youtube vidoes are 'Not available in your country'

Greater Fool's picture

Until and unless you hear about cuts to the big four - Defense, Medicare, Medicaid, and Social Security - you can be certain you are merely listening to partisan talking points aimed at posturing for the next election, not credible plans for attacking the root of the problem.

Credible thoughts on how to attack the root of the problem were floated recently by a commission of legislators themselves and more or less dismissed out of hand because they are politically unworkable. It is difficult to find a more succinct statement of why the US system of representative government, as it currently stands, is an utter failure.

VodkaInKrakow's picture

Raise taxes to Clintonian levels. After all, the mega rich where still mega-rich back then. And the VAT, WORST FUCKING TAX EVER. 23% of my income goes to paying for tax loopholes for corporations right now. Want to know what 'Capitalism' really is anymore - I'll fucking tell you.

The energy company in my neck of the woods recently changed its name after seven years. That energy company, now registered under some bullshit name, qualifies as a 'new' company for tax purposes - lower taxes. The game is rigged in Europe as surely as it is rigged in America. Do you think the average, Joe European can do that? OH FUCK NO!

Fuck all those assholes who want a VAT. You do not deduct it from your taxes at the end of the year. FUCK YOU!

This is not directed at the original poster. I saw some pieces of shit wishing for a VAT over the last several days.

gwar5's picture

Obama jacked up the Federal spending baseline 25% over the last two years. Any cut he gives is a fraud.

Anybody that calls spending "investments" is commie who thinks everybody is stupid and the State run media to cover for him on it, as ever.

Smiley's picture

I'm curious; do modern politicians take college courses specifically designed to argue against the merits or basic mathematics?


Judge Judy Scheinlok's picture






Soup's picture

stop posting in caps you douche.

jomama's picture

have to laugh to keep from crying? 

i think it's fairly obvious at this point to surmise that the global bankster cartel is hell bent on moving capital out of the US and into emerging markets. 

americans are too dependant on federal handouts to change it even if they wanted to.

buzzsaw99's picture

almost time for owebama to sit down and write two letters.

walküre's picture

65% revenue increase over 4 years?

Has the UST reverse merged into a company that sells the water of life?

Is Obama already hitting the campaign trails? Must be so.

smlbizman's picture

these revenues can easily be reached if we borrow enough from bennie and the jets. and return the interest back to the treasury...i say this in jest but somehow i think this may be part of his plan..

walküre's picture

Fed transfered about 80 billion in revenues from 2010.

They would have to buy a whole lot more paper to get anywhere close to reaching this revenue.

Also, the world knows full well that the Fed and UST are in a circle jerk.

WTI is down, BRENT is up. The gap is getting wider. WTI is manipulated to keep the peace in the US.

The USSR did the same but it didn't work. This will end badly for the US also.

countryboy42's picture

Also, the world knows full well that the Fed and UST are in a circle jerk.

I was thinking more like a circular firing squad.

eddiebe's picture

Whatever happened to 'deficits don't matter'?

 What would happen if the bankers manage the dollar down to let's say 40 over those years. That would make Obameas budget figures look alot more creditable, no?

Squid Pro Row's picture

Excellent article.  Here are my thoughts.

  • The world needs a medium for international exchange and today its the dollar.
  • The medium of exchange may change in the future, but until the alternative is accepted the dollar is it.
  • Any change to this arrangement will be fought by the US and its millitary.
  • The US can continue printing and her creditors will just have to bear it.
  • Dollars have to be held by someone - "dollar dumping" comments often omit the notion that every transaction has a seller and a buyer.
  • The status quo is unlikely to materially change in the near to medium term.
EscapeKey's picture

The world needs a medium for international exchange and today its the dollar.

I've done a bit of research into this, and the US Dollar is only actually the invoicing currency for about 40% of transactions in world trade. The Euro takes around the same slice.

Commodities, etc, are traded in Dollars, of course, but the overwhelming majority of intra-european trade, and trade with the Eurozone, is done in Euros.

ConfusedIdiot's picture

Agreed, SPR. Which "bank" will guarantee return of these dollars? USA corps alone have $1.3 trillion in unencumbered cash held in "banks" . Total offshore denominated $ investments over $7 trillion. Which "banks" are safe?

overmedicatedundersexed's picture

we had a rather simple document that said what were the fed gov's responsibilities..but as time went on our politicians decided to do more (for some it was to do "good "see Fabian socialist),,but for those of us dark hearts :it was and is to expand a base for corruption and power.

 use occam's razor as to who is correct.


dick cheneys ghost's picture

bank of england warns of high inflation for next 3 yrs.

djsmps's picture

I once worked at an audio company where the VP of engineering presented the company's growth plan to us.

Present: $6 million, Year 1: $20 million, Year 2: $50 million, Year 3: $125 million, Year 4: $200 million.

When asked what the plan was to achieve this, his answer was "Whatever it takes."

walküre's picture

I see business plans like these all the time.

When you tell the executives that their plans are flawed, they get pissed.

Diogenes's picture

Step one: Steal underpants. Step two: ? Step three: PROFIT!!!!

StychoKiller's picture

No one plans to fail, but a lot of people fail to plan!

Seasmoke's picture

i wouldnt believe a word or number that comes out of the Pole Smokers mouth

tahoebumsmith's picture

We will definately hit the 20 TRILLION by 2015. The debt ceiling wil be raised 9 more times and there is nothing we can do about it. The ink jets will be printing faster then ever and nobody but the FED and the big banks will be buying Treasury bonds with fiat currency. After all they are the ones that got us into this mess so they will be the ones making it worse by trying to cover up the rape and pillage they have done in the past 5 years. The dollar will be worthless and probably another currency will have already replaced it. There will have to be a big reset at some point, my guess it is coming sooner then later as we all know the debt in America can never be paid back.