The Campaign Spot

Geithner Loves Rosy — Rosy Scenario, That Is

Treasury Secretary Tim Geithner, testifying before the House, emphasizes that he believes the economy will grow by 3.2 percent in 2010.

The Wall Street Journal notes this is, by most calculations, pretty optimistic:

After contracting at a 1.2% rate in 2009, a more modest drop than the Congressional Budget Office and Blue Chip Consensus forecasts assume, the White House sees growth domestic product growth snapping back by 3.2% next year and then 4% or higher the three years after that.

The last time the economy preformed that well was the New Economy heyday of the late 1990s.

The 2010-2013 forecasts are slightly more optimistic than CBO but much rosier — in some cases by well over one percentage point — than what the Blue Chip Consensus calls for. A separate private-sector gauge, the Survey of Professional Forecasts, also projects a much weaker economy this year and next.

Under these calculations, Obama’s Treasury Department puts the deficit at $1.75 trillion next year, declining to $1 trillion the following two years and lowering to $533 billion in 2013.

But what if the economy contracts by more than 1.2 percent? Pretty likely, no? That means lower tax revenues. That means the deficit will be higher than that $1.75 trillion. And projected out, year by year, that deficit could grow ever larger, if the other projections are similarly excessively optimistic . . .