A reader at Andrew Sullivan’s place points out the absurdity of Obama’s deficit reduction projections:
I see in Table 8.8 of the budget that the White House assumes real GDP growth of 3.2% in 2010, 4.0% in 2011, 4.6% in 2012 and 4.2% in 2013. I leave it to your imagination what the deficits would be if they had made more realistic assumptions.
Considering what we learned about the GDP yesterday, I would suggest that we take those projections with more than just a grain of salt.
Milton Friedman used to say that the bounceback from a recession is analogous to a rubber band. The farther you pull it down the stronger the bounceback. That was why the recovery from the double dip 80, 81-82 recessions was so strong because the contraction was pretty severe. So the question is when will the economy bounce back? Given the monetary push behind it I would not be surprised by a strong bounceback, but obviously there are concerns on the inflation side if that happens.