Sjeltur

President Obama thinks explosive government spending will save the US economy. You have to give him credit for being positive, this year the federal deficit will be $1.85 trillion, but Obama thinks the defict will shrink to “just” $533 billion by 2013. Obama is also very positive about the growth of the economy in the coming years. But now the IMF published new estimates about the economic growth, and these figures should be a wake-up call for Obama.

The Obama administration thinks the contraction of the Gross Domestic Product (GDP) for 2009 will be 1.2%. After that, Obama assumes a growth of 3.2% in 2010, 4.0% in 2011, and 4.6% in 2012. How realistic are these figures, really? Let’s have a look at the period 1998-2008, the US saw two major bubbles during that time, the tech bubble and the real estate bubble. But despite these bubbles, the growth was no more than 2.7% annually, on average. We saw a contraction of the US economy in the last quarter of more than 6%, so it’s very hard to see how Obama thinks the contraction this year will be only 1.2%, let alone a growth in later years far bigger than the growth was in times when the economy was booming.

The International Monetary Fund (IMF) published their new estimates about economic growth, they think the US economy will shrink 2.8% this year, way more Obama is counting on to make his plans a success. Knowing this, the very optimistic figures for later years are just plain fantasy. This should be a wake-up call for Obama, his plans are bound to fail, but will he change his policies? I would not put any money on it…