I read an interesting article which was published in the NY Times yesterday. (free registration required). The article, "Un-Spin the Budget," is by Paul Krugman. This is just plain classic.
Seriously, the administration is poised to do the same thing on the budget that it has done again and again in Iraq: claim that a modest, probably temporary lull in the flow of bad news shows that victory is around the corner and that its policies have been vindicated.
So let me do some pre-emptive de-spinning and debunking.
To understand where the budget deficit came from, you can't do better than the Jan. 18, 2001, issue of the satirical newspaper The Onion, which predicted the future with eerie precision. "We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent," the magazine's spoof had the president-elect declare. "And, on the foreign front, we must find an enemy and defeat it."
Well I agree with Krugman's view of the situation, and he closes with this statement.
In other words, we're still deep in the fiscal quagmire, with federal revenues far below what's needed to pay for federal programs. And we won't get out of that quagmire until a future president admits that the Bush tax cuts were a mistake, and must be reversed.
You can find his full reasoning in the article which is well worth a read.
My evidence of the failure of the current economic policy is that our position relative to Canada's dollar has declined.
A Canadian dollar how has more buying power in the US than it has had for a long time. It wouldn't be that way it the international community viewed the US government's economic policy through the same rosy colored glasses that have some believing we have turned the corner and that the tax cuts for the super rich are going to save the economy.
Here are a few comments from the article, "Travellers enjoy strong dollar," in the Toronto Star (free registration required). The "Loonie" is the name for the Canadian dollar coin.
The Canadian dollar is finally having a good summer...
In fact, the currency is having its best July since 1992...
It's even easier to splurge now that the exchange rate has broken out of what has become a summer rut. The loonie has gained more than 4 per cent since mid-May, closing yesterday at 82.20 cents (U.S.), up 0.19 of a cent, its fourth consecutive increase. That cabana treat will be nearly 30 per cent cheaper now compared with three years ago, thanks to the hard-charging dollar.
So if you take my advice, "A Summer Excursion Through New Brunswick, PEI, & Nova Scotia," and go to Canada to enjoy a change of scenery, you'll find it more expensive. Of course that is only relatively true since one US Dollar is still worth, according to Google, $1.2335 Canadian.
To get back to my point, if our budget is working it doesn't appear to be driving our prosperity in relative terms compared at least to Canada. I have some more comments on this in my post, "The Economy As A Free Agent."
You can always invest in Canadian stocks and hope the current trend continues.