Departing from normal journalistic practices, the Washington Post devoted its lead article to an editorial criticizing the Obama administration's budget policies. The headline of the piece, ostensibly an article on new projections from the Congressional Budget Office, is "Deficit Projected to Soar With New Programs." In fact, the main cause of the increase in the deficit in the latest projections is not "new programs," the main cause of the increase is worse than expected unemployment and growth numbers. A more neutral account of the projections would have highlighted the fact that the Congressional Budget Office now expects the unemployment rate to average 10.2 percent in 2010. It previously had projected that unemployment would average just 9.0 percent, even without the benefit of a stimulus package. The article does not discuss this sharp deterioration in economic projections until deep into the jump page. The article also wrongly includes the assertion that: "deficits of that magnitude [the projected deficits for the end of the projection period] would require dramatically more government borrowing from China and other creditors,..." It is the trade deficit that requires borrowing from China (more precisely, lending from China causes the trade deficit by raising the value of the dollar), not the budget deficit. The Post should stop making such xenophobic assertions. The Post also notes that China has expressed concern that it may lose money on its dollar investments. Presumably it knows that it in fact will lose money on its dollar investments. The dollar is virtually certain to fall in the years ahead since is trade deficit is unsustainable. This means that the Chinese will be paid back in dollars that are worth considerably less than the dollars they lent. China may be willing to accept this loss to sustain their export market in the United States. The public expressions of "concern" are most likely for public relations purposes. (Governments don't generally express their real concerns in public forums.)
--Dean Baker
