Ouch, this isn’t good news for President Obama’s agenda… The White House has been using some pretty rosy economic forecasts to sell his agenda. However, those rosy forecasts have finally crashed head-on into economic reality. In short, GDP declined roughly twice as much as they predicted and their out year deficit forecasts will be roughly $2 trillion higher than originally forecast:
U.S. unemployment will surge to 10 percent this year and the budget deficit will be $1.5 trillion next year, both higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said.
The Office of Management and Budget forecasts a weaker economic recovery than it saw in May as the gross domestic product shrinks 2.8 percent this year before expanding 2 percent next year, according to the administration’s mid-year economic review issued today. The Congressional Budget Office, in a separate assessment, forecast the economy will grow 2.8 percent next year. Both see the GDP expanding 3.8 percent in 2011.
“While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.”
The budget shortfall for 2010 would mark the second straight year of trillion-dollar deficits. Along with the unemployment numbers, the deficit may complicate President Barack Obama’s drive for his top domestic priority, overhauling the U.S. health care system.
“It throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.”
Frankly, I don’t have a lot of faith in the Administration’s economic recovery forecasts… Not with Bush tax cuts set to expire next year and the general anti-business, anti-capital formation rhetoric coming from the White House and Congress.
The only question that needs to be answered is how can the Obama Administration have any credibility on economic issues at this point?
- White House Raises Long-Term Deficit Forecast – Wall Street Journal
- Deficit fears put Obama’s reforms in jeopardy – Financial Times
- Most red ink ever: $9 trillion over next decade – Associated Press
- The Budget & Economic Outlook: An Update – Congressional Budget Office Director’s Blog
- Orszag: Let’s spend money to fight … deficits? – Hot Air
- The U.S. budget deficit is even worse than you think – James Pethokoukis