The White House on Thursday sharply reduced its forecast for economic growth over the next year as President Obama prepares to petition Congress to approve proposals he says will help create much-needed jobs. Under the new forecast, the unemployment rate won’t fall below 6 percent until 2017 — two years later than the White House predicted in February, when Obama released his 2012 budget proposal. Unemployment is expected to remain at about 9 percent well into 2012, when Obama is up for re-election.
The White House budget office also reduced its expectations for annual gross domestic product growth, estimating the economy will grow at a rate of 1.7 percent this year — down from the 2.7 percent growth rate projected in February. In 2012, the growth estimates fell from 3.6 percent to 2.6 percent.
“The economic predictions make clear there is a real need in the short term to kick-start economic growth and get on a sustained higher-growth path,” White House budget chief Jack Lew said.
The Office of Management and Budget’s revisions reflect the effect of recent economic activity on the president’s assumptions in his 2012 budget, which he delivered to Congress six months ago.
Administration officials emphasized that the estimates, though dampened, are not an indication that the country is slipping into a double-dip recession.
“We are not forecasting a double-dip recession … [though] the pace of growth is not what we’re going to be happy with,” said Katherine Abraham, a member of the White House Council of Economic Advisers.
On the upside, White House officials said the country’s long-term deficit is now expected to decline more sharply than originally anticipated, thanks to steep spending cuts required by a budget deal Obama struck with congressional Republicans.
The administration predicts the deficit will be 8.8 percent of the GDP — down from an estimated 10.9 percent — by the end of this year.
Obama’s opponents on Capitol Hill were hardly impressed.
“By its own admission, the Obama administration’s record on job creation and fiscal responsibility is abysmal,” House Budget Committee Chairman Paul Ryan, R-Wis., said. “Today’s report confirms that the president’s policies have failed to deliver on his promises of job creation, deficit reduction, and much-needed economic growth. Since taking office, the president’s policies have made a difficult situation worse.”
Ryan pounced on the administration’s new projection that the unemployment rate, now at 9.1 percent, won’t fall below 8 percent — which Obama promised the 2009 stimulus package would achieve — until at least 2013.
The nation’s shifting financial prospects will inject real urgency into Obama’s speech before Congress on Thursday, when he plans to lay out a detailed package of proposals intended to spur job growth.
Lew said the president will propose tax cuts for the middle class, aid for the long-term unemployed and new spending proposals for transportation and infrastructure projects.
“There’s going to be a mix of tax and infrastructure spending,” he said. “The [new economic forecast] largely underscores the need to get back on a sustainable fiscal path and reinvest in economic growth and job creation.”
