Some economists warn Barack Obama's economic predictions too optimistic
By JEANNE CUMMINGS | 7/14/09 4:29 AM EST
POLITICO
Barack Obama's economic forecasts for long-term growth are too optimistic, many economists warn, a miscalculation that would mean budget deficits will be much higher than the administration is now acknowledging.
The White House will be forced to confront the disconnect between its original, upbeat predictions and the mainstream consensus about how the economy is likely to perform in a new budget forecast to be unveiled next month.
Christina Romer, chairwoman of the White House's Council of Economic Advisers, said in a POLITICO interview that the administration — like many independent economists — did not fully anticipate the severity and pace of this recession. She said the White House will be updating its official forecasts.
The new numbers will come as part of a semiannual review that, under ordinary circumstances, is the kind of earnest-but-dull document that causes many Washington eyes to glaze over.
This time, however, the new forecasts — if they are anything like what many outside economists expect — could send a jolt through Capitol Hill, where even the administration's current debt projections already are prompting deep concerns on political and substantive grounds.
Higher deficit figures also would arrive at a critical moment in the health care debate, as lawmakers are already struggling to find a way to pay for the president's nearly $1 trillion reform package.
Alternately, if Obama clings to current optimistic forecasts for long-term growth, he risks accusations that he is basing his fiscal plans on fictitious assumptions — precisely the sort of charge he once leveled against the Bush administration.
White House officials rebuff such suggestions, saying the midyear correction is precisely intended to keep their economic program reality based.
But a series of POLITICO interviews in recent days with independent economists of varied political stripes found widespread disdain for Obama's first round of assumptions, with some experts invoking such phrases as "rosy" and "fantasy."
Obama's current forecasts envision 3.2 percent growth next year, 4 percent growth in 2011, 4.6 percent growth in 2012 and 4.2 percent growth in 2013.
The administration is already under intense pressure over its economic calculations on the most politically sensitive statistic: employment. The administration once vowed to use stimulus policies to keep the jobless rate below 8 percent; it is now just shy of 10 percent.
Deficit figures do not pack the same emotional punch as unemployment lines do. But they matter greatly to policymakers and the financial markets as a measure of whether the country can afford Obama's big agenda.
And the general public is paying attention, too.