FACT CHECK: Obama budget a leap of faith on growth
By CALVIN WOODWARD and MARTIN CRUTSINGER
Associated Press
February 2, 2010
WASHINGTON (AP) -- President Barack Obama's proposed budget relies on a commission without teeth to help his administration wrestle the deficit out of the danger zone. It forecasts stronger economic growth than most economists expect and calls on Congress to cut programs that lawmakers cherish.
All budgets from the White House are leaps of faith of some sort. This one is no exception.
The economic forecasts used in setting spending priorities are in line with independent expectations for now. After that, though, the administration's projections appear ever more fanciful.
A look at some budget assumptions and how they compare with the facts and political realities:
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BUDGET: Forecasts four years of growth of 4 percent or more and unemployment dropping to 8.2 percent in 2012.
THE FACTS: No one knows what will happen, but the administration's projections are rosier than private economists expect.
For 2010, the administration is projecting that the overall economy, as measured by the gross domestic product, will grow at an annual rate of 3 percent, when measured from the fourth quarter of last year. That is very close to the 2.9 percent GDP growth forecast from economists surveyed by Blue Chip Economic Indicators.
However, the administration is projecting that growth in 2011 will jump to 4.3 percent and remain at 4 percent-plus for three years, a scenario that is much stronger than the forecasts of private analysts. The Blue Chip consensus is for growth to be more than a percentage point lower in 2011 at around 3.1 percent.
Likewise, the administration's projection that unemployment, currently 10 percent, will end the year around 9.8 percent is in line with the outlook of most private economists. Many are looking for the jobless rate to peak at about 10.5 percent this summer and then gradually decline as the recovery gains strength.
However, for next year, the administration is projecting the jobless rate will drop to an average of 9.2 percent and will average 8.2 percent in 2012, the presidential election year. Many private economists don't believe the jobless rate will improve that quickly, given all the headwinds now facing the economy.
Stronger economic growth and more people working translates into more revenues for the government and less spending in such areas as unemployment insurance and thus a smaller budget deficit. However, private economists reviewing the administration's forecasts said the actual track for the economy is likely to be more sluggish, making future deficits, already expected to be huge, even larger.
"The administration's economic forecast is highly optimistic," said David Wyss, chief economist at Standard & Poor's in New York. "This is going to be a half-speed recovery. Usually you get a bigger kick coming out of such a deep recession, but we think there are just too many headwinds out there."
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BUDGET: Save some $20 billion by cutting programs.
THE FACTS: Congress typically disregards most items on a president's budget-cutting wish list and puts money into the programs anyway. Several dozen of the programs Obama proposes cutting in the new budget were marked for elimination in his budget a year ago.
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