White House forced to face hard facts on economy

THE White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today’s bleak landscape.

The administration’s annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama’s budget in February and update in May, and that could complicate his efforts to get his signature healthcare and global-warming proposals through Congress.

The release of the update, usually scheduled for mid-July, has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its August 7 summer recess.

The administration is pressing for votes before then on its $1 trillion healthcare initiative, which lawmakers are arguing over how to finance.

White House budget director Peter Orszag said yesterday the administration believes the “chances are high” of getting a health care bill by then. However, new analyses showing runaway costs are jeopardising Senate passage.

“Instead of a dream, this routine report could be a nightmare,” Tony Fratto, a former Treasury Department official and White House spokesman under President George W Bush, said of the delayed budget update. “There are some things that can’t be escaped.”

The administration earlier this year predicted that unemployment would peak at about 9% without a big stimulus package and 8% with one. Congress did pass a $787 billion two-year stimulus measure, yet unemployment soared to 9.5% in June and appears headed for double digits.

Obama’s current forecast anticipates 3.2% growth next year, then 4% or higher growth from 2011 to 2013. Private forecasts are less optimistic, especially for next year.

Any downward revision in growth or revenue projections would mean budget deficits would be far higher than the administration is now suggesting.

Setting the stage for bleaker projections, Vice-President Joe Biden recently conceded, “We misread how bad the economy was” in January. Obama modified that by suggesting the White House had “incomplete” information.

The new budget update comes as the public and members of Congress are becoming increasingly anxious over Obama’s economic policies. A Washington Post-ABC News survey released yesterday shows approval of Obama’s handling of health-care reform slipping below 50% for the first time. The poll also found support eroding on how Obama is dealing with other issues that are important to Americans right now — the economy, unemployment and the swelling budget deficit.

The Democrat-controlled Congress is reeling from last week’s testimony by the head of the nonpartisan Congressional Budget Office, Douglas Elmendorf, that the main health care proposals Congress is considering would not reduce costs, as Obama has insisted, but “significantly expand” the federal financial responsibility for healthcare.

That gave ammunition to Republican critics of the bill.

Last week, Obama vowed a new “health insurance reform cannot add to our deficit over the next decade and I mean it.”

The nation’s debt — the total of accumulated annual budget deficits — now stands at $11.6 trillion.