President Obama’s 2010 spending plan envisions the budget deficit falling next year. Fat chance, say some expert budget crunchers.
The administration’s budget projects the deficit will shrink by a third next year — to $1.17 trillion. But, to get there, the budget makers produced some pretty rosy assumptions about the economy, some say more fantasy than reality.
The administration forecast 3.2 percent economic growth for next year, sparked by the $787 billion fiscal stimulus package.
But that figure is wildly more optimistic than other, more sober predictions.
The Blue Chip Economic Indicators survey projects 2.1 percent growth next year, while the Congressional Budget Office, before the stimulus program was passed, estimated just 1.5 percent.
Even those numbers could turn out to be too high. Federal Reserve Chairman Ben Bernanke said in a speech Tuesday that full economic recovery will take more than two to three years.
Financial stability has to return before the recession ends, he points out. Who knows when that will happen.
What do experts have to say about the White House growth forecasts?
“One glaring, central risk to the budget’s projections is the economic outlook,” Joseph Minarik, a Clinton administration aid now at the Committee for Economic Development, tells Bloomberg. The budget assumes “the economy is going to turn around more rapidly.”
Economist Nigel Gault at IHS Global Insight agrees.
“The situation is deteriorating almost daily,” he tells Reuters. “They clearly do have an economic backdrop to their budget that is too optimistic.”
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