President Barack Obama’s new federal government budget outline depicts a still-fragile economy continuing its slow but steady recovery from the deep 2007-2009 recession. The White House forecast sees the U.S. unemployment rate not falling to pre-recessionary levels of below six percent until after Obama has left office.
One bright spot in the projections: Tame levels of inflation at just over two percent for all of the next decade.
The White House’s economic assumptions and forecasts are slightly more optimistic in some areas such as short-term economic growth. Otherwise, they generally are in line with recent Congressional Budget Office and private sector Blue Chip projections.
The White House budget projects overall economic growth – as measured by gross domestic product -rising 2.3 percent this year, 3.2 percent in 2014 and 3.6 percent in 2016. That’s up from the negative-3.1 annual rate for 2009 in the depth of the recession. Last year, GDP rose 2.2 percent.
Congressional budget experts see the economy growing at just 1.4 percent this year, 3.4 percent in 2014 and 4.3 percent in 2016. The Blue Chip consensus sees 2.3 percent economic growth this year, 2.8 percent next year, 3.2 percent in 2015 and 2.8 percent in 2016.
All three forecasts see annual GDP growth declining slightly from 2016 through 2023.
“When the president took office in January 2009, the economy was in the midst of an historic economic crisis. The first order of business for the new administration was to arrest the rapid decline in economic activity that threatened to plunge the country into a second Great Depression,” the White House document said.
Since then, “the unemployment rate has fallen from its October 2009 peak of 10.0 percent to 7.7 percent,” as of this past February. Still, the White House went on to add that “even with healthy economic growth, unemployment is expected to be higher than is consistent with full employment for several more years. The administration is projecting unemployment to continue to decline over the next five years, stabilizing at 5.4 percent by 2018.”
The nonpartisan CBO sees unemployment averaging 7.8 percent this year and falling to 6.3 percent by 2013. The Blue Chip consensus sees 7.7 percent unemployment for 2013 and 6.3 percent by 2016.
The president’s budget projects continuing low inflation rates for the next few years, inching up from just 2.1 percent this year to 2.2 percent in 2014, a level where the administration forecasts it will remain for the next ten years.
Congressional and Blue Chip forecasts also see inflation, as measured by the consumer price index, as hovering at just over two percent over the next ten years.
Obama’s budget projects that, if Congress adopts the various tax and spending proposals in his fiscal 2014 budget, the federal budget deficit – the extent to which spending will exceed tax revenues – would be $744 billion in 2014. That’s down from a projected $973 billion this year, but, from a historical perspective, it’s still a relatively high 4.4 percent of the gross domestic product.
If Obama’s proposals were all adopted – a highly unlikely possibility – the White House estimates the deficit would be further trimmed to $528 billion by the 2016 election year, or 2.8 percent of the GDP.