President Obama’s mid-session budget review confirms what most private and government projections have recently concluded — that the economy is considerably weaker than earlier forecasts held, and won’t fully recover from the Great Recession for years.
Most troubling, both for the country and for Obama politically, is that near-term unemployment is expected to remain significantly higher than expected, averaging 9 percent in fiscal year 2012.
Obama’s budget office initially calculated its economic forecast based upon data available through June. Even that data presaged an 8.8 percent average unemployment rate in 2011 and an 8.3 percent average rate next year. But the mid-session review got delayed, and when the Office of Management and Budget revised it to incorporate the data through the end of August, the picture became much gloomier. Unemployment will average 9.1 percent this year, and 9.0 percent next year, OMB concluded, and won’t dip below 7 percent until 2015 at the earliest.
The revised figures “reflect the substantial amount of economic turbulence over the past two months,” OMB says, triggered by the European debt crisis, the earthquake in Japan, congressional brinkmanship over the debt ceiling among others. They also take into account the fact that GDP growth in the first half of fiscal year 2011 turned out to be significantly lower than originally thought.
Despite these and other setbacks, “we are not forecasting a double-dip recession,” Katharine Abraham, a member of Obama’s Council of Economic Advisers, told reporters Thursday.
The report does not incorporate the impact of Obama’s yet-to-be-unveiled jobs plan which, if enacted, would likely alter near-term unemployment and fiscal figures.
Thus, the fiscal figures are improving much faster than the broader economic ones. “The deficit for 2011 is now expected to be $1.316 trillion, down $329 billion from the deficit of $1.645 trillion deficit estimated in February,” the report says.
Read the entire review below.
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at email@example.com.