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Obama Predicts Unemployment, Deficits Far Worse Than Previously Stated...


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Aug. 25 (Bloomberg) -- U.S. unemployment will surge to 10 percent this year and the budget deficit will be $1.5 trillion next year, both higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said.

The Office of Management and Budget forecasts a weaker economic recovery than it saw in May as the gross domestic product shrinks 2.8 percent this year before expanding 2 percent next year, according to the administration’s mid-year economic review issued today. The Congressional Budget Office, in a separate assessment, forecast the economy will grow 2.8 percent next year. Both see the GDP expanding 3.8 percent in 2011.

“While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.”

The budget shortfall for 2010 would mark the second straight year of trillion-dollar deficits. Along with the unemployment numbers, the deficit may complicate President Barack Obama’s drive for his top domestic priority, overhauling the U.S. health care system.

“It throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.”

Spending Caps

House Republican Leader John Boehner of Ohio seized on the estimates to call for the Democrat-controlled Congress to impose “strict annual caps on federal spending.”

The health-care overhaul “is just the latest in a long line of expensive Democratic experiments that will add to the deficit, raise taxes on families and small businesses and cost more American jobs,” Boehner said in a statement.

The two budget agencies say the shortfall is being driven by the recession as outlays rise for unemployment compensation, food stamps or other programs meant to stabilize the economy rise and tax receipts fall.

Administration and congressional budget officials expect the unemployment rate, which was 9.4 percent last month, to keep rising. White House officials said the rate likely will rise to 10 percent by the end of 2009, averaging 9.3 percent for the entire year. It will worsen to a 9.8 percent average in 2010 instead of the 7.9 percent estimate in May.

The CBO report also estimates the 2009 jobless rate at 9.3 percent. It puts next year’s average at 10.2 percent.

Deficit Projections

The OMB raised its deficit projection for fiscal 2010, which begins Oct. 1, from the $1.26 trillion forecast in May, reflecting slower economic growth this year and next because of “the severity of the crisis in the U.S. and in our trading partners,” said Christina Romer, White House chief economist, who along with Orszag briefed reporters on the report.

The median estimate of 31 economists in a Bloomberg News survey completed Aug. 21 was for a fiscal year 2010 deficit of $1.3 trillion.

The outlook for the 2009 fiscal year is slightly better than the previous forecast. The government’s shortfall will peak this year at $1.58 trillion before narrowing over the next decade. That is less than the $1.84 trillion projected in May because budget officials were able to delete hundreds of billions of dollars that had been set aside for bank bailouts.

Last year’s deficit was $459 billion.

The CBO estimates the budget deficit will total $1.6 trillion this year, or 11.2 percent of the GDP, and $1.4 trillion in 2010.

Bailout Money

“The Obama White House deserves some credit for managing the financial situation so that the additional bailout wasn’t necessary,” said Stan Collender, a former budget analyst for the House and Senate budget committees.

Orszag said reining in the deficit is a “top priority” of the administration. He said the budget blueprint Obama submits to Congress in February will “include proposals to put the nation back on a fiscally sustainable path.” He declined to give specifics.

The OMB added almost $2 trillion to the 10-year deficit from its May forecast, to $9.05 trillion. The nonpartisan CBO’s long-range projection was $7.14 trillion. The difference stems from the CBO’s assumption that tax cuts enacted in 2001 and 2003 will expire on schedule in 2011. Obama has promised to keep the lower tax rates for middle-income Americans.

Market Reaction

“The market will view this as a very consensus-oriented forecast” and there won’t be any significant reaction, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.

Zandi predicted Congress will pass a second “mini” stimulus bill next year of about $250 billion to aid jobless workers, state governments and home buyers. “The economy will be growing at an uncomfortably slow rate, not enough to bring down unemployment, and of course it’s an election year” for Congress, he said.

Orszag defended the trillion-dollar deficits during a recession and said they shouldn’t be used to block the administration’s health-care initiative. Revising the way the nation pays for medical care will help save money, he said.

“I know there are going to be some who say this report proves we can’t afford health reform,” Orszag said. “I think that has it backwards” because savings must be squeezed from the system.

Back to Growth

Even with economic conditions worse that originally forecast, Romer said “we do expect positive GDP growth by the end of this year” for the fourth quarter as the economy reaches “a turning point.”

“A return to employment growth will take longer,” Romer said, adding that the jobless rate likely will peak in the fourth quarter of this year.

Romer said the economic stimulus package probably is adding “between 2 and 3 percentage points” to economic growth in the second quarter of this year, blunting conditions that would have been worse. A report on the effect of the stimulus program is due to Congress next month, she said.

Inflation will remain subdued. Projections for the consumer price index show a contraction of 0.7 percent this year, a rise of 1.4 percent next year and 1.5 percent in 2011, Romer said.

The economic assumptions were compiled by the Council of Economic Advisers, Treasury Department and the Office of Management and Budget. The estimates reflect conditions as of early June.


Added: Aug-26-2009 
By: Songun
In:
News
Tags: Obama, Doom, Unemployment, Deficits, Stimulus, Clunkers, CHANGE!
Views: 7591 | Comments: 21 | Votes: 1 | Favorites: 0 | Shared: 0 | Updates: 0 | Times used in channels: 1
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  • The economy must be racist I guess.

    Posted Aug-26-2009 By 

    (9) | Report

  • I knew he would fail, but wow. He's totally surpassing all expectations. You go Obama! Show Carter how it's really done! lol

    Posted Aug-26-2009 By 

    (9) | Report

    • Yep. Stunning how stupid he and his entire administration are. I could not script it any better if I wanted to orchestrate his failure. I mean, it started on his first day with ZERO plan on Gitmo, but announced to the damn world that he was closing it???

      He is in so damn far over his head and his economic policies are the stupidest in our history. Epic, epic, epic fail on every single aspect of leadership.

      Thank God he's going to get blown out of office. Thank God.

      Posted Aug-26-2009 By 

      (2) | Report

  • EPIC FAIL

    Enough said

    Posted Aug-26-2009 By 

    (9) | Report

  • I just read this and probably the numbers are actually going to be higher since this administration is good at blowing smoke up our ............

    Posted Aug-26-2009 By 

    (6) | Report

    • Michigan Fast Facts



      Michigan Unemployment Rate
      (Seasonally Adjusted)


      July 2009 15.0%




      %15 unemployment has got to be bullshit.....and soon to be much higher.


      Most people i talk to here

      A. Have or are facing losing there jobs and currently collecting unemployment.
      B. Maxed unemployment out and now working for temp services rarely landing full time jobs. *extremely rare*.

      Or

      C. Lost job, maxed out unemployment,seeking work through temp servic More..

      Posted Aug-26-2009 By 

      (2) | Report

  • Yeah, no shit.

    We warned you that spending your way out of recession doesn't work. We warned you that spending your way out of debt doesn't work.

    Too bad your agenda of growing a bigger nanny state trumped common sense.

    You've screwed us, our children, grand children, etc.

    Thanks.

    FBO

    Posted Aug-26-2009 By 

    (6) | Report

  • Let's see...

    Step 1. Predict things will be really really bad.

    Step 2. When things are only really bad, then you can say you "saved" everyone from the really really bad things.

    Gosh... Us unwashed masses are just too stupid to see through that ruse. Golly gee willikers. I wish I was as smart as the Obama people!

    Posted Aug-26-2009 By 

    (5) | Report

  • IOUSA The Movie. It's happening like the video predicts.

    Posted Aug-26-2009 By 

    (4) | Report

    • That was one scary video my man.

      I live in Michigan. And as a resident of this Northern state i know for a fact things are bad.
      Everybody is fealing it. You can see it on peoples faces every day here.
      Im sure its that way everywhere though.

      People are fealing the economis stress.

      I for one can honistly say that every day i wake up and drag my feat to my shittey slave driving job. Thats taking full advantage of this economic shit were facing I might add. Counting my lucky stars More..

      Posted Aug-26-2009 By 

      (4) | Report

    • Yup many people saw this coming, just a year ago all the people in the movie were labeled nutcases. Actually werent you one of the people who were bashing Paul,Celente,and Schiff. Not that it matters anymore heh.

      Posted Aug-26-2009 By 

      (1) | Report

    • I'll always bash Paul. He's a stoner. No need for his kind to lead anyone...anywhere...about anything.

      Posted Aug-26-2009 By 

      (0) | Report

  • Stop the madness.

    End that G*d d*mned Fed.

    They are the whole problem ladies and gentlemen.

    Posted Aug-26-2009 By 

    (4) | Report

  • Obama is destroying the Nation he despises.

    Posted Aug-26-2009 By 

    (4) | Report

  • this was obama's plan from the beginning.....he told people there would be change and he is making that happen....i hope all that voted for him is happy to see how they helped him destroy the US

    Posted Aug-26-2009 By 

    (4) | Report

  • Comment of user '2daloo' has been deleted by author (after account deletion)!
  • People were sucking up those bogus stats and singing happy days are here again, LOL, all you have to do is look around and you can see the economy is in the tank, there is still no regulation of wall street and the banks.

    Posted Aug-26-2009 By 

    (2) | Report

  • Witnessing the end of a political party ! ! !

    Posted Aug-26-2009 By 

    (0) | Report

  • Must Cut "taxes"!! Must shrink Goverment!! Must reverse NAFTA!!

    The fox guarding the Hen house NEVER works..oops the crooks guarding the white house.

    Posted Aug-26-2009 By 

    (0) | Report