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FACT CHECK: Obama Budget a Leap of Faith On Growth
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FACT CHECK: Obama Budget a Leap of Faith On Growth
FACT CHECK: Obama Budget a Leap of Faith On Growth

Monday, 01 Feb 2010 06:42 PM

President Barack Obama's proposed budget relies on a commission without teeth to help his administration wrestle the deficit out of the danger zone. It forecasts stronger economic growth than most economists expect and calls on Congress to cut programs that lawmakers cherish.

All budgets from the White House are leaps of faith of some sort. This one is no exception.

The economic forecasts used in setting spending priorities are in line with independent expectations for now. After that, though, the administration's projections appear ever more fanciful.

A look at some budget assumptions and how they compare with the facts and political realities:

——

BUDGET: Forecasts four years of growth of 4 percent or more and unemployment dropping to 8.2 percent in 2012.

THE FACTS: No one knows what will happen, but the administration's projections are rosier than private economists expect.

For 2010, the administration is projecting that the overall economy, as measured by the gross domestic product, will grow at an annual rate of 3 percent, when measured from the fourth quarter of last year. That is very close to the 2.9 percent GDP growth forecast from economists surveyed by Blue Chip Economic Indicators.

However, the administration is projecting that growth in 2011 will jump to 4.3 percent and remain above at 4 percent-plus for three years, a scenario that is much stronger than the forecasts of private analysts. The Blue Chip consensus is for growth to be more than a percentage point lower in 2011 at around 3.1 percent.

Likewise, the administration's projection that unemployment, currently 10 percent, will end the year around 9.8 percent is in line with the outlook of most private economists. Many are looking for the jobless rate to peak at about 10.5 percent this summer and then gradually decline as the recovery gains strength.

However, for next year, the administration is projecting the jobless rate will drop to an average of 9.2 percent and will average 8.2 percent in 2012, the presidential election year. Many private economists don't believe the jobless rate will improve that quickly, given all the headwinds now facing the economy.

Stronger economic growth and more people working translates into more revenues for the government and less spending in such areas as unemployment insurance and thus a smaller budget deficit. However, private economists reviewing the administration's forecasts said the actual track for the economy is likely to be more sluggish, making future deficits, already expected to be huge, even larger.

"The administration's economic forecast is highly optimistic," said David Wyss, chief economist at Standard & Poor's in New York. "This is going to be a half-speed recovery. Usually you get a bigger kick coming out of such a deep recession, but we think there are just too many headwinds out there."

——

BUDGET: Save some $20 billion by cutting programs.

THE FACTS: Congress typically disregards most items on a president's budget-cutting wish list and puts money into the programs anyway. Several dozen of the programs Obama proposes cutting in the new budget were marked for elimination in his budget a year ago.

Obama actually got more than usual on this front in 2009, persuading Congress to go along with more than $6 billion in cuts out of the $17 billion he sought. But he achieved those savings from just a few big-ticket defense and related programs, such as canceling production of the F-22 fighter.

This time, there are fewer massively expensive programs on the list, and it will be an uphill battle trying to get lawmakers to back off on nickel-and-dime spending important to their states.

Although supporting major military systems this time, Obama does want to save $2.5 billion by stopping purchases of the C-17 cargo plane.

The Pentagon tried to cease production of the aircraft before, but lawmakers restored the money to save jobs in their states.

Obama also wants to save $115 million this year and $1.2 billion over 10 years by eliminating payments to states and Indian tribes that have completed cleanup of abandoned coal mines. His reasoning: The job has been finished, so the money should stop.

But he was rebuffed when he tried the same thing last year. Lawmakers from mining states say the money is needed to create jobs and to clean up other mines, and already a half dozen from both parties are vowing to keep the program intact.

Obama also wants to eliminate the B.J. Stupak Olympic scholarship, a $1 million annual program named for the late son of Rep. Bart Stupak, D-Mich.

Stupak was a leader of moderate Democrats who won a battle to include language forbidding money in the House health care bill to help pay for abortions, a provision that angered liberals and has been a major stumbling block in completing the legislation. Former President George W. Bush also tried to cut the scholarship, which helps an Olympic training center in Stupak's northern Michigan district.

——

BUDGET: Counts on a presidential commission to help the administration reduce the deficit to 3 percent of the overall economy, a level that private economists generally believe is manageable. That would be a significant improvement from this year's projected record-breaking $1.56 trillion deficit, which would equal 10.6 percent of GDP.

THE FACTS: The commission has yet to be appointed and there's no sure path to having its recommendations considered by Congress.

Even with its proposed partial budget freeze and tax increases on the wealthy, the administration would not achieve its goal of getting the deficit down to 3 percent of GDP, only reaching 3.9 percent by 2015. Achieving that last one percentage point of deficit reduction is where the commission is supposed to come in.

The trouble is that the idea of establishing the commission by law failed last week when senators in both parties opposed it. Republicans expressed worry the commission would open the door to tax increases, even though most budget experts say it will probably take a combination of tax increases and cuts in the government's big spending entitlement programs such as Medicare and Social Security to get the deficit under control.

Some Republicans are urging a boycott of the panel that will result. Even if Obama manages to get Republicans to serve, it is not at all clear the commission's recommendations, due at the end of this year, would be voted on in Congress.

Democratic leaders of both the House and Senate have committed to such a vote, although it won't come until after the November elections.

But under the agreement brokered by Vice President Joe Biden, the commission's proposals would have to first win support of 60 senators to guarantee the effort would not be blocked by a filibuster.

——

Copyright 2010 The Associated Press
02-02-2010 09:10 AM
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RE: FACT CHECK: Obama Budget a Leap of Faith On Growth
Obama Budget, Jobs Plan Get Early Tests On Hill


Tuesday, 02 Feb 2010 06:55 AM Article Font Size


President Barack Obama's proposed budget, stuffed with initiatives to spark jobs and the economy, is getting an early test with lawmakers weary of record deficits, wary of his tax ideas and nervous about winning re-election in November.

Obama's proposed $5,000-per-job tax credit for companies that hire more workers could come up for a vote in the Senate as early as the end of the week — if senators can work out the details.

Treasury Secretary Tim Geithner and Obama's budget director, Peter Orszag, were to push it during appearances Tuesday before congressional committees to explain the president's $3.8 trillion budget plan. Defense Secretary Robert Gates and Joint Chiefs of Staff Chairman Adm. Mike Mullen also were to be on Capitol Hill to discuss war spending.

Congress rejected the idea of a jobs credit for businesses last year, questioning whether it would work and how to prevent unscrupulous employers from defrauding the government.

Obama also wants to renew some expiring goodies from his stimulus plan last year:

—Another round of $250 bonus payments to Social Security recipients and other retirees.

—Extended jobless benefits and health insurance subsidies for the long-term unemployed.

—Another year of middle-class tax credits of up to $400 for individuals and $800 for couples filing jointly.

But the budget also would impose nearly $1 trillion in higher taxes on couples making more than $250,000 and individuals making more than $200,000 by not renewing tax cuts enacted under former President George W. Bush. Obama would extend Bush-era tax cuts for families and individuals making less.

All told, Obama's tax and spending plan raises more taxes than it cuts, while still posting a record-breaking $1.56 trillion deficit — an amount equal to about 42 cents for every dollar the government is spending.

"It's a budget that reflects the serious challenges facing the country," Obama said. "We're at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt."

Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, predicted the tax proposals would ignite a spirited debate. "I only hope the debate can be more focused on policy than politics," he said.

Republicans said they were ready.

"As if record deficits weren't enough, President Obama's budget still includes major tax increases that will hit our fragile economy like a brick wall," said Rep. Tom Price of Georgia.

In all, Obama would increase taxes on some businesses and wealthy individuals by about $1.4 trillion over the next decade, while cutting taxes for middle-class workers and other businesses by about $330 billion. The bottom line: Tax receipts would increase by about $1.1 trillion over the decade.

"The tax increases in the budget dwarf the tax relief," said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee. "Everyone should be intellectually honest about that."

To address soaring deficits, Obama proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies. It would save $250 billion over the next decade by following the freeze with caps that would prevent spending increases after 2013 from rising faster than inflation.

Military, veterans, homeland security and big benefit programs such as Social Security and Medicare would be spared. Federal support for elementary and high school education would get what the administration termed the biggest increase in history. The Pell grant college tuition program which would nearly double, to just under $35 billion, helping an additional 1 million students.

As tax receipts increase and need-based benefits decrease as the economy recovers, the deficit would fall to $1.27 trillion in 2011 under Obama's budget. It would drop to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.

The administration argued that Obama inherited a deficit that already was topping $1 trillion when he took office and, given the severity of the downturn, the president had to spend billions stabilizing the financial system and jump-starting economic growth.


Copyright 2010 The Associated Press
02-02-2010 09:14 AM
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SumOfAllFears Offline
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RE: FACT CHECK: Obama Budget a Leap of Faith On Growth
Obummer has lost it.
02-02-2010 06:58 PM
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RE: FACT CHECK: Obama Budget a Leap of Faith On Growth
We are going down like a rock.
02-02-2010 10:36 PM
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