White House putting off release of budget update

[July 20, 2009]  WASHINGTON (AP) -- The White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today's bleak landscape.

The administration's annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama's budget in February and update in May, and that could complicate his efforts to get his signature health care and global-warming proposals through Congress.

The release of the update -- usually scheduled for mid-July -- has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its Aug. 7 summer recess.

The administration is pressing for votes before then on its $1 trillion health care initiative, which lawmakers are arguing over how to finance.

The White House budget director, Peter Orszag, said on Sunday that the administration believes the "chances are high" of getting a health care bill by then. But new analyses showing runaway costs are jeopardizing Senate passage.

"Instead of a dream, this routine report could be a nightmare," Tony Fratto, a former Treasury Department official and White House spokesman under President George W. Bush, said of the delayed budget update. "There are some things that can't be escaped."

The administration earlier this year predicted that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one. Congress did pass a $787 billion two-year stimulus measure, yet unemployment soared to 9.5 percent in June and appears headed for double digits.

Obama's current forecast anticipates 3.2 percent growth next year, then 4 percent or higher growth from 2011 to 2013. Private forecasts are less optimistic, especially for next year.

Any downward revision in growth or revenue projections would mean that budget deficits would be far higher than the administration is now suggesting.

Setting the stage for bleaker projections, Vice President Joe Biden recently conceded, "We misread how bad the economy was" in January. Obama modified that by suggesting the White House had "incomplete" information.

The new budget update comes as the public and members of Congress are becoming increasingly anxious over Obama's economic policies.

A Washington Post-ABC News survey released Monday shows approval of Obama's handling of health-care reform slipping below 50 percent for the first time. The poll also found support eroding on how Obama is dealing with other issues that are important to Americans right now -- the economy, unemployment and the swelling budget deficit.

The Democratic-controlled Congress is reeling from last week's testimony by the head of the nonpartisan Congressional Budget Office, Douglas Elmendorf, that the main health care proposals Congress is considering would not reduce costs -- as Obama has insisted -- but "significantly expand" the federal financial responsibility for health care.

That gave ammunition to Republican critics of the bill.

Late last week, Obama vowed anew that "health insurance reform cannot add to our deficit over the next decade and I mean it."

The nation's debt -- the total of accumulated annual budget deficits -- now stands at $11.6 trillion. In the scheme of things, that's more important than talking about the "deficit," which only looks at a one-year slice of bookkeeping and totally ignores previous indebtedness that is still outstanding.

Even so, the administration has projected that the annual deficit for the current budget year will hit $1.84 trillion, four times the size of last year's deficit of $455 billion. Private forecasters suggest that shortfall may actually top $2 trillion.

The administration has projected that the annual deficit for the current budget year will hit $1.84 trillion, four times the size of last year's deficit of $455 billion. Private forecasters suggest that shortfall may top $2 trillion.

If a higher deficit and lower growth numbers are not part of the administration's budget update, that will lead to charges that the White House is manipulating its figures to offer too rosy an outlook -- the same criticism leveled at previous administrations.

The midsession review by the White House's Office of Management and Budget will likely reflect weaker numbers. But where is it?

White House officials say it is now expected in mid-August. They blame the delay on the fact that this is a transition year between presidencies and note that Obama didn't release his full budget until early May -- instead of the first week in February, when he put out just an outline.

Still, the update mainly involves plugging in changes in economic indicators, not revising program-by-program details. And indicators such as unemployment and gross domestic product changes have been public knowledge for some time.

Standard & Poor's chief economist David Wyss said part of the problem with the administration's earlier numbers is that "they were just stale," essentially put together by budget number-crunchers at the end of last year, before the sharp drop in the economy.

Wyss, like many other economists, says he expects the recession to last at least until September or October. "We're looking for basically a zero second half (of 2009). And then sluggish recovery," he said.

Orszag, making the rounds of Sunday talk shows, insisted the economy at the end of last year, which the White House used for its optimistic budget forecasts, "was weaker at that time than anyone anticipated." He cited a "sense of free fall" not fully recognized at the time.

"It's going to take time to work our way out of it," the White House budget director told "Fox News Sunday."

Even as it prepares to put larger deficit and smaller growth figures into its official forecast, the administration is looking for signs of improvement.

"If we were at the brink of catastrophe at the beginning of the year, we have walked some substantial distance back from the abyss," said Lawrence Summers, Obama's chief economic adviser.

[Associated Press; By TOM RAUM]

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