White House Fudging Economic Forecast Big-Time

Monday, May 11, 2009 2:21 PM

By: Dan Weil and Julie Crawshaw

The Obama administration sees the economy through extremely rose-colored glasses.

In its 2010 budget request, the White House says it sees a 3.5 percent spike in growth in the fourth quarter and left unchanged its prediction of just a 1.2 percent overall reduction in GDP for 2009.

That is a lot more optimistic than most private forecasts.

Consider that the latest Blue Chip Economic Indicators Survey, which sees just 1.8 percent fourth-quarter growth. Meanwhile, the latest Wall Street Journal survey calls for a 1.4 percent full year decline.

Meanwhile, the latest estimate of the deficit is $1.84 trillion — equal to 12.9 percent of gross domestic product. In February the White had projected a deficit of $1.75 trillion, or 12.3 percent of GDP.

The administration is banking on the fiscal stimulus package, the government’s bank rescues and the Federal Reserve’s massive easing programs to get the economy going.

The first of the $787 billion stimulus package is just now hitting the states, while the Federal Reserve seems more focused on staving of deflation than heading off any rebound in inflation ahead.

“Although the economic downturn so far in 2009 has been more severe than the administration expected when the forecast was finalized, if the financial system begins to function more normally, there is every reason to expect a somewhat stronger recovery given the depth of the current recession,â€