(Reuters) – President Barack Obama on Thursday sharply cut estimates for U.S.
economic growth, underscoring the difficult challenge he faces in spurring a
stronger recovery and creating more jobs.
The president, who must curb high unemployment to improve his chances of
winning re-election in 2012, will give a major speech on September 8 on how he
plans to lift hiring and growth.
“The economic projections make clear there is a real need in the short term
to kick start economic growth and get on a sustained higher growth path,” White
House budget chief Jack Lew told reporters on a conference call.
In a midyear review of its annual budget, the White House offered some hints
of what Obama will say next week. It said the speech could include proposals for
a mixture of tax cuts aimed at middle class families, infrastructure spending
and aid for the long-term unemployed.
Under the new projections, the White House said the deficit would come down
more sharply than expected to 8.8 percent of GDP this year, compared with the
10.9 percent forecast when the budget was released in February.
The improvement was largely due to spending cuts imposed under a deal struck last month by Obama
and opposition Republicans to raise the U.S. debt ceiling, which will shave
$1.45 trillion from the deficit over the next 10 years.
But economic growth was marked down. The White House acknowledged that the
outlook had deteriorated amid sharp financial market turbulence following
ratings agency Standard & Poor’s downgrade of the AAA U.S. credit
rating.
As a result, it offered an alternative economic forecast based on what has
happened in recent weeks. This projects GDP growth this year of 1.7 percent,
compared with 2.7 percent expected back in February, with 2.6 percent forecast
for 2012, down from a 3.6 percent prediction in February.
However, the more subdued growth outlook did not have a major impact on the
expected deficits, and growth was expected to rebound to above 4 percent by
2015.
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