Americans' confidence in the economy is sitting at its lowest point since March 2009, and in every state in the country, a vast majority of Americans see the economy as getting worse. Meanwhile, the number of people claiming new jobless benefits rose again last week. Under those circumstances, it's no wonder the White House is doing everything it can to make even the most dismal economic news seem like a silver lining on a very dark cloud.
That shred of news came yesterday in the form of the Congressional Budget Office's (CBO) mid-year assessment of the budget and economic situation. In the report, the CBO lowered its projected 2011 economic growth rate from 3.1 percent in its January report to only 2.3 percent--well below the growth rate needed to reduce the unemployment rate. The CBO also projects a deficit for 2011 of $1.284 trillion--slightly lower than the January deficit projection of $1.480 trillion. As for unemployment, the CBO didn't have much good to say. In its estimation, the jobless rate will fall only to 8.9 percent by the end of this year but remain above 8 percent until 2014.
Economic growth that's below what's needed to reduce unemployment and a deficit still over a trillion dollars? How can that be good news? Well, it is if you set the bar for success low enough. And the White House has done just that. In a press briefing yesterday, White House spokesman Josh Earnest said "the report sort of validates the progress that's been made" while also crediting President Barack Obama's policies for pulling America "back from the brink."
While White House officials took the CBO's report as a "validation" of their hard work, others have taken it as a warning--including House Budget Committee chairman Paul Ryan (R-WI). Ryan's office says that the CBO's report shows that 2011 is the third straight year that deficits will be in excess of $1 trillion, and the debt held by the public will equal about three-quarters of the economy in 2013. Ryan noted:
The Congressional Budget Office has again warned policymakers of the urgent need to get Washington's fiscal house in order. This reports confirms again that years of reckless overspending have not produced the economic growth or the jobs that the President promised and that American families need.
And while the CBO report offers some relatively positive news about deficits, even those estimates seem extremely optimistic based on the data the projections rely on, according to The Heritage Foundation's J.D. Foster. And as Heritage's James Sherk and Rea Hederman write, "The recovery will take a long time under any imaginable circumstances":
Economists estimate that the natural rate of unemployment is 5.2 percent. If the economy began growing immediately at the same rate the payroll survey reported during the tech bubble (+265,000 jobs per month), unemployment would not return to this level until mid-2014. More realistically, if employers began hiring at the same average rate they did during the 2003–2007 expansion (+176,000 jobs per month), unemployment would not return to its natural rate until 2018.
In September, President Obama is due to give a speech in which he will unveil a new plan to create jobs and get America's economy growing again. The trouble is that the plan will likely be baked in the same oven that produced the policies that have left America's economy where it is today. If America doesn't want continued deficits and unemployment as far as the eye can see, then a new agenda is in order.