White House budget sees full economic recovery

By @ibtimes on

The White House assumes the U.S. economy will fully recoup losses incurred in the latest recession by 2017, putting it at odds with many private economists who believe the downturn left permanent scars.

In its budget plan released on Monday, the Obama administration envisions economic growth accelerating in 2012 and remaining above average through 2017.

By contrast, the Blue Chip survey of private forecasters shows more moderate growth over that period, peaking in 2012.

If the economy follows the more modest growth path, both the deficit and the unemployment rate would be significantly higher than the White House expects.

Some international economic organizations have argued that a financial recession permanently scars an economy, and this view is also shared by some American forecasters, the administration said in its budget analysis.

The statistical evidence for permanent scarring comes mostly from the experiences of developing countries and its relevance to the current situation in the United States is debatable.

The White House said so far in this recovery, those forecasts based on the view that the recession inflicted lasting damage have proven to be too pessimistic.

White House budget forecasts often contain optimistic economic assumptions. The latest installment is somewhat unusual in that the 2011 forecast is lower than most private forecasters expect. The budget assumes 2011 growth of just 2.7 percent year over year, while Blue Chip sees 3.1 percent.

The administration said this was because it locked in its economic projections in mid-November, which was before a tax deal, reached in December, led many private forecasters to raise their projections.

Beginning in 2012, the White House's numbers look decidedly more upbeat. It sees growth ramping up to 3.6 percent, followed by back-to-back years of growth well above 4 percent.

Blue Chip's consensus view has growth peaking at 3.3 percent in 2012 and then cooling off to 2.8 percent by 2014.

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