President Obama’s economists are nothing if not optimistic. In the fiscal year 2013 presidential budget request, they’ve once again forecast higher future growth than their private-sector peers – about a half-point of gross domestic product growth more, per year, than the 45 economists included in the Philadelphia Fed’s Survey of Professional Forecasters.
The Obama budget, released Monday, forecasts 2.7 percent real GDP growth this year and 3.0 percent next year. Growth increases to 3.6 percent in 2014 and 4.1 percent in 2015. The highest the Philadelphia Fed consensus projections peg growth at 2.3 percent this year and slowly rising to 3.1 percent in 2015.
The most obvious political effect of more-optimistic projections is they allow the administration to claim smaller budget deficits, because higher growth brings in more tax revenue.
There’s one wonky reason that the administration’s mid-term growth forecasts are higher than consensus. Obama’s economists believe the economy will return eventually to the production path it was traveling before the Great Recession. Some other economists predict growth will never return to that track – that it has taken a permanent step down, from which it will now grow.
But when it comes to the short term, Team Obama’s extra dose of economic sunshine radiates from a major case of political optimism: The budget assumes that Congress will approve not only a full-year extension of the current payroll-cut cut, but also the bulk of Obama’s proposed American Jobs Act. By next month.
That’s the same American Jobs Act that has languished on Capitol Hill since Obama announced it last fall. The proposal includes a major new infrastructure spending push that Republicans bash almost daily. There’s no sign House and Senate Republicans are keen to flip on a dime and pass it now.
Negotiations on the payroll cut alone are again coming down to the wire. House Speaker John Boehner, R-Ohio, greeted the budget on Monday by calling it “bad for job creation.”
Private-sector economists understand, from past experience, just how unlikely it is that Obama and Congressional Republicans can agree on new measures to boost growth. They’ve adjusted their projections accordingly. The administration knows this, but doesn’t care.
“This economic forecast is based on the assumption that the Administration’s budget proposals are enacted in full,” the administration says in a companion set of economic assumptions issued alongside the budget. “The Administration recognizes that not all forecasters share this assumption, and it is the main reason the Administration projections for real growth in 2012 are stronger than the consensus expectation.”
The administration gives no supporting evidence for those assumptions. It would be nice to see some, if they do, in fact, exist.