White House downgrades economic forecast

The White House is not predicting a double-dip recession, but it has downgraded its economic forecast.

On Thursday, the White House budget office released its “mid-session review,” updated projections that reflect new policies and forecasts that occurred after the February budget.

Among the budget office’s revised predictions, according to CNN: The unemployment rate won't fall below 6 percent until 2017, two years later than was predicted in February. The Office of Management and Budget now expects the unemployment rate, currently 9.1 percent, to remain above 8.2 percent throughout next year.

The OMB report said that, due to a rise in oil prices, the Japanese earthquake in March, the debt ceiling debate and Europe’s debt crisis, “economic growth and job creation, while positive, have not been strong enough to bring down the unemployment rate to an acceptable level.”

The budget office report now predicts the economy will grow at a 1.7 percent rate this year, down from its 2.7 percent forecast in February. Growth is expected to be 2.6 percent next year and 3.5 percent in 2013. Annual GDP will also grow more slowly than the budget office previously thought – only a percentage point for this year, 2012 and 2013 – but pick up in 2015 and 2016.

On bright spot in the report, Agence France-Presse reports:

Owing to steep spending cuts and a better-than-expected rise in receipts, the country's huge fiscal deficit – which earned it a first-ever downgrade from ratings agency Standard & Poor's in August – will be only 8.8 percent of gross domestic product this year, compared to 10.9 percent anticipated in January.

The deficit will fall to 6.1 percent of GDP by next year and just 2.7 percent in 2014, the OMB forecast.

The report also examined the impact of the Bush-era tax cuts for the wealthiest Americans on the budget deficit, the Wall Street Journal reports:

Allowing the 2001 and 2003 tax cuts for the wealthiest Americans to expire, as the administration has sought, would increase revenue by $866 billion over the next 10 years, the report estimated. The government would also save $160 billion in interest costs because it wouldn't need to borrow as much.

"The President has consistently said that he will refuse to let these tax cuts be extended," the report stated.

"The review largely underscores the need to get back on a sustainable fiscal path and reinvest in economic growth and job creation," White House Budget Director Jacob Lew told the press.