The White House released its long-delayed mid-session fiscal budget review on 1 September 2011. We’re taking our first look at what they’re now forecasting for GDP this year and next.
The Obama administration is now predicting that GDP will grow at 1.7% during Fiscal Year 2011 (FY2011), down from the 2.7% it projected in February 2011 when the administration originally released its FY2012 federal budget proposal.
Since the government’s fiscal year runs from October 1 through September 30, that period of time coincides with the period running from fourth quarter of 2010 through the third quarter of 2011. To hit that level of GDP growth after actually recording GDP growth rates of 2.3% in the fourth quarter of 2010 and 0.4% and 1.0% in the first and second quarters of 2011, the Obama administration is actually forecasting that U.S. GDP will grow at an annualized rate of 3.1% in the current quarter of 2011 to reach the administration’s 1.7% overall GDP growth rate.
That’s simply not going to happen in the current economic climate.
And because that’s the case, the federal government will not collect as much in taxes as the Obama administration is claiming it will for the year. The U.S. budget deficit will be therefore be greater than projected, which will add a greater than projected amount to the U.S. national debt.
Based upon the administration’s rosy GDP forecast, Table 1 of the mid-session fiscal budget review projects that the budget deficit for FY2011 will be $1,316 billion, which is down $329 billion from the $1,645 billion deficit that it had forecast in February 2011. The actual deficit figure for the year will fall in between the administration’s projected deficit amounts.
White House Office of Management and Budget. Fiscal Year 2012 Budget of the U.S. Government Mid-Session Review. 1 September 2012.