In the near-term, the administration expects the 2010 deficit to come in at $1.47 trillion -- slightly lower than originally forecast and slightly above last year's deficit of $1.41 trillion. Meanwhile, the 2011 and 2012 deficits will come in somewhat higher than the White House forecast in February.
"The economy is still weaker than we'd like, and [there is] a medium-term and long-term fiscal situation that requires attention," outgoing White House Budget Director Peter Orszag said in a call with reporters.
In terms of taxes, the administration now expects that the Treasury will take in $402 billion less over the next 10 years than originally expected, but at the same time will also spend $461 billion less than was forecast.
The tax revenue collected will average 18.7% a year, slightly above the 40-year historical average. Federal spending, however, will average 23.2%, above the 20.7% historical average.
0:00/1:18Bernanke testifies before CongressChristina Romer, who chairs the president's Council of Economic Advisers, noted that she expected real economic growth to be moderate this year and more rapid for the next two years.
When asked what accounted for the White House's relatively optimistic growth estimates relative to other economists' forecasts, Romer said the administration believes rapid growth in business investment and an emphasis on U.S. exports is "what we think makes these numbers completely reasonable."
Romer explained why the White House's GDP forecast for 2011 is higher than that of the Congressional Budget Office, which forecast 2.4% versus the administration's 4%. The reason: The CBO forecast assumes all the Bush tax cuts will expire by Jan. 1, whereas the White House has proposed they be extended for the majority of Americans.
On unemployment, the White House's 9% forecast for 2011 is more pessimistic than recently revised Federal Reserve predictions. The Fed believes unemployment will fall between 8.3% and 8.7% next year.
Romer said the latest forecasts were generated from data through the end of May and finalized in early June. Since then, there have been some discouraging June reports on jobs and retail sales.
The administration's forecasts assume Obama's proposals will be adopted wholesale by Congress, which is unlikely. Moreover, Congress this year hasn't even officially debated what the fiscal year 2011 budget should look like. The new budget year begins Oct. 1, 2010.
On Dec. 1, Obama will get a report from his bipartisan fiscal commission, which he has asked to recommend ways to cut the medium- and long-term deficits. And the president has pledged that he will offer serious deficit reduction plans in his 2012 budget outline.
Obama tells agencies: Cut 5%Laid-off workers lose COBRA health subsidy
