White House pushes fiscal compromise in annual economic report

Goolsbee was asked what the greatest risks to the recovery are now, and he said that the administration is keeping an eye out on financial woes in Europe and aftershocks from the revolutions in the Middle East that are driving up fuel prices.

But he said the White House has concluded that the U.S. economy is less structurally sensitive to oil shocks than it was in the 1970s, so at the newly elevated fuel prices would not “derail” the recovery.

The economic report, issued annually since the Truman administration, touts the effectiveness of the December bipartisan tax cut compromise and other Obama policies.
 
It states “the most immediate task must be to get our fellow Americans back to work by accelerating economic growth and job creation by the private sector.”

“That’s why, at the end of last year, I signed into law a measure to prevent taxes from rising on middle-class families and to create new incentives for businesses to create jobs,” it states.

It says the positive impact of the new law exceeded what most private forecasters had been expecting for fiscal policy, leading them to increase their estimates of 2011 growth, and notes that the Congressional Budget Office has estimated that it added as much as 2.8 percentage points to Gross Domestic Product growth.

The report repeats longer-term economic projections that House Republicans have derided as overly rosy.

The White House projects GDP growth of 3.1 percent in 2011, and growth rising to an average rate of 4.1 percent during the following four years.

Goolsbee defended the projections in a press conference.

He said that forecasts for 2011 are substantially better than they were a year ago due in part to Obama’s policies.

He said the White House believes that in the longer term, in contrast to Blue Chip economists, the recession has not as severely impaired output capacity.

“The economy has shifted out of rescue mode, into the growth phase where we are trying to get the hiring up,” he said. He said that the White House has determined that the boom of the 2000s was unsustainable because it was built on excessive consumer spending and a housing bubble.

The Obama agenda of targeted investments in education, research and infrastructure is meant to foster a more traditional economic recovery based on exports and business investment, he said.