Obama Budget Forecasts 8.9% Unemployment for the Entire Year

As Talking Points Memo points out this morning, President Obama’s proposed budget forecasts an average unemployment rate of 8.9% for the entire year.  It also forecasts a GDP growth of 3% next year, which is a rosy figure considering the fact that Obama’s tax increases will kick in January 2013.

The question, of course, is why Obama would forecast such an extraordinarily high unemployment rate.  There are two answers.  First, it allows him to project similarly extraordinarily high economic growth if his plans are implemented – after all, if you keep the baseline down, that makes the upside a good deal higher.  Second, it allows him to “surpass expectations” when unemployment decreases thanks to artificial means like inflation.

That strategy may backfire now.  Obama’s aides say that these budget numbers are “already out of date.”  That means that expectations will be higher than Obama wants them to be for the coming year.


Sure, he’s already exceeded his post facto expectations.  But he has also demonstrated that his own budget wizards don’t know too much about which way the economy is headed.  If the economy truly is headed in the right direction, that’s largely thanks to the very tax cuts Obama wants to destroy in this budget.  If the Obama plan is working, at least half that plan was leaving taxes low.  And his new budget proposes $1.4 trillion in new taxes.  GOP opponents will likely seize on the 8.9% number to take credit on behalf of a Republican Congress that stopped Obama from implementing his original plans to spend and tax more.


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