Is "Rosy" Back? Economists Question Obama's Economic Forecasting

President Barack Obama seeks to slice the enormous federal budget deficit in half by 2013. This seems like an impossible task, especially in light of the magnitude of the deficit he inherited from Bush, the increasing rate of government spending, and the implementation of new tax cuts.

But if the economy recovers as rapidly as Obama anticipates that it will, he might actually accomplish his goal. Many economists, however, question the administration's economic forecasts because they greatly exceed the projections of private economists and the Congressional Budget Office.

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"They used to joke during the Reagan years that the highest-ranking woman in the administration was Rosy Scenario," said Nariman Behravesh, the chief economist at IHS Global Insight, a major private forecasting firm.

Rosy may be back in town, said Behravesh, who called the Obama administration's forecasts "way too optimistic."

For its part, the administration insisted that it hadn't cooked the books to show greater growth, and thus more tax revenues, in coming years. But the administration forecast is far higher than the projections for growth in the overall economy, as measured by the gross domestic product, of many private analysts. . . .

GDP plays the biggest role in determining the accuracy of deficit forecasts because weaker-than-expected growth swells government payments for such things as unemployment benefits and food stamps and reduces tax receipts.

In its budget, the administration predicted that the overall economy, as measured by the gross domestic product, will shrink by 1.2 percent this year but will grow by a solid 3.2 percent in 2010. That growth would be followed by even stronger increases of 4 percent in 2011, 4.6 percent in 2012 and 4.2 percent in 2013.

By contrast, the consensus of forecasters surveyed by Blue Chip Economic Indicators in February predicted that the GDP will fall by a larger 1.9 percent this year and then increase at weaker rates of 2.1 percent in 2010, 2.9 percent in 2011 and 2012 and 2.8 percent in 2013.