Thursday, July 09, 2020

Breaking precedent, White House won't release formal economic projections this summer that would forecast extent of downturn

May 28. 2020
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By The Washington Post · Jeff Stein, Josh Dawsey · NATIONAL, BUSINESS, POLITICS 

WASHINGTON -- White House officials have decided not to release updated economic projections this summer, opting against publishing forecasts that would almost certainly codify an administration assessment that the coronavirus pandemic has led to a severe economic downturn, according to three people with knowledge of the decision.

The White House is supposed to unveil a federal budget proposal every February and then typically provides a "mid-session review" in July or August with updated projections on economic trends such as unemployment, inflation and economic growth.

Budget experts said they were not aware of any previous White House opting against providing forecasts in this "mid-session review" document in any other year since at least the 1970s.

Two White House officials confirmed the decision had been made not to include the economic projections as part of the mid-session release. The officials, who spoke on the condition of anonymity to discuss internal deliberations, said that the novel coronavirus is causing extreme volatility in the U.S. economy, making it difficult to model economic trends.

The document would be slated for publication just a few months before the November elections.

"It gets them off the hook for having to say what the economic outlook looks like," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who served as an economic adviser to the late senator John McCain, R-Ariz.

Both liberal and conservative critics said the White House should publish its economic projections in line with the precedent set by prior administrations, regardless of the uncertainty caused by the pandemic. The White House under President Barack Obama continued to release these numbers during the Great Recession, although they were unflattering.

This year's White House budget report is expected to include data on federal spending, along with information on enacted legislation, but not an annual federal deficit projection, the White House officials said. The officials said the White House will release the annual deficit for the year by the end of the fiscal year in October.

A senior administration official said in a statement that would be "foolish" to publish forecasting data when it "may mislead the public." 

"Given the unprecedented state of play in the economy at the moment, the data is also extremely fluid and would produce a less instructive forecast," said senior administration official, who spoke on condition of anonymity to describe the White House's decision. "Furthermore, we remain in complete accordance with the law as there is no statutory requirement to release this information, just precedent, which, when compared to our current economic situation, is dismissible."

The magnitude of the economic impact has grown by the week. The Treasury Department said earlier this month it plans to borrow $3 trillion from April through June to finance spending in response to the pandemic, while the monthly deficit in April soared to $738 billion.

On Thursday, the Labor Department reported that Americans filed another 2.1 million jobless claims last week, bringing the 10-week total to more than 40 million.

The budget review will include a brief summary of economic conditions to date. One official said White House staff are also busy with implementing the $2 trillion Cares Act aid package approved by Congress in March.

The economic projections are jointly produced by a "troika" consisting of the director of OMB, the chair of the White House Council of Economic Advisers, and the treasury secretary.

Since the release of the White House budget in January, the unemployment rate has skyrocketed from about 3.5% to close to 15%. President Donald Trump has repeatedly expressed confidence in a rapid economic rebound from the virus, but mainstream economists and Wall Street forecasters have predicted unemployment could remain north of 10% through 2020 and into 2021.

Budget experts say there is no reason the White House would be unable to release its own economic projections. The Congressional Budget Office, for instance, updated its economic projections in both April and May as the coronavirus rippled through the U.S. economy.

In its 2017 mid-session budget review, the White House said it would not be providing new economic projections, but for a much different reason. It said it was not providing new forecasts because "economic developments over the past few months do not provide a basis for changing this forecast," using the same assumptions it had in the previous budget. In other words, it was sticking with its previous projections.

This year's mid-session budget will not include new projections even though White House officials have acknowledged that the economy has changed markedly in the past few months.

"There is no logistical reason they couldn't do it," said Bill Hoagland, senior vice president at the Bipartisan Policy Center and former Republican staff director for the Senate Budget Committee. "It seems more likely they do not want to bring attention to the high level of unemployment they'd have to project for this year, and into next year."

White House officials have said they are being transparent about the extent of the downturn. Kevin Hassett, a White House economist, said over the weekend that unemployment could remain north of 10% on Election Day in November. Larry Kudlow, director of the White House National Economic Council, said last week that "the numbers coming in are not good. In fact, they are downright bad in most cases."

Critics say the White House is not confronting the extent of the economic damage facing the nation. The administration has largely broken off negotiations with Congress on an additional stimulus package, although many economists say additional stimulus is necessary.

"They're never going to address the problems if they put these kinds of blinders on," said Jared Bernstein, a former economic adviser to presumptive Democratic presidential nominee Joe Biden. "Managing the economy means publishing credible forecasts."

White House officials have defended their response to the economic downturn, citing the trillions of dollars they approved with Congress to pump into the economy.

In a typical year, the White House budget also helps federal agencies plan their budget requests for Congress. Agencies such as the Transportation and Energy departments use the administration's economic information to forecast projected needs for various government programs.

"The agencies need good information on the economic outlook to plan. The economy today is not the economy six months ago," said Claudia Sahm, who worked on the macroeconomic forecast underlying the budget as an economist in the White House Council on Economic Advisers during the Obama administration. "Without these forecasts, they cannot ask for the right amount in appropriations."

Russell Vought, the acting director of OMB, will appear before the Senate Budget Committee for his nomination hearing on June 3.

 

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