President Barack Obama may have been too optimisticÂ aboutÂ economic recovery in the $3.6 trillionÂ federal budgetÂ he announced last week, according to an analysis by Associated Press writer Tom Raum.
The president’s ambitious plans for a new era of big-government activism — which includeÂ $634 billion for health care reform over the next decade– depend on a full economic recovery, Raum wrote. And that recovery probably won’t come as soon as the administration expects it to.
On Friday, the Commerce Department said the economy shrank 6.2 percent in the fourth quarter (from the third quarter)Â of last year — much worse than shrinkage ofÂ 3.8 percent previously estimated.
“We’re in bad shape, very bad shape, and this just confirms it, Mark Zandi, chief economist for Moody’s Economy.com, told the AP. “I think the administration budget is optimistic on growth, especially this year and 2010. I think it will be tough to get the kind of growth rates they’re expecting.”
The Commerce Department announcement came just a day after the Obama Administration forecasted that the economy would return to growth nextÂ year. Economic growth is important to the health care reforms baked into the federal budget because the administration plans to pay for those reforms by raising taxes on rich families and businesses.
“Today’s news is yet another reminder that families and small businesses are hurting during this recession,” House Republican leader John Boehner of Ohio said about the revised economic contraction figure. Now is not the time “to take more of their money away to pay for a big-government spending spree,” Boehner told the AP.
Is it likely that the Obama Administration is right and the economy will recover next year?
“Yes, it’s possible,” Rob Shapiro, head of the globalization program at NDN, a Democratic think tank, told the Associated Press.
“Do I think it’s probable? No, I don’t. But I don’t think anybody’s forecast is probable,” said Shapiro, who also isÂ chairman of Sonecon, an economic consulting firm. “No one has called this cycle correctly. Because it is so unlike any other downturn, economists are legitimately more uncertain about what its course will be.”
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