- The Washington Times - Friday, February 12, 2010

The White House on Thursday provided a bleak economic forecast in an annual report to Congress, predicting high unemployment even as companies stop shedding jobs and blaming the Bush administration for steep federal deficits and for the policies that led to the financial market collapse.

The administration’s Council of Economic Advisers said the economy will grow by 3 percent but that the unemployment rate could climb back above the current 9.7 percent rate, reaffirming the somber outlook that accompanied President Obama’s fiscal 2011 budget.

In a letter attached to the 462-page report, Mr. Obama touted his efforts to counter the recession, saying last year’s stimulus package helped the nation avert an economic catastrophe, and he called for Congress to act on his proposals for a jobs spending bill and an overhaul of the financial regulatory system.

“Through these reforms, we seek not to undermine our markets but to make them stronger: to promote a vibrant, fair, and transparent financial system that is far more resistant to the reckless, irresponsible activities that might lead to another meltdown,” Mr. Obama said.

The CEA report, which calls for “rebalancing” the tax code so that households earning more than $250,000 are subject to pre-Bush income tax rates, comes just days after Mr. Obama told Bloomberg News he was “agnostic” to the idea of raising taxes on the middle class to help chip away at the deficit.

“The whole point of it is to make sure that all ideas are on the table,” Mr. Obama told Bloomberg of his proposed commission that would be charged with tackling the nation’s long-term fiscal woes. “So what I want to do is to be completely agnostic, in terms of solutions.”

Republicans were quick to criticize the report, which they said contained little substance.

“The Obama administration’s report is full of blame for the policies of the past, praise for its own failed policies, and promises about their ideological agenda to grow government. Cutting beyond the fluff, the truth that unemployment won’t fall back to its 2008 level for another seven years shows up on page 75,” House Republican Whip Eric Cantor said.

“Instead of praising themselves and blaming others, a greater focus on small businesses and smart solutions to reduce uncertainty and create jobs would be welcome and long overdue.”

The White House defended its discussion of the Bush administration’s role in adding to the deficit, pointing out that the tax cuts of 2001 and 2003 as well as the Medicare prescription drug program were not paid for with offsets in federal spending.

“It is all facts,” said Christina Romer, CEA chairman. “It’s not trying to shift blame.”

The administration’s budget, unveiled earlier this month, predicts a deficit of $1.55 trillion this year, which it would reduce to $1.2 trillion in fiscal 2011. Mr. Obama announced plans to create a bipartisan commission after the Senate defeated a bill that would have created a similar body but with legislative authority.

The report predicts greater job growth next year, saying that an average gain of 190,000 jobs a month will reduce average unemployment to a rate of 9.2 percent in 2011.

Mr. Obama has called on Congress to take up several proposals he’s made on small business in recent weeks, including a tax credit for firms that hire or raise wages and an elimination of the capital gains tax on small businesses. In addition, he has proposed taking $30 billion from the Wall Street bailout program to create a new fund that would give community banks tax incentives to lend.

The House in December passed a $154 billion bill aimed at spurring job growth but the Senate is having a tougher time crafting a measure.

A top Democrat and Republican on Thursday announced a deal on an $85 billion proposal that would include an incentive for hiring along with money for infrastructure projects and an extension of unemployment benefits. But hours later Majority Leader Harry Reid, Nevada Democrat, said he would instead propose a smaller package as a first step.

Mr. Obama has also pushed the Senate to act on an overhaul of the financial regulatory system, which would give the government greater authority to break up troubled firms and create a new financial consumer protection agency. The House passed its version last year.

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