The White House cut its outlook for US growth in 2012 and 2013 on Friday, hours after data showed the economy grew at a tepid pace in the second quarter, raising concerns about a slowdown that could mar President Barack Obama's re-election chances.
In its semi-annual budget review, the White House said it expected gross domestic product to rise 2.3 percent this year and 2.7 percent again next year - less than the 2.7 percent and 3.0 percent growth projections it made in February. "The economy continues to face serious headwinds that have dampened growth and limited gains in employment," the mid-session report on Obama's fiscal 2013 budget proposal stated.
It also widened its estimate for the federal deficit in fiscal 2013 - which begins October 1 - to $991 billion from the original $901 billion made in February, and said the budget gap for fiscal 2012 would be $1.211 trillion, slimmer than the original $1.327 trillion. Over a 10-year window, from fiscal 2013 through 2021, it said deficits would be $240 billion lower than projected.
As has become customary in a politically divided Washington, Obama's 2013 budget proposal was rejected in Congress, where Republicans are opposed to raising taxes and Obama's Democrats want to collect more revenue alongside any spending cuts. The Republicans control the House of Representatives and Obama's fellow Democrats control the Senate. An agreement struck last August to avert a sovereign default set spending levels for this year. Another fight is brewing over tax hikes and spending cuts slated for the end of 2012, a convergence of timing referred to as the "fiscal cliff."
Next week, the House is expected to vote against an Obama proposal to raise taxes on families making more than $250,000 a year. The Senate had backed the plan, which would extend tax rates begun under Republican former President George W. Bush for middle-class families for another year.