title: White House debt path view tied to optimistic growth forecast
text: WASHINGTON (Reuters) - The Obama administration’s plan to set federal borrowing on a sustainable path relies on stronger economic growth than what is seen by other big government agencies, which in turn have been lowering their expectations. The administration’s view, laid out on Tuesday in its annual budget proposal, is that gross domestic product will grow 2.3 percent each year over the long run.  The median policymaker at the Federal Reserve, however, sees long-term growth at 2 percent, which is the same rate seen by the non-partisan Congressional Budget Office. The differences are modest but show White House economists are being slower to downgrade their view of America’s growth potential. While the Fed and the CBO have been cutting their views on long-term growth in recent years, the White House has held steady in each budget submitted since early 2013.  Over the same period, the CBO has cut its view from 2.2 percent and the views of core Fed policymakers have gone from a 2.3-2.5 percent range to a 1.8-2.2 percent range.      It is impossible to make a full apples-to-apples comparison between the administration’s view with those of the Fed and CBO. The administration’s projections are based on the assumption its budget is fully enacted, which is unlikely to happen.  Proposed immigration law changes would make the workforce younger and more productive while infrastructure investments would also boost efficiency, the administration said in the budget. Prominent academics including former Treasury Secretary Lawrence Summers and Northwestern University economist Robert Gordon have warned that U.S. growth may have shifted persistently lower in recent decades.  A stronger growth view allows the White House to project that the national debt will stay around 75 percent of GDP through 2026. The CBO by comparison sees debt on an upward path over the period, hitting 86 percent in 2026.  White House economists acknowledge slower growth would put pressure on the budget, saying in Tuesday’s proposal that a 1 percentage point slowdown in GDP growth would add $3.1 trillion to the deficit in the decade through 2026. The budget also assumes a modest pace of health care inflation, easing strains on the budget created by an aging society, while arguing that proposed investments and immigration reform will help productivity growth. But the proposal notes that slower productivity growth and higher health care costs could result “in a debt explosion, with debt-to-GDP reaching over 500 percent by (around 2090).” 