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Fratto: Mid-Session Review a Mid-Summer No-Show


Lost in the whirlwind of the epic debt ceiling debate is the absence of attention to the usual mid-summer White House report resetting the Administration’s economic assumptions and fiscal outlook.

The Mid-Session Review (MSR) – a product of the Office of Management and Budget (OMB) is due every July15th, and includes fresh macroeconomic assumptions from the so-called “Troika”: the OMB Director, the Chairman of the Council of Economic Advisors, and the Treasury Secretary.

In addition to new macroeconomic assumptions, the report updates the Administration’s fiscal outlook, and the two are related. The July 15th deadline is frequently missed by all Administrations, but usually there’s some announcement by the Press Secretary that it will come late.

This year, we haven’t heard a peep from the White House about the MSR, and probably with good reason.

Last year the White House released the Mid-Session Review on July 23rd – in true Washington fashion, on a lazy Friday afternoon, attempting to bury a troubling report. But given the relatively rosy outlook of last year’s report, one wonders what the strategy will be to bury this year’s report.

Last year’s MSR predicted real GDP growth for 2011 to average 4.0% and the unemployment rate to average 8.7%. These predictions were downgraded in the President’s February 2011 budget, predicting real GDP growth in 2011 to average 2.7%, with the unemployment rate settling at 9.3%.

The Administration may have been prescient on its unemployment rate prediction, but will likely miss the mark on real GDP growth by a wide mark. We’ll wait to see Q2 revisions, but the first half of 2011 probably came in at less than 1% growth. For growth to meet the White House’s lower GDP estimate, growth will need to exceed 4.0% the rest of the year. No one believes that’s likely.

Lowered expectations for real GDP growth also have enormous implications for the White House’s budget projections, and will likely push further to out-years its goal of reaching “primary balance” (a 3% fiscal deficit, allowing for interest payments only).

The recent budget agreement will require the Administration to update its fiscal estimates in preparation for the next round of budget and debt ceiling action in November. Maybe the White House will use that as an excuse to further delay the Mid-SessionReview.

Regardless, Administration economists are now having to grapple with decidedly more negative economic data since last summer, and the White House Press Office is grappling with how to ensure the MSR continues to go un-noticed.

Tony Fratto, is a Managing Partner at Hamilton Place Strategies, former Assistant Secretary at the U.S. Treasury Department, and a former White House official. He is also an on-air contributor for CNBC and founder of the policy discussion website rooseveltroom.net You can follow him on Twitter at http://twitter.com/TonyFratto.