White House cuts US growth forecast

President Barack Obama is reported to have sharply cut US economic growth projections, a move, which reflects the difficult challenge he is faced with in spurring a recovery and creating more jobs. 

Obama would have to curb high unemployment to brighten his chances of winning re-election in 2012. He is expected to outline his plans to lift employment and growth in a major speech scheduled for 8 September. 

"The economic projections make clear there is a real need in the short term to kick start economic growth and get on a sustained higher growth path," White House budget chief Jack Lew told reporters during a conference call.

Meanwhile, in a midyear review of its annual budget, the White House dropped some hints of what Obama would say next week. The speech, according to White House, could include proposals for a mixture of tax cuts for middle class families, spending on infrastructure and aid for the long-term unemployed.

The new projections, according to the White House, would bring down the deficit to 8.8 per cent of GDP this year, as against the 10.9 per cent projection at the time the budget was released in February.

The improvement was largely due to a deal struck with Republicans last month, which envisaged spending cuts which would shave $1.45 trillion from the deficit over the next 10 years.