Any return to dramatic spending reductions would be a “headwind” to the economy that’s finally “hitting its stride,” Furman said. White House report highlights middle-class stagnation Report says more budget cuts would damage economic growth.

The White House is using a new economic report to boost its case for its “middle-class economics” agenda — and to needle Congress about the need to avoid a return to sequestration budget cuts.

The annual Economic Report of the President, written by President Barack Obama’s Council of Economic Advisers, makes the same basic argument Obama has made in his speeches: The economy is recovering, but the benefits of the growth haven’t been shared by the middle class.


Thursday’s report lays the groundwork for Obama’s policies — especially on trade, business tax reform and family-friendly workplace policies — by declaring that the key to helping the middle class is to address rising income inequality and declining participation in the workforce. Those trends have kept wages from rising faster, the report says, even though productivity has been high over the past two decades.

And Obama’s economic advisers say the report shows why congressional Republicans shouldn’t try to return to deep spending cuts in their next budget — noting that the easing of sequestration cuts last year, along with a big increase in consumer spending, was one of the reasons the economy grew by 2.8 percent in 2013 and 2014, 0.7 percentage points faster than in Obama’s first term.

“I think one of the reasons you saw higher growth in 2014 was the reduction in austerity and manufactured crises,” Jason Furman, chairman of the Council of Economic Advisers, told reporters at a briefing Wednesday. Any return to dramatic spending reductions would be a “headwind” to the economy that’s finally “hitting its stride,” Furman said.

Obama’s budget calls for an end to the deep automatic spending cuts that will start again in October under a 2011 budget law, but Republicans have suggested they’d rather live within those spending limits than pass the capital gains tax increases and other taxes on the wealthy that Obama wants. And they say the report shows the White House is making too much out of a mild economic recovery.

“If wasteful government over-spending and campaign-style speeches created jobs, America would be in the middle of an unprecedented boom — not the slowest recovery in a half-century,” said Don Stewart, a spokesman for Senate Majority Leader Mitch McConnell. “The White House should focus less on trumpeting the slowest recovery in over 50 years, and more on finally cooperating with Congress to advance opportunity and jobs for the Middle Class.”

Thursday’s report is a 419-page collection of historical data and tables that looks at long-term workforce trends, the rise of work and family conflicts, and energy consumption. It also highlights trade, a subject the Obama administration wants to promote as it tries to ease opposition among some Democrats.

In the past, the annual economic reports have served as a guide to the topics the White House considers important for the upcoming year’s agenda. Last year, the report included chapters on the impact of the stimulus and Obamacare, as well as the progress made by the War on Poverty. So this year’s chapters on middle-class economics, workplace flexibility, reductions in carbon emissions, trade and business tax reform show how the agenda has changed as Obama heads into the final two years of his presidency.

The report says the improving economy has started to lead to higher wages, but not enough to make up for decades of weak wage growth. One way to boost wages higher, Furman said, is to increase productivity growth — which he said would be one benefit of trade deals like the Trans-Pacific Partnership.

It would also be an opportunity to insist on stronger labor standards, a key goal of Democrats who are wary of trade deals, Furman said.

“We’d rather trade with them and have higher labor standards than not,” he said.