Obama Administration Hedges Against Bad Economic News

In a startling forecast, White House economic adviser Christina Romer said Thursday that the nation's soaring unemployment rate is likely to remain at a "severely elevated level" even if it moves up or down a bit.

But that testimony, before the Joint Economic Committee of Congress, only marked the latest installment in the Obama administration's ongoing campaign to manage expectations over how long the unemployment rate will hover near the 10 percent mark.

And those expectations -- which speak to whether Americans perceive the economy to be headed in the right or wrong direction -- could play a crucial role in the 2010 elections.

"I think the thinking is ... let's go out there and beat the drum that things are going to be really bad for a long period of time to come, so that when 10 percent turns out to be persistent, they can say, 'Look, we all knew that was going to happen. That's old news,'" said Karl Rove, a Fox News contributor and former Bush administration adviser.

He noted that the Obama administration "mismanaged" the perception of the economy from the start by "overpromising" results.

At first, Obama aides predicted stimulus spending would hold the jobless rate below 8 percent -- a prediction they now admit was off the mark.

"At the time, our forecast seemed reasonable. Now, looking back, it was clearly too optimistic," Jared Bernstein, chief economist for Vice President Biden, said in June.

The effectiveness of the $787 billion stimulus package likely will figure heavily into the 2010 debate. The nation has lost some 2 million jobs since the package was enacted.

But the White House and liberal economists say things would be much worse without it.

"One of the things we have going for us right now is the stimulus package. That's the thing that has brought us back from the brink," said the Economic Policy Institute's Heidi Shierholz. She said the stimulus is saving between 200,000 and 250,000 jobs a month and noted that there's still 60 percent of the package left.

But Romer, chairwoman of the White House Council of Economic Advisers, was less optimistic on that point.

"The fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009, and by mid-2010, fiscal stimulus will likely be contributing little to further growth," she said.

Fox News' James Rosen contributed to this report.