|Thelma and Louise Setting Fiscal Policy in DC|
Basically they said if the fiscal cliff is not fixed by President Obama and the House and the Senate before the end of this year, 2012, we will fall back into a recession.
How's that for grabbing your attention? You want to go backwards and relive the downside of the past 4 years, again?
Here's the report in full: CBO Read it for yourself if you have the guts and the stomach for it.
Below, we have taken the summary and inserted somewhat irreverent and pithy comments in red as if we were hearing it for the first time in a Budget Committee hearing and thinking these thoughts to ourselves. You'll be amused and maybe somewhat stunned what goes through the mind of a congressional staffer during such a hearing, besides the obligatory 'What am I going to have for lunch today?' and 'Who do the Redskins play this weekend...I wonder if I can get a ticket from someone?':
What Policy Changes Are Scheduled to Take Effect in January 2013?
What Is the Budget and Economic Outlook for 2013?
What Is the Budget Outlook for 2014 to 2022 Under Current Law (CBO’s Baseline) (The 'Fake' Baseline that will NOT Occur)?
- Deficits and Debt: Budget deficits are projected to continue to shrink for several years—to 2.4 percent of GDP in 2014 and 0.4 percent by 2018 (which would be great but it won't be allowed to occur because the Bush Tax Cuts will be extended and the Medicare cuts in Obamacare and the defense cuts in sequestration will not be allowed to stand, among other spending cuts)—before rising again to 0.9 percent by 2022. With deficits small relative to the size of the economy, debt held by the public is also projected to drop relative to GDP—from about 77 percent in 2014 to about 58 percent in 2022. (Good, but won't happen) Even with that decline, however, debt would represent a larger share of GDP in 2022 than in any year between 1955 and 2009. Not good.
- Revenues: Most of the projected decline in the deficit occurs because revenues are set to rise considerably in the coming years under current law (meaning the Bush tax cuts will be allowed to expire, which we already know they won't be allowed to do)—from 15.7 percent of GDP in 2012 to 19.6 percent in 2014 and 21.4 percent in 2022. Between 2012 and 2014 alone, revenues in CBO’s baseline shoot up by one-quarter as a share of GDP because of the expiration of various tax cuts at the end of 2012, the expiration of provisions related to the AMT at the end of 2011 (which will boost tax receipts mainly in 2013 and later), and other factors. all this means is that if the Bush tax cuts are allowed to expire as under current law at the end of this year, CBO expects tax revenue collections by the Treasury to explode somehow, even in this still-weak economy. Ask any residential/commercial real estate person or anyone associated with the construction industry if they expect to pay the same amount of taxes next year if the Bush tax cuts expire as they did in 1999 under Bill Clinton. The answer is a resounding 'no' because their businesses are now cut in half or more vis-a-vis 13 years ago
- Outlays: Outlays, by contrast, are projected to be a smaller share of GDP in 2022 under current law (22.3 percent) than they are in 2012 (22.9 percent). Discretionary spending is projected to decline relative to GDP throughout the next 10 years because of the caps on discretionary funding that stem from provisions of the Budget Control Act. Caps work. PAYGO works. Both make legislators set priorities for spending instead of just spending everything on everything and trying to make everyone happy. By CBO’s estimate, discretionary spending will fall to 5.6 percent of GDP by 2022—the lowest level in at least 50 years. Progressive liberals should be panicking as entitlement spending will continue to squeeze out education, welfare and environmental protection programs. Mandatory outlays will remain about the same as a share of GDP through 2019, CBO projects, and then will grow faster than the economy, reaching 14.4 percent of GDP in 2022, compared with 13.2 percent in 2012. more older Boomers lasting and living longer than their predecessors.
- Net Interest: Despite the surge in federal borrowing in recent years, net interest outlays are projected to hold steady at 1.4 percent of GDP through 2015, primarily because interest rates are expected to remain near historic lows for the next few years. Interest rates are anticipated to rise noticeably thereafter, causing net interest outlays to increase to 2.3 percent of GDP by 2020, CBO projects. What the heck happens if interest rates go to 5%? 7%; 21% (hey, youngsters! it happened in 1981-82 here in America, you can look it up!)
What Is the Economic Outlook for 2014 to 2022 Under Current Law (CBO’s Baseline)? Which assumes that the Bush Tax Cuts expire, remember. And the cuts in Medicare and defense and discretionary spending will be made and maintained.
- Economic Growth from 2014 to 2017: As the economy adjusts to a lower path for budget deficits, real GDP is projected to begin growing again in late 2013. CBO must be assuming that the business community will react with relief and start investing once they feel like some adults are running the White House and Congress again. The pace of economic expansion will average 4.3 percent from 2014 through 2017, CBO projects, although the economy will continue to operate below its potential level (when output reflects a high rate of use of labor and capital) until 2018. below potential growth til 2018. Ugh.
- Unemployment Rate from 2014 to 2017: As economic growth picks up, the unemployment rate is projected to decline to 8.4 percent in the fourth quarter of 2014 and to 5.7 percent by the fourth quarter of 2017. Wow. Well, then, whoever wins this Presidential race is going to feel like they won the jackpot when everyone sings their praises long about 2017, won't they?
- Inflation and Interest Rates from 2014 to 2017: Inflation (as measured by the PCE price index) is projected to inch up toward 2 percent by 2017. CBO anticipates that, as the economy strengthens, interest rates will return to more-typical levels; the rate on 3-month Treasury bills is projected to be 3.4 percent at the end of 2017, and the rate on 10-year Treasury notes is projected to be 4.6 percent. these are still not very high
- The Outlook for 2018 Through 2022: Beyond 2017, CBO does not attempt to predict the timing or magnitude of fluctuations in business cycles. CBO’s economic projections for the 2018–2022 period are based on trends in the factors that underlie the economy’s potential output, such as the size of the labor force, the stock of productive capital, and productivity. meaning CBO is just 'guessing' and pulling numbers out of thin air around them in Ford Annex Building again. In those projections, the growth of real GDP averages 2.4 percent between 2018 and 2022, and inflation hovers around 2 percent. By late 2022, the unemployment rate declines to 5.3 percent, and interest rates on 3-month Treasury bills and 10-year Treasury notes are 3.8 percent and 5.0 percent, respectively. And everyone eats apple pie and sings the National Anthem before and after every meal again