The CBO has just issued its most recent outlook for the next ten years. It puts as good a spin on a bad situation as would be possible from Washington.
It states:
In 2010, under an assumption that no legislative changes occur, CBO estimates that federal spending will total $3.5 trillion and revenues will total $2.2 trillion. The resulting deficit of about $1.3 trillion would be just $65 billion less than last year’s shortfall and more than three times the size of the deficit recorded in 2008. Total outlays are projected to increase by just $5 billion, while revenues are projected to rise by $70 billion. The deficit for this year is on track to be about as large as last year’s because an expected decline in federal aid to the financial sector will be offset by increases in other outlays, particularly spending from last year’s stimulus legislation and outlays for income support programs, health care programs, Social Security, and net interest. At the same time, revenues are projected to increase only modestly primarily because of the slow pace of economic recovery forecast by CBO and the lagged effect of the recession on tax receipts.
In 2011, according to CBO’s baseline projections, the deficit falls to $980 billion, or 6.5 percent of GDP, as the economy improves, certain tax provisions expire as scheduled, and spending related to the economic downturn abates. Revenues are projected to rise by about $500 billion, an increase of 23 percent, while outlays are projected to increase by $126 billion, or 4 percent.
The outlook is as follows:
Severe economic downturns often sow the seeds of robust recoveries. During a slump in economic activity, consumers defer purchases, especially for housing and durable goods, and businesses postpone capital spending and try to cut inventories. Once demand in the economy picks up, the disparity between the desired and actual stocks of capital assets and consumer durable goods widens quickly, and spending by consumers and businesses can accelerate rapidly. Although CBO expects that the current recovery will be spurred by that dynamic, in all likelihood, the recovery will also be dampened by a number of factors. Those factors include the continuing fragility of some financial markets and institutions; declining support from fiscal policy as the effects of ARRA wane and tax rates increase because of the scheduled expiration of key tax provisions; and slow wage and employment growth, as well as a large excess of vacant houses.
In reality the issues are driven by the total economic uncertainty from Washington. Business is uncertain as to tax rates, as to the taxing from exogenous new taxes such as cap and trade and health care, from the fragility of the dollar, from the uncertainty of available credit to finance current operations, from the depletion of equity for start up opportunities and the list goes on. That abject terror which exists in the business community, especially with entrepreneurs, will delay a recovery and the numbers projected by the CBO post-recovery shall never be met and things will get worse.
It states:
In 2010, under an assumption that no legislative changes occur, CBO estimates that federal spending will total $3.5 trillion and revenues will total $2.2 trillion. The resulting deficit of about $1.3 trillion would be just $65 billion less than last year’s shortfall and more than three times the size of the deficit recorded in 2008. Total outlays are projected to increase by just $5 billion, while revenues are projected to rise by $70 billion. The deficit for this year is on track to be about as large as last year’s because an expected decline in federal aid to the financial sector will be offset by increases in other outlays, particularly spending from last year’s stimulus legislation and outlays for income support programs, health care programs, Social Security, and net interest. At the same time, revenues are projected to increase only modestly primarily because of the slow pace of economic recovery forecast by CBO and the lagged effect of the recession on tax receipts.
In 2011, according to CBO’s baseline projections, the deficit falls to $980 billion, or 6.5 percent of GDP, as the economy improves, certain tax provisions expire as scheduled, and spending related to the economic downturn abates. Revenues are projected to rise by about $500 billion, an increase of 23 percent, while outlays are projected to increase by $126 billion, or 4 percent.
The outlook is as follows:
Severe economic downturns often sow the seeds of robust recoveries. During a slump in economic activity, consumers defer purchases, especially for housing and durable goods, and businesses postpone capital spending and try to cut inventories. Once demand in the economy picks up, the disparity between the desired and actual stocks of capital assets and consumer durable goods widens quickly, and spending by consumers and businesses can accelerate rapidly. Although CBO expects that the current recovery will be spurred by that dynamic, in all likelihood, the recovery will also be dampened by a number of factors. Those factors include the continuing fragility of some financial markets and institutions; declining support from fiscal policy as the effects of ARRA wane and tax rates increase because of the scheduled expiration of key tax provisions; and slow wage and employment growth, as well as a large excess of vacant houses.
In reality the issues are driven by the total economic uncertainty from Washington. Business is uncertain as to tax rates, as to the taxing from exogenous new taxes such as cap and trade and health care, from the fragility of the dollar, from the uncertainty of available credit to finance current operations, from the depletion of equity for start up opportunities and the list goes on. That abject terror which exists in the business community, especially with entrepreneurs, will delay a recovery and the numbers projected by the CBO post-recovery shall never be met and things will get worse.
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