CBO Outlook: Apocalypse soon
The Congressional Budget Office has released its latest budget projections today.
Remember a few things thing about these numbers. The CBO can only work within the parameters of today’s reality. Economists are terrible seers. If you look at CBO projections from 10 years ago, you’ll notice it got nearly nothing right. One massive assumption in these projections is that Washington will carry out across-the-board spending cuts and then function under those caps – either by allowing sequestration to happen or by making similar cuts — moving forward. That is a leap of faith.
On Tuesday, in his press conference in which he called on congress to pass even more tax hikes, President Barack Obama claimed: “Our economy right now is headed in the right direction …” Here’s what that direction looks like according to the CBO:
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- GDP was 5.5 percent below real potential in 2012. It expects the GDP to grow by only 1.4 percent this year — from the fourth quarter of 2012 to the fourth quarter of 2013. That is less than the 1.9 percent growth for 2012. (During the same 12 quarters following the recession under Ronald Reagan, the real GDP growth averaged 5.6 percent.)
- The unemployment rate is expected to remain above 7.5 percent next year, the sixth consecutive year with unemployment would be that high. That would be the longest period of unemployment rates staying that high in the past 70 years.
- Good news. The CBO predicts that the deficit will fall to $430 billion by 2015 – which means the United States will only have to borrow 24 cents on the dollar. The bad news is that deficits will spike back to the vicinity of $1 trillion by the end of the decade and continue to get worse as we move forward.
- The CBO forecasts that debt held by the public in 2023 would be a larger percentage than in any year since 1951, around 77 percent of GDP. To put that in perspective, the 40-year average is 39 percent.
- The CBO also predicted that servicing that debt will get a lot more expensive. “Higher costs for interest will eventually require the government to raise taxes, reduce benefits and services, or undertake some combination of those two actions,” according to the report.
Affordable Care Act?
- Estimates regarding the cost of Obamacare continue to rise. Now, the CBO estimates it will cost $1.3 trillion over the decade rather than the promise it would not cost more than $900 billion over ten years. (The Republican Senate Budget Committee puts the cost at $2.6 trillion but let’s stick with the CBO for now.)
- The report predicts that more employers will pay penalties for failing to offer health coverage than was previously estimated, bringing in $13 billion in additional “revenue.” So Obamacare will push around 7 million people from their employer-based insurance coverage. That’s almost twice as many as had been estimated. (Premiums have already spiked because of Obamacare.)