CBO: "pace of the recovery has been slow, and the economy remains in a severe slump"

[ProSense]

Budget and Economic Outlook: An Update (CBO)

The United States is facing profound budgetary and economic challenges. At 8.5 percent of gross domestic product (GDP), the $1.3 trillion budget deficit that the Congressional Budget Office (CBO) projects for 2011 will be the third-largest shortfall in the past 65 years (exceeded only by the deficits of the preceding two years). This year's deficit stems in part from the long shadow cast on the U.S. economy by the financial crisis and the recent recession. Although economic output began to expand again two years ago, the pace of the recovery has been slow, and the economy remains in a severe slump. Recent turmoil in financial markets in the United States and overseas threatens to prolong the slump.

CBO expects that the recovery will continue but that real (inflation-adjusted) GDP will stay well below the economy's potential—a level that corresponds to a high rate of use of labor and capital—for several years. On the basis of economic data available through early July, when the agency initially completed its economic forecast, CBO projects that real GDP will increase by 2.3 percent this year and by 2.7 percent next year. Under current law, federal tax and spending policies will impose substantial restraint on the economy in 2013, so CBO projects that economic growth will slow that year before picking up again, averaging 3.6 percent per year from 2013 through 2016.

With modest economic growth anticipated for the next few years, CBO expects employment to expand slowly. The unemployment rate is projected to fall from 9.1 percent in the second quarter of 2011 to 8.9 percent in the fourth quarter of the year and to 8.5 percent in the fourth quarter of 2012—and then to remain above 8 percent until 2014. Although inflation increased in the first half of 2011, spurred largely by a sharp rise in oil prices, CBO projects that it will diminish in the second half of the year and then stay below 2.0 percent over the next several years.

If the recovery continues as CBO expects, and if tax and spending policies unfold as specified in current law, deficits will drop markedly as a share of GDP over the next few years. Under CBO's baseline projections, which generally reflect the assumption that current law will not change, deficits fall to 6.2 percent of GDP next year and 3.2 percent in 2013, and they average 1.2 percent of GDP from 2014 to 2021. Those projections incorporate the effects of the deficit reduction measures in the recently enacted Budget Control Act of 2011; they also reflect the sharp increases in revenues that will occur when provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 tax act) expire.

In CBO's baseline, cumulative deficits total $3.5 trillion between 2012 and 2021, and by the end of 2021, debt held by the public equals 61 percent of GDP. That estimate of deficits over the next 10 years is considerably lower than the $6.7 trillion that the agency projected in March. About two-thirds of that reduction stems from the effects of enacting the Budget Control Act, which set caps on future discretionary spending and created a process for adopting additional deficit reduction measures; the remainder is the result of changes in the economic outlook and technical revisions to CBO's projections.

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Via TPM: Budget deal slices deficits nearly in half: CBO

WASHINGTON (Reuters) - A sweeping U.S. budget deal and lower interest rates will slice projected budget deficits nearly in half over the next 10 years, the nonpartisan Congressional Budget Office reported on Wednesday.

CBO reported that the United States will rack up $3.487 trillion in cumulative deficits over 10 years, some $3.3 trillion below its previous projection.

[RC]

1. Is it not obvious the fix is to undo everything that the Republican Bush Administration did?

To get the economy going again, it is the job of the government to INCREASE spending in this country.
To get the money to increase spending we need to increase revenue, we need to raise taxes and stop the wasteful wars.
We need to get money into circulation. Starving the economy as the Republicans are doing is a recipe for total collapses of our country.

[bigdarryl]

2. If this becomes true by there predictions Obama is a shoo win for 2012