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The nonpartisan Congressional Budget Office just released its August budget and deficit projections.They predict 2.7% GDP Growth, 8.5% unemployment in 2012—which Jim Pethokoukis notes, is more bullish than expected by Goldman Sachs and JP Morgan.
- $1.284 trillion deficit for the fiscal year ending September 30—down slightly from the past two years. This is the third-largest deficit in the past 65 years.
- Better fiscal outlook for the next 10 years—assuming current law remains unchanged and the “Super Committee” completes its work.
- Deficits from 2012-2020 will run up an additional $3.487 trillion in debt—but annual deficits will fall to $205 billion in 2015.
- “CBO Projects that real GDP will increase by 2.3 per cent this year and by 2.7 per cent next year. Under current law, federal tax and spending policies will impose substantial restraint on the economy in 2013 averaging 3.6 per cent per year from 2013 through 2016.”
- “The unemployment rate is projected to fall from 9.1 per cent in the second quarter of 2011 to 8.9 per cent in the fourth quarter of the year and to 8.5 per cent in the fourth quarter of 2012—and then to remain above 8 per cent until 2014.” CBO predicts the unemployment rate in 2016 to fall to 5.3 per cent.
- CBO says an extension of the Bush Tax cuts and “fixing” the Alternative Minimum Tax would result in at least a 2 per cent jump in the deficit as a percentage of GDP.
- CBO Bottom Line: To prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches.
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