CBO Puts Taxmageddon and Fiscal Cliff on Public's Radar
The Congressional Budget Office (CBO) released its report, “An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022” today, according to a post at the CBO Director’s Blog. Issued annually in the late summer, the report provides “the agency’s updated economic and budget projections spanning the period from 2012 through 2022.
They also published an infographic, which condenses the report into a single graphic -- showing the economic consequences of fiscal tightening in 2012. CBO also provides a 14-slide briefing document and a 45-minute video clip of the CBO Director’s appearance on C-SPAN talking about the updated budget and economic outlook.
In short, the CBO Director said:
“In January 2013, substantial changes to tax and spending policies are scheduled to take effect under current law. Whether lawmakers allow those policy changes to take effect or alter them will play a crucial role in determining the path of the federal budget over the next decade and the outlook for the economy in the near term and beyond.
“If those changes come to pass, they will boost tax revenues and cut spending, yielding a deficit in 2013 almost $500 billion less than the $1.1 trillion shortfall projected for 2012. As shown in the first figure, if current laws governing taxes and spending remain in effect over the next decade (CBO’s baseline projection), debt held by the public will fall from 73 percent of GDP in 2012 to 58 percent of GDP in 2022. In contrast, if policymakers altered those laws to maintain many policies that have been in effect in recent years (CBO’s alternative fiscal scenario), deficits would be much larger and debt would climb to nearly 90 percent of GDP by 2022. (In either case, debt would be relatively high by historical standards.)
“In CBO’s judgment, the sharp increases in federal taxes and reductions in federal spending that, under current law, are scheduled to begin in calendar year 2013 are likely to interrupt the recent economic progress, resulting in what will probably be considered a recession That forecast is summarized in the table below.”
CBO forecasts economic growth (“under current law”) of 2.1% for 2012, -0.5% for 2013, 4.3% for the years 2014-2017, and drop to 2.4% for the years 2018-2022. On unemployment rates, CBO projects an 8.2% rate for all of 2012, increase to 9.1% in 2013, and drop to 5.7% and 5.3% in the out years. I’m not sure I’d bet the family farm on those numbers. However, take the time to become more familiar with the federal budget and economy than virtually all of your neighbors.