Free Markets, Free People

CBO forecast for 2012– another trillion dollar deficit and 8.9% unemployment

Speaking of the record compiled under the Obama administration, the CBO provides plenty of ammo for the GOP:

The Congressional Budget Office on Tuesday predicted the deficit will rise to $1.08 trillion in 2012.

The office also projected the jobless rate would rise to 8.9 percent by the end of 2012, and to 9.2 percent in 2013.

That’s because it has revised its previous estimate as the GDP growth numbers for last year were revised down.

Additionally, and reading between the lines, it also means that the administration and Congress has yet to even begin to get a handle on the main problem – spending.

Of course part of that stands to reason when you take into consideration the Democratic controlled Senate hasn’t passed a budget in over 1,000 days.

The Hill, ever the master of understatement, gives you a peek at what should be obvious:

A rising deficit and unemployment rate would hamper President Obama’s reelection effort, which in recent weeks has seemed to be on stronger footing.

“Hamper"?”   It should put it in the crapper.  Or so you would think.  But then there’s the GOP primary going on, huh?

CBO Director Doug Elmendorf told reporters that Congress will have to make important choices this year regarding the supercommittee trigger and tax policy that will have huge effects on the deficit.

While unable to recommend choices, Elmendorf said that addressing the deficit sooner rather than later is easier.

The deficit was $1.4 trillion in 2009, $1.3 trillion in 2010 and $1.3 trillion in 2011. The largest deficit recorded before that was $458 billion in 2008.

Well, of course addressing the deficit sooner rather than later is a lot easier.  Haven’t we been saying that for years?  Decades?

Anyone think it will be addressed in this next year?  Consider what the CBO recommends:

The deficit will be much higher if Congress takes several actions that many expect.

If the Bush tax rates are extended, for example, the deficit would rise.

It would rise if Congress patches the Alternative Minimum Tax, which lawmakers have routinely done to prevent higher taxes from being imposed on middle class taxpayers.

It would also rise if Congress continues to pass the “doc fix” that prevents a cut to Medicare payments to doctors, something that Congress has done on a near-annual basis.

Finally, if Congress does not follow through on cuts mandated by the failure of the supercommittee, the deficit will grow. Lawmakers are already talking about canceling scheduled cuts to the Pentagon’s budget.

So, let’s see – raise taxes, lower taxes, subsidize and cut spending. Or is that last one, cut projected spending?

*sigh*

The “doc fix”, unless passed, will see Doctors leave Medicare in droves.   I certainly would if I were in their shoes.  Any guesses how that turns out?

And while the Democrats only want the “rich” to pay higher taxes, if the current tax rates (also known as the “Bush tax cut”) are allowed to revert to their prior percentages, taxes will increase 30% on everyone by 2014.  Catch 22?

The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.

At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.

You don’t say?  Stupid if you do, damned if you don’t?  Nice position we’ve gotten ourselves in, no?

And finally, sequestration will “cut” 10% across the board, to include defense which has already taken that sort of a cut.  Dangerous.

However, for the rest of the government, I expect the usual accounting tricks with no real cuts in spending if sequestration is enacted.

As for taxes increasing, the increase is fairly dramatic at a time the economy can’t absorb such increases:

The anticipated percentage increase in federal tax revenue is not only large when calculated in dollar terms but also when calculated as a share of GDP. The jump from 15.4 percent of GDP in fiscal 2011 to 20.0 percent of GDP in fiscal 2014 equals an increase of 29.8 percent. The jump from 16.3 percent in fiscal 2012 to 20.0 percent in fiscal 2014 equals an increase over two years of 22.7 percent.

Federal tax revenues have averaged “about 18 percent of GDP for the past 40 years,” according to CBO. So, in the next two years federal tax revenues will rise from a level that is below the modern historical average to a level that is above it.

Again I’m reduced to saying “what a freakin’ mess”.  When I say over and over again, “we’ve been ill served by our political class for decades”, it is this to which I point.

Yes, all of this and the never mentioned additional 200 plus trillion in unfunded future mandated liabilities that have been amassed.

~McQ

Twitter: @McQandO

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25 Responses to CBO forecast for 2012– another trillion dollar deficit and 8.9% unemployment

  • “The “doc fix”, unless passed, will see Doctors leave Medicare in droves.”

    Am I reading this wrong? I thought the ‘doc fix’ kept payments to doctors from being cut. Thus if it does not pass then there will be cuts in Medicare payments to doctors which would result in more of them dropping out of the program.

    • @tkc882 I was under the impression that there have been temporary “doc fix”-es but Congress has been unable to make it permanent.
      Meanwhile, there still is that “promise” to reduce Medicare by $550 billion in the reconciled ObamaCare package to be considered as well.
      Obama has done the standard liberal cuts to DOD, with Frank and others demanding more. I keep getting the idea that they haven’t figured out quite yet that those “reduced” soldiers, sailors and contractors will just go on unemployment.

    • @tkc882 As I understand it the “Doc Fix” delays mandated cuts in payments to Doctors for whatever length of time Congress sets for the “fix”. They do it every year or so. If left to kick in, there’s a big reduction in payments. It was apparently passed in one of the few “cut spending” moods Congress has had in the last 50 years, and it has been nullified each year since.

      • @Bruce McQuain @tkc882 “and it has been nullified each year since.”, which, all in all, should give us all a real warm fuzzy feeling about any spending cuts they promise to make eh?

        • @looker Considering that most of the ‘draconian’ cuts simply slow down the increase in spending and don’t actually cut anything I wouldn’t hold out much hope.

          @Bruce Thanks, I was reading it wrong.

        • @looker @Bruce @tkc882 The DOJ has a “doc fix” working on Fast & Furious. Hard to keep up…

    • @tkc882 National Journal: ‘Doc Fix’ Just Got More Expensive
      Permanent repeal of the flawed Medicare payment formula known as the sustainable growth rate just got a lot more expensive. According to the Congressional Budget Office, … a 10-year repeal of the growth-rate formula that froze doctors’ rates at current levels would cost $316 billion, compared with $290 billion when CBO last calculated the rate in November. The difference may make permanent repeal of the formula–always a long shot–even less palatable to lawmakers. But even with the doc fix on hold, the report projects that spending on health care programs will explode in the coming decade (Sanger-Katz, McCarthy, 1/31).

      • @Ragspierre I’ll wager that much of the strain on the welfare state in the next decade or two will come from babyboomers retiring. They paid into this welfare system but we all know that money got spent. They’re still going to want their benefits and I can only imagine politicians bending over backwards to pander to such a large constituency.
        I doubt any fiscal problems will even be considered until it is too late. So the country becomes something like Greece, only a lot bigger. Too big to fail and too big to bail out.

        • @tkc882 Like Steyn has stated, we are the brokest nation on the planet. Not only is there not enough wealth in the US to support the welfare state, there isn’t enough wealth in the WORLD.

        • @Ragspierre @tkc882 Are you somehow suggesting sir, that the funding for the investigation of the long term effects of cocaine usage on the sex life of Japanese spotted quail is about to come to an end!!!!?????

        • @looker @tkc882 One way or another…

        • @Ragspierre @tkc882 “Not only is there not enough wealth in the US to support the welfare state, there isn’t enough wealth in the WORLD.”
          However,,, there is this -
          http://www.usnews.com/news/articles/2012/01/31/house-set-to-ban-welfare-payments-at-strip-clubs

          But of course the same people who can’t get ID to vote, can’t USE their cards at anywhere but liquor stores you see….because…..

          “While supporters claim that the bill is necessary to safeguard taxpayer dollars, critics claim it is stigmatizing those hit with hard times to score political points. Democratic Rep. Gwen Moore, claimed that the bill would “humiliate and marginalize” poor people.

          “It many neighborhoods, the closest ATM is located in a nearby liquor store,” Moore said when the bill was debated in December.”

          Uh huh, I see. Was there a bridge for sale too?

        • @looker @tkc882 OMG…!!! The HUMANITY…!!! People will be FORCEDDDDDD to use the ATM at the liquor-eria…WITHOUT buying booze…!!!! How…marginalizing….!!!!

        • @looker @Ragspierre @tkc882 Is it possible that evidence against Democrats in Troy, New York,has finally hit rock bottom? When they weren’t paying off college kids with their vote, they were apparently tricking mentally impaired voters into signing absentee ballots, telling them “the city made it easier to vote this year.”

        • @Ragspierre @tkc882 I’m gathering there’s a dog whistle word there for Democrats when they use the word ‘poor’ – I think they really mean ‘stupid’.

        • @Ragspierre @looker @tkc882 So you stand where on putting restrictions on what people can buy with welfare funds? Because a couple of days ago you called restrictions on how people can use their welfare money was nanny-statism.

        • @CaptinSarcastic @Ragspierre @tkc882 Rags wanted to do away with the program. I never said, but if there must be such programs, they damn well ought to be prohibited for using the money for booze, and smokes, and a myriad of other purchasable items that have nothing to do with nutrition and shelter. And then, of course, now we’re wandering into black market territory as they figure out ways to translate ‘food’ items they are allowed to buy into cash for the things they are NOT allowed to buy. Pretty clever these people who can’t find ATM’s that aren’t in Liquor stores.

        • @CaptinSarcastic @Ragspierre @tkc882 Just because I don’t want to shoot the deer eating my crops doesn’t mean I want to let them have free run of the fields.

        • @CaptinSarcastic @Ragspierre @tkc882
          http://atlanta.cbslocal.com/2012/02/02/cash-strapped-georgia-college-students-turning-to-food-stamps/

          And I’ll kill THIS crap too. College education is not a freaking right, and if they need to choose between eating and going to school….I’m gonna be a real bastard about it and tell them to go part time, get a job, and stop collecting welfare. It’s NOT MY job to provide them with a meal while they study WHATEVER they’re studying.

  • ZeroHedge has had a field day with the CBO report.
    In one piece they point real growth as 2.0% for 2012 and 1.1% for 2013 with unemployment as 8.9% and 9.2%
    http://www.zerohedge.com/contributed/cbo-report-omg
    They also point to a table that shows that the Social Security Trust Fund will top out in 2019.

    In another, they point to some special language that says that unemployment is really 10% now.

    • But here is the kicker: “Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent” translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%.
      http://www.zerohedge.com/news/latest-congressional-budget-outlook-2012-2022-released

    • @Neo_ What does the SS trust fund running out mean? My understanding is that SS is already putting out more then it takes in. Am I wrong? Or are they talking about SS using up its IOUs it got from the government?

      • @Don S @Neo_ This apparently is when all the money in the trust that hadn’t been hijacked into T-bills runs out. When it tops out, it will be running on revenues and the redemption of T-bills.

  • Adam Smith said, There is a lot of ruin in a nation. . And we are just about down to the final chapters.