26 August 2009 
Yesterday the Congressional Budget Office released their “summer update“ publication, in which they update their baseline budget and economic projections for changes in the economy and legislation enacted so far this year. The Administration also released their “Mid-Session Review“ publication, which makes similar updates for the President’s policy proposals.
Most of the press coverage focused on the updated budget deficit projections. I instead want to draw your attention to one component of the new CBO economic forecast.
We know of two big changes since CBO published their January baseline projection:
- The economy in 2009 was worse than most professional forecasters projected at the beginning of this year before President Obama took office and launched his ambitious legislative agenda. A weaker economy has caused everyone to lower their estimates of employment and their estimates of this year’s recession, where “everyone” includes CBO, OMB, and major private forecasters. Forecasters also have lowered their estimates for 2010, in part because they are starting from a lower 2009 level.
- There have been significant policy actions, the most notable of which was the $787 billion fiscal stimulus.
The new economic forecasts reflect both changes. The first makes the updated economic projections for 2009 and 2010 much worse than they were in January, and the second makes them somewhat better. (There is a vigorous debate about how much better.)
(photo credit: The White House)
There is no disagreement, however, about the net directional effect of the two. CBO and OMB project a weaker economy in the remainder of 2009 and in 2010 than they projected at the beginning of this year before enactment of the stimulus.
How much weaker?
Based on CBO’s forecast for the average unemployment rate in calendar year 2010, 2.3 million fewer people will be employed on average next year than they projected in January.
For comparison, in July there were about 140 million people employed in the U.S.
Next year’s reality will depend heavily on when the economy turns up and how quickly growth returns. A new projection of fewer people employed next year should not surprise anyone. But 2.3 million is a big bad number.
I think that number could be a tad optimistic come January….so I expect the administration to change how they measure again…
I supply the construction industry with steel products. Everyone has no idea when or where the next project will come from. From where I sit in talking to others in the industry, 2010 may be as bad as 2009. when does this administration finally recognize that they are the problem.
Problem? You are operating under the assumption that Obama and his minions give a hoot about the economy – they are all about power and amassing as much as possible as quickly as possible and the rest of us just be damned.
Ell, I'll be damned.
Welcome to Omerica.
Amazing. There are SOME people who STILL haven’t figured it out. Yes, we were on-line to have a bad year…and their predictions prior to Obama’s election were spot ON. The problem is one of psychology. Obama was elected and said he would raise taxes on the rich. Now the rich heard him and so stopped investing and spending…which rolled downhill. Now our economy is stunted because people are AFRAID! They’re afraid of the Obama Administration and what they are going to do next.
Worse, the Administration keeps wanting to spend their way out of a bad economy, using taxpayer dollars to do so…which increases the fears of everyone and retards personal spending even more.
This really isn’t rocket science…I cannot understand why more people don’t realize this.
Great info. Are you going to compare the numbers to your RCP column? Here's what I see:
Projected Economic Growth (real GDP):
Administration: 2009 changed from -1.2% to -2.8%
2010 changed from 3.2% to 2.0%
CBO: 2009 changed from -2.2% to -1.0%
2010 change from 1.5% to 2.8%
Unemployment:
Admin: 2009 changed from 8.1% to 10.0%
2010 changed from 7.9% to 9.7%
CBO: 2009 changed from 8.3% to 9.3%
2010 changed from 9.0% to 10.2%
Deficit (% of GDP):
Admin: 2009 changed from 12.3% to 11.2%
2010 changed from 8% to 10.4%
CBO: 2009 changed from 11.9% to 11.2%
2010 changed from 7.9% to 9.6%
It looks to me like no one is expecting things to turn around much next year and this is without the devastating bills they are trying to pass. I look forward to your analysis.
After much soul searching I have to say I hope so. There is so much wrong qith the democratic congress and the obama administration that a major depression before 2010 would be preferable to a continued democratic controlled congress. I would only ask that it last until after the 1012 elections.
i am so screwed.
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