While everyone was screaming and drawing battle lines over
the latest CBO report on the Affordable Care Act, I was reading another CBO
report—“Budget and Economic Outlook: 2014 to 2014.” You can find the report here http://www.cbo.gov/publication/45010
. It’s quite uplifting.
Since the Financial Crisis of 2008, growth in our economy
has been tepid, coming in below 3% each year. In our office, we carefully
follow the release of each piece of economic data. We noted the slow
improvements in our economy since 2010 and saw a pick up in activity in 2013.
It seemed that we were back on track. Our view is that this would continue into
2014. After the auspicious beginning in markets this year, our projections
seemed too optimistic. Nice to know the CBO agrees with us!
According to the report, GDP growth is expected to be 3.1%
for years 2014, 2015, 2016, AND 2017. While still not setting the world on
fire, 3.1% is a healthy rate. Four years of this pace will be good for
business!
Buried in the report is a comment about the improvement in state
and local budgets. They are healing from the huge losses of the past few years
and are finding themselves with more cash than expected. The result is that
these state and local governments should begin spending again. More spending
here means more economic growth.
And maybe some of their spending will involve hiring more
people. THAT will be a welcome change, since 2/3 (TWO-THIRDS, you read that
right!) of the job loss over the last five years has come from the government
sector. The CBO projects the unemployment rate will stay above 6% until 2016. A
turnaround in this trend will help with our stubborn unemployment situation.
And guess what else?
The federal deficit continues to shrink!! Much of that is due
to improvements in tax revenue with an improving economy. The CBO expects a
further reduction of $514 billion in 2014 and $478 billion in 2015. In 2016,
they expect us to start losing ground again since we refuse to address the real
problems in our budgetary process. In fact, with the exception of Social
Security, healthcare programs, and net interest, all other government programs
are seeing declining expenditures.
And inflation? Meh.
Don’t expect anything beyond 2.0% for the next few years.
I was all smiles until I got to the part covering 2018 and
beyond. They are projecting a return to the snail’s pace for our economy at
that point. I’ll be like Scarlet O’Hara and worry about that tomorrow! For now,
I’m looking at the glass half full.
With all this positive news, why didn’t THIS report make the
headlines?!?
