By “slow,” Congress’ nonpartisan forecasting agency means the economy will grow by “just 1.4 percent,” which means it’s barely moving, stuck in a paralytic trance in which relatively few jobs are created and our country slogs along at a permanently sluggish pace. “That subdued economic growth will limit businesses’ need to hire additional workers, thereby causing the unemployment rate to stay near 8 percent this year,” the CBO says.
Then it hits us with this unpleasant forecast: Next year isn’t looking much better.
If the jobs picture and slow growth estimates are as bad as they say, 2014 will be the sixth consecutive year with unemployment exceeding 71/2 percent of the labor force — “the longest such period in the past 70 years.”
The CBO forecasts that economic growth will “pick up in later years” but the agency has offered similar forecasts in past years that haven’t panned out quite the way they hoped.
Nevertheless, it adds ominously that “under the fiscal policies embodied in current law, [economic] output is expected to remain below its potential (or maximum sustainable) level until 2017.” More on this in a moment.
The CBO does offer some encouraging estimates about the budget deficit in the short-term, but don’t break out the champagne just yet. Under Mr. Obama, annual federal deficits over the past four years consistently have been well above $1 trillion. This year’s deficit was on track to another $1 trillion-plus. The CBO, though, says the deficit “will shrink this year to $845 billion, or 5.3 percent of gross domestic product (GDP), its smallest size since 2008.”
That remains to be seen, because forecasters in the past four years have been underestimating the economy’s persistently slow growth under Mr. Obama’s big-spending policies.
There’s another worrying factor in CBO’s projections and that is its forecast of a growing “output gap” in the years to come. Washington Post economics analyst Neil Irwin says he’s not popping the champagne cork on the small decline in the deficit, either. He’s focusing on another, bigger deficit that looms ahead of us. He explains: “Political commentators have made a big deal of the budget deficit falling below $1 trillion for the first time in half a decade. But this is the real trillion-dollar deficit: a $1 trillion gap between what the United States is capable of and what it actually produces,” he writes.
“It gets worse! The $1.01 trillion output gap is higher than it has been in more than a year. In the third quarter, that gap was only $914 billion. … In other words, this deficit is getting worse, not better. And under CBO projections, it will widen again this year, as the economy grows at something below its potential,” Mr. Irwin says. “What is now a $1 trillion output gap will become a $1.2 trillion output gap, as the economy slows down.”
As many of Mr. Obama’s economic critics have been saying over the past four years, the American economy is underperforming, and the CBO says that trend will continue through 2016, and possibly beyond.
If the “CBO’s projections turn out to be right, our economy has a huge problem, and it’s getting worse, not better,” Mr. Irwin warns.
Unemployed and underemployed Americans who are on the front lines of the underperforming Obama economy viscerally understand what they’re facing, even if they do not fully understand why.
A revealing survey by the John J. Heldrich Center for Workforce Development at Rutgers University, released Thursday, finds Americans are deeply pessimistic about their economic future, and the vast majority believe things will not improve for “many years” to come. “Nearly one in four respondents said they were laid off at some point during the past four years, and even larger numbers said they had immediate family members or close friends who were thrown out of work,” The Washington Post reported.