New CBO Numbers Paint Grim Picture of Economy

While
recent news reports have stressed a largely positive picture of the
economy as it emerges from a steep recession, the new CBO projections
paint a much gloomier picture of the economy over the next several
years. An analysis from the Center for Economic and Policy Research
(CEPR) highlights the numbers from the latest budget projections and
shows that the CBO data imply an economy facing a sustained period of
low growth and high unemployment, the main cause of
larger-than-expected budget deficits.

"The CBO now believes that the impact of the recession will be larger
and longer lasting than its previous projections showed in January,"
said Dean Baker,
Co-Director of CEPR and author of the report. "These latest projections
show that the unemployment rate won't return to previous levels until
2014, more than six years after the collapse of the housing bubble
threw the nation into recession."

The analysis, "CBO Projects More Severe Downturn,"
looks at some of the key implications of data in the new CBO release
for unemployment, underemployment, lost output, and lost investment.
The data indicate:

• Unemployment in 2010 will average 10.2 percent

• 12 million people will be underemployed - only able to find part-time work - or unemployed in 2010

• A significant reduction in consumption through 2014

• A cumulative loss of investment through 2014 of $600 billion

"If the CBO projections prove correct, millions of people will be
struggling to pay their health care bills, cover their mortgage or rent
payments, and meet other necessary expenses for themselves and their
families," said Baker. "This means there is a serious need for
discussion of ways to lower unemployment and stimulate growth, even if
it means continuing to carry large deficits until the economy begins a
full recovery."

The full CEPR report can be found here.