CBO revises estimate, warns U.S. economic growth will underwhelm in 2014

posted at 4:01 pm on August 27, 2014 by Noah Rothman

The Congressional Budget Office released a bit of a good news/bad news report on Wednesday regarding the state of the U.S. economy and federal budget.

In the bad news column, CBO projected 2014’s GDP growth at just 1.5 percent. The report blamed this revision on “the surprising economic weakness in the first half of the year.”

In early June, the International Monetary Fund projected the United States to grow by just 2 percent this year, revising its own estimate down from a previously anticipated 2.7 percent GDP expansion.

This report is not likely to be warmly greeted by the White House.

“The new assessment was considerably more pessimistic than the Obama administration’s, which predicted last month that the economy would expand by 2.6 percent this year even though it contracted by an annual rate of 2.1 percent in the first quarter,” USA Today reported.

As Ed Morrissey observed in March, the administration proposed what even The New York Times called a progressive “wish list” in the form of a budget which relied on significant projected economic growth to avoid conceding its bank-breaking nature.

[T]he Obama administration assumes a growth rate of 3.1 percent in 2014, when CBO expects 2.7 percent and the private sector consensus comes in at 2.5 percent, according to Investors Business Daily. The actual GDP growth rate for 2013 was 1.9 percent, according to the Commerce Department , down from 2012’s 2.8 percent, and leading indicators for 2014 offer little hope for any kind of sharp rebound from stagnation.

Morrissey also noticed that the Obama budget supposed that Congress would pass a pro-growth “tax reform” package (code for tax increases) to generate enough revenue to cover the cost of its myriad progressive spending proposals. That did not happen, and this lame duck Congress is highly unlikely to craft, let alone pass, a divisive proposal aimed at reforming the tax code.

As for the good news, The Wall Street Journal reported, the CBO projected that the annual federal budget deficit is going to be smaller than previously projected.

The CBO said the deficit through 2024 is expected to be more than $400 billion smaller than the forecast in an April report. For fiscal 2014, which ends Sept. 30, 2014, the CBO predicted an annual deficit of $506 billion, a shortfall that is smaller when compared with previous years but slightly more—$14 billion—than it predicted in its earlier forecast.

The budget deficit was expected to close at a faster pace in 2014 than the CBO estimates it will, but the deficit will nevertheless fall to its lowest level since 2007. A declining jobless rate and an increase in the number of working taxpayers is resulting in an increase individual and corporate tax revenue to the government, helping narrow that gap.


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“the surprising economic weakness in the first half of the year.”

Anybody else getting tired of this “Surprising” but totally expected BS?

oscarwilde on August 27, 2014 at 4:04 PM

Stagflation…

PatriotRider on August 27, 2014 at 4:06 PM

But…But….Keynes!!!

WryTrvllr on August 27, 2014 at 4:07 PM

We knew this already. Close the CBO down.

echosyst on August 27, 2014 at 4:09 PM

Anybody else getting tired of this “Surprising” but totally expected BS?

oscarwilde on August 27, 2014 at 4:04 PM

Yeah that and unexpected…

sandee on August 27, 2014 at 4:10 PM

Dave Ramsey said the other day that we’re all a bunch of Eeyores and that the economy is definitely improving.

So…there you have it!

/s

Dr. ZhivBlago on August 27, 2014 at 4:11 PM

Hey Ned Peckerwood.

You may want to put down the jack*ff lube….

ToddPA on August 27, 2014 at 4:13 PM

You mean we doubled the national debt under Obama for THIS?

otlset on August 27, 2014 at 4:14 PM

This report is not likely to be warmly greeted by the White House.

Buuuuuulshiiiiiiit……..Hussein earned that.

antipc on August 27, 2014 at 4:15 PM

So… does this mean we get more free stuff? /

Turtle317 on August 27, 2014 at 4:15 PM

I guess Bush did even more damage than we realized.

Sadly, President Hillary will probably have to deal with an even worse economy as a result of Bush’s economic decisions…all the way through 2024.

Frank Lib on August 27, 2014 at 4:15 PM

Stagflation…

PatriotRider on August 27, 2014 at 4:06 PM

We already have Stagflation, we are heading into a deflationary spiral.

oscarwilde on August 27, 2014 at 4:17 PM

I guess Bush did even more damage than we realized.

Sadly, President Hillary will probably have to deal with an even worse economy as a result of Bush’s economic decisions…all the way through 2024.

Frank Lib on August 27, 2014 at 4:15 PM

Heh, you’re funny.

GOPRanknFile on August 27, 2014 at 4:18 PM

For fiscal 2014, which ends Sept. 30, 2014, the CBO predicted an annual deficit of $506 billion, a shortfall that is smaller when compared with previous years but slightly more—$14 billion—than it predicted in its earlier forecast.

Over half a trillion is not exactly good news. And keep in mind that’s after taxes were jacked up on “the rich” along with all the new taxes in Obamacare. So basically at this point, if we’re going to close that deficit(never mind actually run a surplus ever again), we’ll have to do it by growing the economy substantially which isn’t gonna happen under this regime.

Doughboy on August 27, 2014 at 4:23 PM

Dave Ramsey said the other day that we’re all a bunch of Eeyores and that the economy is definitely improving.

So…there you have it!

/s

Dr. ZhivBlago on August 27, 2014 at 4:11 PM

Can’t stand that guy. You just gave me yet another reason.

rickv404 on August 27, 2014 at 4:26 PM

What was Reagan’s GDP growth? I think around 5% a year.

Sven on August 27, 2014 at 4:27 PM

#smartpower

everdiso/lester on August 21, 2014 at 3:13 PM

Schadenfreude on August 27, 2014 at 4:29 PM

This report is not likely to be warmly greeted by the White House.

Obviously the CBO is racist.

rbj on August 27, 2014 at 4:32 PM

Stagflation…

PatriotRider on August 27, 2014 at 4:06 PM

Well, we got conservative V7_sport on the other thread telling us how we need to inflate ourselves to prosperity… So…

astonerii on August 27, 2014 at 4:33 PM

im sure the commentors on this site will find at least a dozen differant ways to deny obama any credit for this or spin it as a bad thing.

ThisIsYourBrainOnKoch on May 31, 2014 at 5:33 PM

Not this time Kochie, he’s all yours.

slickwillie2001 on August 27, 2014 at 4:33 PM

I guess Bush did even more damage than we realized.

Sadly, President Hillary will probably have to deal with an even worse economy as a result of Bush’s economic decisions…all the way through 2024.

Frank Lib on August 27, 2014 at 4:15 PM

That is some mighty fine trolling there…

SoCalInfidel on August 27, 2014 at 4:35 PM

Frank Lib on August 27, 2014 at 4:15 PM

Been busy today, Frank…….

Barred on August 27, 2014 at 4:39 PM

Well, we got conservative V7_sport on the other thread telling us how we need to inflate ourselves to prosperity… So…

astonerii on August 27, 2014 at 4:33 PM

In terms of the economy we can grow/inflate/cut our way out of the current mess but not too much more.

It’s so laughable at times.

But then there’s this:

Our debt isn’t a bunch of loans we have to pay back, its an investment made by parties in the US economy, a bet that the US economy will provide safer and steadier growth than other potential investments.

everdiso on August 27, 2014 at 2:11 PM

nobar on August 27, 2014 at 4:41 PM

I thought I read somewhere that the administration regime changed the way growth was calculated so that it would always be two points higher than under the old calculation. Therefore, a 1.5% growth on the year is actually a .5% contraction using the old method.

Occams Stubble on August 27, 2014 at 4:41 PM

If the CBO consists of more that one high-school dropout with a spreadsheet, it’s a waste of money.

Fogpig on August 27, 2014 at 4:53 PM

Revised 1st Quarter numbers show a -2.1% contraction. Remember the cheering from Obama and his bots when Q2 came in at +4.0%? “Happy Days Are Here Again!

Average them together and you get a net 1.9% growth for the first half of the year or exactly what it was for the full year 2013.

Nothing has changed at all. Some activity was shifted from Q1 to Q2, that’s all.

Adjoran on August 27, 2014 at 5:10 PM

M. L’Inspecteur Renault, please pick up the white courtesy telephone.

formwiz on August 27, 2014 at 5:10 PM

The budget deficit was expected to close at a faster pace in 2014 than the CBO estimates it will, but the deficit will nevertheless fall to its lowest level since 2007. A declining jobless rate and an increase in the number of working taxpayers is resulting in an increase individual and corporate tax revenue to the government, helping narrow that gap.

This is at best burying the lead and arguably misleading, Ed.

Adjusting for automatic stabilizers and to the economic cycle, the decline in the budgetary deficit is even larger.

Republicans should be trumpeting this because it’s a huge triumph for the GOP caucus in Congress.

The long-term fiscal impact of the government in the economy is declining for the second time in decades, the other being Newt’s Congress, and Republicans shouldn’t allow a Democrat president to, once again, take credit for it when both Clinton and Obama fiercely opposed budgetary discipline.

joana on August 27, 2014 at 5:13 PM

Subtract off for population growth and the real rate of inflation and it’s negative.

VorDaj on August 27, 2014 at 5:20 PM

“WALTER!!!”

Frank Lib on August 27, 2014 at 4:15 PM

Del Dolemonte on August 27, 2014 at 5:24 PM

Subtract off for population growth and the real rate of inflation and it’s negative.

VorDaj on August 27, 2014 at 5:20 PM

Inflation?

astonerii on August 27, 2014 at 5:28 PM

U.S. Debt 1/20/09: $10.626 TRILLION

U.S. Debt 8/27/14: $17.684 TRILLION.

Any questions?

conservative hispanic on August 27, 2014 at 5:44 PM

Stagflation…

PatriotRider on August 27, 2014 at 4:06 PM

Well, we got conservative V7_sport on the other thread telling us how we need to inflate ourselves to prosperity… So…

astonerii on August 27, 2014 at 4:33 PM

Whatever; nimrod can’t even count to 2.

Midas on August 27, 2014 at 5:57 PM

The answer is simple. This administration just needs rosier sunglasses.

GarandFan on August 27, 2014 at 6:09 PM

“A declining jobless rate and an increase in the number of working taxpayers is resulting in an increase individual and corporate tax revenue to the government, helping narrow that gap.”

And yet we have more unemployed now than we did in 2008. But I sure am pleased all those people that are working their new version of f/t are making their contribution to government kitty.

Recon5 on August 27, 2014 at 6:09 PM

the economy and job market are booming.

what’s next for Obama to fix for you guys?

everdiso on August 15, 2014 at 10:18 AM

Chuck Schick on August 27, 2014 at 6:20 PM

Hope and Change!!

The Notorious G.O.P on August 27, 2014 at 6:31 PM

A declining jobless rate and an increase in the number of working taxpayers is resulting in an increase individual and corporate tax revenue to the government, helping narrow that gap.

Declining my azz. I’ve been out of work for seven months, and many of the people who are going back to work are getting part-time work – aka the new full-time.

Mark Boabaca on August 27, 2014 at 7:07 PM

Dave Ramsey said the other day that we’re all a bunch of Eeyores and that the economy is definitely improving.

So…there you have it!

/s

Dr. ZhivBlago on August 27, 2014 at 4:11 PM

Can’t stand that guy. You just gave me yet another reason.

rickv404 on August 27, 2014 at 4:26 PM

I don’t know…I think he’s helped a lot of people, though it’s sad so many have to have a millionaire tell them to save money and not spend what they don’t have.

———–

Subtract off for population growth and the real rate of inflation and it’s negative.

VorDaj on August 27, 2014 at 5:20 PM

Inflation?

astonerii on August 27, 2014 at 5:28 PM

So you’re saying there’s no inflation? I’ve heard both sides of that argument, and both sides seem to make sense. All I know is that real wages on average haven’t really gone up in something like 15 years, and that many things are markedly more expensive now than 6-8 years ago.

It’s odd that gas prices aren’t lower given the fact that Americans are driving hundreds of thousands of miles less than they did a few years ago. I know the Chinese are buying more cars, but I don’t recall anyone saying that that’s the reason gas is more per gallon…holding steady at $2 or so, maybe, because of the offset.

Look at prices for things in say, 1960, compared to today. Some maintain that the Fed fears inflation, but it’s been consistently escalating for decades.

I would concede that the Weimar inflation many predicted would have happened by now has not.

Dr. ZhivBlago on August 27, 2014 at 8:41 PM

Increased tax revenues is NOT because of a lower unemployment rate/more people working. The US work force is at an all time low. The only reason the unemployment rate has gone down is that so many have given up looking for work! The reason tax revenues are up, if that’s true, is because of increased taxes on the “rich.” At least those “rich” that have not yet or cannot move to a different country…..

devan95 on August 27, 2014 at 10:25 PM

oscarwilde on August 27, 2014 at 4:04 PM

Remember the regime reported that Q2 GDP would be +4% when Q1 was actually -3.69%?

I said at the time that the economy would never swing seven plus points in one quarter.

dogsoldier on August 28, 2014 at 5:40 AM