January 31, 2012
The Congressional Budget Office (CBO) released its projections for deficit reduction and economic recovery. Sobering report, at best, arguing for sluggish growth over the next two years. CBO claims that uninspiring economic growth will be the result of higher tax rates and curbs on spending scheduled to occur this year and especially in 2013. CBO projects that economic output will remain below potential until 2018 with unemployment remaining above 7 percent until 2015.
You can find the full report here: http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf
According to the CBO, “U]nder current law, revenues will rise considerably as a share of GDP—from 16.3% in 2012 to 20.0% in 2014 and 21.0% in 2022. In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30%, mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the AMT, and the imposition of new taxes, fees, and penalties that are scheduled to go into effect. Revenues continue to rise relative to GDP after 2014 largely because increases in taxpayers’ real (inflation-adjusted) income are projected to push more of them into higher tax brackets and because more taxpayers become subject to the AMT.”