Editor’s note: As of press time, this forecast by the Congressional Budget Office offers their latest assessment of the economy. Whether you agree with their forecast or policies, it is nonetheless important to at least understand how the government views our economy through their lens. Naturally, the presidential election this year could have a profound effect on this latest assessment. However, it doesn’t diminish its importance for your company’s financial planning.
We now face a make-or-break moment for the middle class and those trying to reach it. After decades of eroding middle-class security as those at the very top saw their incomes rise as never before and after a historic recession that plunged our economy into a crisis from which we are still fighting to recover, it is time to construct an economy that is built to last. The President’s 2013 Budget is built around the idea that our country does best when everyone gets a fair shot, does their fair share and plays by the same rules. We must transform our economy from one focused on speculating, spending and borrowing to one constructed on the solid foundation of educating, innovating and building. That begins with putting the nation on a path to live within our means – by cutting wasteful spending, asking all Americans to shoulder their fair share and making tough choices on some things we cannot afford, while keeping the investments we need to grow the economy and create jobs. The Budget targets scarce federal resources to the areas critical to growing the economy and restoring middle-class security: education and skills for American workers, innovation and manufacturing, clean energy and infrastructure. The Budget is a blueprint for how we can rebuild an economy where hard work pays off and responsibility is rewarded.
Key Budget Facts
♦ In the Budget Control Act, both parties in Congress and the President agreed to tight spending caps that reduce discretionary spending by $1 trillion over 10 years. This budget reflects that decision. Thus, for all the priority areas we are investing in, difficult trade-offs had to be made to meet these very tight caps.
> Discretionary spending is reduced from 8.7 percent of GDP in 2011 to 5.0 percent in 2022.
n Including the $1 trillion in discretionary cuts, the Budget includes more than $4 trillion in balanced, deficit reduction so that, by 2018, we will cut the deficit to less than 3 percent of GDP, stabilize the debt-to-GDP ratio and achieve primary balance.
♦ For every $1 in new revenue from those making more than $250,000 per year and from closing corporate loopholes, the Budget has $2.50 in spending cuts including the deficit reduction enacted over the last year.
♦ 2012 Projected Deficit: $1.33 trillion, 8.5 percent of GDP; 2013 Projected Deficit: $901 billion, 5.5 percent of GDP; 2018 Projected Deficit: $575 billion, 2.7 percent of GDP; 2022 Projected Deficit: $704 billion, 2.8 percent of GDP.
Jumpstart Job Creation
n More than $350 billion in short-term measures for job growth starting in 2012, including many planks of the American Jobs Act that we continue to call on Congress to enact plus some new job creation initiatives. They include:
> Extension of the payroll tax cut and unemployment insurance benefits for the rest of 2012.
> An upfront investment of $50 billion from the surface transportation reauthorization bill for roads, rails and runways to create thousands of quality jobs in the short term.
> Continuing to allow businesses to write off the full amount of new investments.
> $30 billion to modernize at least 35,000 schools and $30 billion to help states and localities retain and hire teachers and first responders.
> Project Rebuild, a series of policies to help connect Americans looking for work in distressed communities with the work needed to re-purpose residential and commercial properties, creating jobs and stabilizing neighborhoods.
> A new tax credit for this year focused on small businesses, and that gives businesses that added jobs and wages a tax cut equal to 10 percent of wages added up to $500,000.