Industry News - Regulatory Updates
February 2, 2012
CBO projections reveal economic picture
The latest projections from the Congressional Budget Office (CBO) indicate unemployment will increase by 0.4 percent this year unless legislators take action.
The CBO report predicts the national deficit may reach $1.1 trillion this fiscal year, the fourth consecutive year in which the federal deficit has exceeded $1 trillion. The projected deficit is lower than in 2011, but remains higher than any seen between 1947 and 2008, AdvisorOne reports. Additionally, the tax increases and spending cuts scheduled to occur at the end of 2012 would increase unemployment and slow economic growth, according to the report.
Allowing current policies to continue, on the other hand, would increase the projected deficit substantially, according to the CBO. The long-term effects of current policies would have to be offset by other policy changes to avoid adding to the deficit, although there may be short-term benefits. Speaking to lawmakers, CBO director Douglas Elmendorf noted that postponing policy decisions is likely to make them more difficult, and may make them more costly.
CBO projections indicate the deficit over the next ten years could range from $3.1 trillion to $11 trillion, the latter being the result of maintaining current spending levels and tax cuts. Elmendorf also noted that healthcare costs will have a major impact on the deficit, particularly later in the decade.
A number of tax increase proposals have surfaced in the ongoing debate over federal fiscal policy, including removing tax breaks, increasing tax rates on high-income Americans or day traders and other investors and a financial transactions tax that would charge individuals buying and selling stocks and other investment vehicles.