The Obama administration and various pundits would have us believe that everything is fine and good with the economy, that we have fully and completely come out of the Great Recession and that the severe downturn that followed the financial crisis is but a distant memory now.
Not so fast. Despite recent deficit reduction, the Congressional Budget Office forecasts that deficits will increase again in 2018–other reports explain that this is because more baby boomers will retire and will put a strain on the benefits system. Additionally:
The most troubling feature of the Congressional Budget Office’s updated forecast was not about government spending or about trends in taxes, the deficit, or debt. Not a whole lot has changed on those fronts.
The most troubling part is that CBO is growing steadily gloomier about the U.S. economy’s capacity to grow, the potential growth rate of gross domestic product. If CBO is right, that means it would be harder to bring down the historically high ratio of government debt to GDP. And it means living standards in the U.S. will improve more slowly.
In August, CBO projected that the economy would grow an average of 2.7% a year from 2014 to 2018; now, it is anticipating 2.5% growth.
That doesn’t sound like much, but over time a few tenths of a percentage point add up to significant numbers.
So, anyone who tries to tell you that everything is hunky-dory with the American economy is either woefully misinformed, or is trying to sell you something. And of course, the, same goes for anyone who tries to tell you that the economy should be a winning issue for Democrats in 2016. By all rights, it should not, though it remains to be seen just how many people will be willing to tell the truth about the economic situation.