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Entries in Congressional Budget Office (7)

Friday
Nov092012

Congressional Budget Office Describes Consequences of 'Fiscal Cliff'

Comstock Images/Thinkstock(WASHINGTON) -- Now that all the confetti has been cleaned up, the harsh reality of dealing with the so-called "fiscal cliff" looms for President Obama and Congress over the next seven weeks.

Expiring tax cuts, deep automatic spending reductions and the growing deficit have combined for a perfect storm that could send the U.S. plummeting into another recession by early 2013 and add trillions to the national debt, according to the non-partisan Congressional Budget Office.

On Thursday, the CBO got more specific about what inaction will mean for the country.  For instance, the unemployment rate would jump from its current 7.9 percent to 9.1 percent by this time next year.

Keeping the tax breaks, the CBO said, should create about 1.8 million jobs in 2013.  The White House and Democrats say that shouldn't include the nation's wealthiest taxpayers, contending that 1.6 million jobs would still be added to the economy if the breaks are extended for the other 98 percent of Americans.

The CBO predicts that if tax breaks for all are extended along with fixing the Minimum Tax, halting the automatic spending cuts and extending expiring payroll tax cut and unemployment benefits, the gross domestic product would rise three percentage points by the end of next year.

Of course, there's a catch and it's big one.  Avoiding the entire fiscal cliff will mean adding to the annual deficit -- currently around $1 trillion -- by $503 billion in 2013 and $682 billion in 2014.

Copyright 2012 ABC News Radio

Wednesday
May232012

‘Fiscal Cliff’ Looms for US Economy, CBO Warns

ABC News(WASHINGTON) -- Allowing Bush-era tax cuts to expire coupled with a scheduled round of automatic spending cuts would probably throw the U.S. economy into a tailspin. That’s the dire warning from a new Congressional Budget Office report that says the economy would contract by 1.3 percent in the first half 2013, pushing off a "fiscal cliff” on Jan. 1.

That’s when a higher tax rate would kick in if the Bush-era tax cuts aren’t extended and more than $100 billion in automatic cuts in domestic spending for agencies such as the Pentagon are kept in place.

Though lawmakers are expected to head off a shift in the government’s financial situation later this year or in early 2013, the CBO says if nothing is done it would likely push the US economy into recession and wring hundreds of billions of dollars from the budget deficit. That would “represent an additional drag on the weak economic expansion,” the CBO says.

The CBO is a nonpartisan agency of Congress that produces economic analysis and estimates of the cost of legislation.

Last summer’s debt and budget agreement imposed almost $1 trillion in cuts to agency budgets over the coming decade and required automatic cuts of another $1 trillion or so.

The CBO study comes as Congress is gridlocked over spending and taxes in advance of the fall elections. The White House and top Democrats are refusing to act on the expiring tax cuts and automatic spending cuts unless Republicans show greater flexibility on raising taxes.

If no deal is reached, the CBO projects that the economy would shrink by 1.3 percent in the first half of 2013, which would meet the definition of a recession, which is when the economy shrinks for two consecutive quarters.

“Such a contraction in output in the first half of 2013 would probably be judged to be a recession,” CBO said.

Copyright 2012 ABC News Radio

Tuesday
May082012

CBO Reports First Monthly Budget Surplus in Three Years

Comstock Images/Thinkstock(WASHINGTON) -- The Congressional Budget Office has reported a monthly budget surplus of $58 billion, which would be a first in nearly three years.

The improved numbers are attributed to a 10 percent increase in tax revenue.  The month of April coincides with tax season which typically results in a yearly surplus, but that hasn’t happened since the 2008 financial crisis when tax revenue fell.

“It is a clear signal that the government’s fiscal situation is finally moving definitively in the right direction,” said Mark Zandi, who is the chief economist for Moody’s Analytics.

Next month’s report will likely show a budget deficit, but the small surplus is an important milestone in the nation’s struggle to fend of a future debt crisis.

Some economists argue that a rush to curb the deficit through immediate spending cuts could harm the economy in the short term.  Britain recently announced that it fell back into recession, with some blaming the drop in gross domestic product on harsh austerity measures.

The other school of thought says that a massive budget deficit is too risky because the interest on the debt could grow to become unmanageable.

Lawmakers will likely have to find a way to cut the deficit over the long run.

“Policymakers have a lot more work to do to establish fiscal sustainability,” said Zandi.

The conventional wisdom is that Congress will address the long-term problem after the election is over.

Copyright 2012 ABC News Radio

Wednesday
Mar212012

'Whistleblower' Says Mortgage Securitization Still Issue for US Homeowners

Courtesy Minh L. Pham(WASHINGTON) -- Lan Pham, an economist fired by the Congressional Budget Office two years ago, is still asking whether the watchdog agency appeared to "diminish or deny" the problem of foreclosure fraud while providing analysis to Congress.

As lawmakers enter budget season in Washington D.C., and wrangle over House Republicans' new budget blueprint, Pham is hoping to draw more attention to the housing market's woes.

"Why is one of the most powerful government agencies that can determine the direction of the nation's policies appearing to diminish or deny that the issue of mortgage securitization is a problem?" she said.  "If it is a problem, we have $7 trillion in mortgage-backed securities that has brought chaos to homeowners, whether or not they are in foreclosure."

Pham said questions like those have led attorneys general to reach the $25 billion foreclosure abuse deal announced last month, and could affect not just underwater homeowners across the country, but the entire U.S. housing market.

With a Ph.D. from the University of Minnesota, Pham worked for the Congressional Budget Office (CBO) for only two and a half months before she was fired in December 2010.  In Pham's termination letter, her supervisor, Deborah Lucas, CBO's assistant director, said "a number of performance issues are the basis for the decision."

But Pham said she was fired for providing an analysis about the banking sector and foreclosure fraud issues involving mortgage-backed securities and robosigning that she said displeased her bosses.  Pham said the main issues of foreclosure problems relate to securitization, the pooling of mortgages that collateralize mortgage-backed securities, and the Mortgage Electronic Registration System, which has electronic records of ownership on about 65 million mortgages -- about half in the country.

In her first interview since releasing a letter addressed to Sen. Chuck Grassley, R-Iowa, through the website Zero Hedge on Thursday, Pham said she is less concerned with losing her job, but rather with bringing more transparency to her former employer.

"Because you see the losses around the country from those who purchased homes with banks foreclosing on homeowners that don't have the title to the mortgage, this is an issue where financially we're talking about a $7 trillion mortgage-backed securities problem," Pham, who is looking for employment, said.  "To me, talking about my career is just beside the point."

Pham wrote a letter to Grassley, ranking member of the Senate Judiciary Committee, dated Feb. 23, 2011, asking for help and explaining her story and writing that "there is room for doubt" about the perception of the CBO as objective and non-partisan.

[CLICK HERE TO READ HER FULL LETTER]

Copyright 2012 ABC News Radio

Thursday
Aug252011

CBO Calls for Major Steps to Slash Federal Deficit

Stephen Chernin/Getty Images(WASHINGTON) -- The U.S. is running a deficit this year of $1.3 trillion, the third largest on record.  But, as the nonpartisan Congressional Budget Office said Wednesday, things could get markedly better if those much-disputed 2001 Bush-era tax cuts are allowed to expire.

According to the CBO, the tax breaks should end along with the payroll tax reduction, federal emergency unemployment benefits and reduced Medicare payment rates to physicians.

If that all happens, the CBO says projected deficits would be trimmed by $3.3 trillion over the next decade, provided that the debt-reduction agreement signed earlier this month also comes into play.

All this is a best-case scenario.  While President Obama wants tax breaks for the rich and corporations to expire by the end of 2012, Republicans are fighting him at every turn, charging him with hurting the job creators and fueling class warfare.

Copyright 2011 ABC News Radio

Wednesday
Aug242011

Working on Jobs Plan, President Obama Speaks to Amex, GE CEOs

SAUL LOEB/AFP/Getty Images(WASHINGTON) -- On a day that the Congressional Budget Office predicted slow economic growth, and an unemployment rate still over 8 percent by the end of next year, the White House says President Obama continues to work on his new jobs plan during his Martha’s Vineyard vacation. And the president is taking some advice.

On Wednesday, Obama talked to his friend and GE CEO Jeffrey Immelt and American Express CEO Ken Chenault, who both serve on the president’s jobs council. Some of their ideas included finding ways to increase the number of college educated engineers, and putting construction workers to work retrofitting old buildings to make them more energy efficient.

Stimulus may be a dirty word in Washington, but it will be part of the president’s new jobs plan.

“We're going to have some additional ideas that should have some bipartisan support,” principal deputy press secretary Josh Earnest told the traveling White House Press corps in Martha’s Vineyard. But that’s exactly what the White House has said for months now, only to have Republicans refuse to play ball.

“And the president's articulated his frustration about that.  He's pointed out that the American people voted for divided government, but they didn't vote for dysfunctional government,” Earnest said.

The president was briefed Wednesday by Brian Deese of his economic team. Earnest says that team is still working on the nuts and bolts of the plan.

The White House says the president’s plan will have “aspects that will be new” including efforts to cut more than the $1.5 trillion the Congressional “Super-Committee” has been tasked with cutting. The speech is still planned for “shortly after” Labor Day.

Copyright 2011 ABC News Radio

Tuesday
Sep282010

Best Bang for the Buck? CBO Outlines Economic Growth Options

Photo Courtesy -- The Republican Party(WASHINGTON) -- Congressional Budget Office director Douglas Elmendorf said Tuesday that extending former President George W. Bush's tax cuts would help spur the country’s sluggish economic recovery in the short term, but it could prove harmful in the long run.  A permanent extension of the tax cuts, Elmendorf told a Senate Budget Committee hearing, would provide “the largest boost in the short run, but the largest negative effect in the long run” since it would swell the country’s already-soaring deficits.  The best bang for the buck, the CBO found, would come from extending jobless benefits. “A temporary increase in aid to the unemployed would have the largest effect on the economy per dollar of budgetary cost,” he said.  The Senate has put off a debate about extending the Bush tax cuts until after the November elections.

Copyright 2010 ABC News Radio









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