The government’s two major budget agencies are taking opposing positions on the long-term impact of the 2007-2009 recession and sluggish recovery on the economy, Bloomberg BNA’s Jonathan Nicholson reports.
The nonpartisan Congressional Budget Office, in its updated economic and budget forecast issued Aug. 22, estimated the economy would still be about 1.5 percent smaller in 2022, the end of the agency’s 10-year forecasting window, than if the recession had not happened.
That contrasts with a more upbeat report issued in July from the White House’s Office of Management and Budget, which said the current economic recovery could accelerate ahead as more resources are used.
“The U.S. economy is operating well below its capacity, with higher levels of unused resources than at any time in over a quarter century. The potential for a more rapid recovery is present in this low level of resource utilization,” the OMB report said.
The debate is important because the slower the economy grows when all its resources are productively in use, the harder it will probably be to reduce the budget deficit and stabilize government debt levels.
The CBO report said lingering weakness in the job market has led some people to retire earlier or leave the labor force in other ways, such as applying for disability benefits.
The slack labor market has also meant young people are putting off launching their careers, and thus delaying their peak earning and productivity years, Bill Beach, director for the Center for Data Analysis at the Heritage Foundation, said Aug. 31.