Deficit Obsession Has Hurt The Recovery: CBO

Brian Beutler, February 5, 2013, 1:47 PM 

Here’s the buried lede from the Congressional Budget Office, which on Tuesday released its Budget and Economic Outlook for the coming decade: D.C.’s deficit obsession has been quite effective at cutting deficits at the expense of the still-struggling economy.

“[E]conomic activity will expand slowly this year, with real GDP growing by just 1.4 percent,” according to CBO’s projections. “That slow growth reflects a combination of ongoing improvement in underlying economic factors and fiscal tightening that has already begun or is scheduled to occur-including the expiration of a 2 percentage-point cut in the Social Security payroll tax, an increase in tax rates on income above certain thresholds, and scheduled automatic reductions in federal spending. That subdued economic growth will limit businesses’ need to hire additional workers, thereby causing the unemployment rate to stay near 8 percent this year, CBO projects.”