OMB issues mid-session review for federal budget and economic outlook

The Office of Management and the Budget (OMB) just issued its Mid-Session Review (MSR) of the economic outlook and the federal budget (actual MSR dcoument). As the OMB web site says, the MSR "contains revised estimates of budget receipts, outlays, and budget authority for fiscal years 2009 through 2019 and other summary information."

OMB is forecasting real GDP to decline by -2.8% this year but to rise by +2.0% next year.

They forecast that the unemployment rate will "peak at a rate above 10.0 percent on a monthly basis before beginning to decline in the middle of 2010."

After next year, they are forecasting that the economy will be growing back to something resembling normal: "Thereafter, the Administration expects a relatively long economic expansion, which will proceed most rapidly in 2011-2014 and eventually lower the unemployment rate to below 6 percent."

On the budget front, OMB says that "the budget deficit is projected to fall in 2010, to $1,502 billion, or 10.4 percent of GDP."

Total federal debt held by the public was $5.8 trillion in 2008, $7.9 trillion in 2009, forecast to be $9.6 trillion in 2010, and $17.5 trillion in 2019. The cumulative deficit for years 2010 to 2019 amounts to $9.05 trillion. Even out in 2019 the annual deficit is $917 billion. Scary numbers.

There are a lot of bug numbers here, but our economy is very big as well. GDP will be about $14.1 trillion in 2009 and $22.9 trillion in 2019.

Personally, none of this particularly worries me. These are conservative forecasts. It may take awhile for our economy to fully bounce back, but then we are more likely to see very strong growth. Not this year or maybe next, but a few years from now the current angst will just be a distant memory.

Also, I do have faith the President Obama will be taking a rather aggressive stance towards the budget deficit in the coming years.

-- Jack Krupansky