–Congressional Budget Office Chief Says Recovery Has Been ‘Anemic’
–CBO’s Elmendorf: Recoveries After Fin Crises Are Slow, Hard
–‘No Intrinsic Contradition’ Between Stim, Def Cuts
–‘Feasible But Not Easy’ To Boost Econ, Cut Deficit

By John Shaw

WASHINGTON (MNI) – Congressional Budget Office director Doug
Elmendorf said Tuesday that his agency believes, as do many other
private forecasters, that the U.S.’s recovery “will proceed at a modest
pace during the next few years.”

In testimony before the Senate Budget Committee, Elmendorf said the
pace of recovery since the recession ended in June of 2009 and the pace
of growth it projects for the next few years are “anemic relative to the
rate of recovery following previous deep recessions.”

However, Elmendorf said the most recent recession was caused by a
financial crisis and that international experience shows that recoveries
after financial crises tend to be slower and more fragile.

The CBO chief said there are both monetary and fiscal policy
options that policymakers might consider that could boost employment and
output over the next few years.

Elmendorf said there is “no intrinsic contradiction” between
providing additional fiscal stimulus now and “imposing fiscal restraint
several years from now, when output and employment will probably be
close to their potential.”

Boosting short-term growth while preparing for long-term deficit
reduction would be “feasible but not easy,” he said.

But Elmendorf warned that permanent spending or tax cuts will put
serious pressure on already ominous fiscal outlook.

“If taxes were cut permanently, or government spending was
increased permanently and no other changes were made to fiscal policy,
the federal budget would be on an unsustainable path and the economy
would suffer,” he said.

Elmendorf’s testimony built on the CBO’s mid-year budget and
economic report that was released in August. He offered no new economic
and budget projections.

In CBO’s August report, it estimated the current 2010 fiscal year
deficit at $1.342 trillion, down slightly from the record deficits of
FY’09.

But, assuming that current budget and tax policies continue, CBO
sees deficits falling to $1.066 trillion in FY’11, $665 billion in
FY’12, $525 billion in FY’13, $438 billion in FY’14 and $507 billion in
FY’15.

Looking further forward, the CBO sees deficits of $585 billion in
FY’16, $579 billion in FY’17, $562 billion in FY’18, $634 billion in
FY’19, and $685 billion in FY’20.

All of these estimates are based on the assumption that the 2001
and 2003 Bush era tax cuts expire at the end of this year.

** Market News International Washington Bureau: (202) 371-2121 **

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