Feb 29, 2012 - Private investment in equipment and software, inflation-adjusted, 2009 Q1 = 100 .... administrative costs
The
U.S. Economy In Charts
U.S. DEPARTMENT OF THE TREASURY February 2012
The Economy
1 Economic Growth I Private sector employment has grown for 23 straight months.
The economy has grown for 10 straight quarters.
Monthly private non-farm payrolls, seasonally-adjusted
Annualized real GDP growth 2011 Q4 Jan ’12
+3.0%
+257k
+2.4% average growth
Private payrolls
+3.7 million
over past 10 quarters
since Feb ’10
Pre-crisis average (Dec 2001 – Nov 2007)
2008 Q4
Jan ’09
-8.9%
-839k Jan 2008
'09
'10
'11
Source: Bureau of Labor Statistics, Treasury calculations.
'12
2008 Q1
'09
'10
'11
U.S. DEPARTMENT OF THE TREASURY
The Economy
2 Economic Growth II The private sector is leading growth.
AVERAGE ANNUALIZED GROWTH SINCE 2009 Q2
Annualized change in quarterly GDP (value-added) by sector, inflation-adjusted +5 Private Nonfarm businesses
Government Federal, state, & local
0
Government employment is shrinking.
• Business output has grown at a 3.3% average annual rate since mid-2009.
22,000
• Government’s contribution to the economy has declined, largely due to state and local budget cuts.
-598k
-10
since Jan ‘09 21,000 Jan 2008
-15 2008 Q1
'09
+0.0%
What’s happening?
Monthly federal, state, and local non-Census payrolls Seasonally-adjusted
-5
+3.3%
Jan 2012
'10
'11
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Treasury calculations.
U.S. DEPARTMENT OF THE TREASURY
The Economy
3 Economic Growth III Overall business investment is growing…
Corporate profits are up.
Gross private domestic business investment, inflation-adjusted, 2009 Q1 = 100
Corporate profits after tax, inflation-adjusted, 2009 Q1 = 100
140
180
130
160 140
120
120 110
+29%
since 2009 Q1
100 90 2008
since 2009 Q1
100 80
'09
'10
'11
…as are investments in equipment & software. Private investment in equipment and software, inflation-adjusted, 2009 Q1 = 100
60 2008
130
130
120
120
+30%
'10
'11
Gross exports, inflation-adjusted, 2009 Q1 = 100 140
110
'09
Exports have been a source of strength.
140
110
+23%
since 2009 Q1
since 2009 Q1
100
100 90 2008
+76%
'09
'10
'11
90 2008
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Treasury calculations.
'09
'10
'11
U.S. DEPARTMENT OF THE TREASURY
The Economy
4 Challenges Remain, More Work Ahead Unemployment has fallen but remains high. Total unemployed and unemployed 27 weeks or longer, seasonally-adjusted
Median household income has declined over the past decade.
Percent of labor force
Median household income, inflation-adjusted, 1967 to 2010 $ 60,000
10 Total unemployment
8
1999: $53,252
55,000
6
Recessions
4
Long-term Unemployment (27 weeks+)
Recessions
2
50,000 2010: $49,445
45,000
0 Jan '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '67
40,000 1967
Projections of growth in advanced economies have declined.
'72
'77
'82
'87
'92
'97
'02
'07
Housing has not yet recovered. S&P/Case-Shiller U.S. national home price index, 2000 Q1 = 100
IMF World Economic Outlook projections of real GDP growth for advanced economies 5 percent
150
4 3 2
Jan 2012 projection
1 0 2010 Q1
100
Jan 2011 projection
50
0 2011 Q1
2012 Q1
2013 Q1
1987 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 Q1
Source: Bureau of Labor Statistics, Census Bureau, International Monetary Fund, Standard & Poor’s.
U.S. DEPARTMENT OF THE TREASURY
Crisis Response
5 The Inherited Crisis Private sector job losses
Economic growth Annualized change in quarterly real GDP
Change in monthly private non-farm payrolls Seasonally-adjusted
Projections of inherited deficits Projected 2001 deficit in January 2001 and 2009 deficit in February 2009
+1.3%
Jan ’08
2.7% 2.7% of GDP surplus ($281 billion)
2009 as of Feb. 2009 -1.8%
2001 as of Jan. 2001 -3.7%
Jan ’09
-839k
-8.9% Q1 2008 Q2 2008 Q3 2008 Q4 2008
Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Treasury calculations based on Congressional Budget Office and Office of Management and Budget data.
-9.2% 9.2% of GDP deficit ($1.3 trillion)
U.S. DEPARTMENT OF THE TREASURY
Crisis Response
6 The Recovery Act Average annual Recovery Act household benefit assistance to state from the Recovery Act and local governments
Effect of the Recovery Act on employment
Inflation-adjusted 2011 dollars
Estimates, 2009Q1 to 2011Q2
Billions of nominal dollars Education
$1,731
Medicaid
Other
CEA (Model approach)
$120 120 billion
CBO (Midpoint) IHS Global Insight
100 Macroeconomic Advisers
Benefits $1,244 Tax cuts
Moody's Economy.com
80 3,000,000 2,500,000
60
2,000,000 40
1,500,000
$344 1,000,000 20 500,000 0 2009
2010
2011
2009
2010
Source: Treasury calculations based on Bureau of Economic Analysis and Council of Economic Advisers data.
2011
2009 Q1
'10
'11
U.S. DEPARTMENT OF THE TREASURY
Crisis Response
7 The Financial Rescue TARP’s bank programs have generated positive returns.
The projected overall cost of TARP has fallen dramatically.
Funds disbursed and recovered under TARP bank programs, Through February 2012
Estimated lifetime cost of TARP, by date of projection $341b
+$14b
-$273b
$291b
positive returns
$245b
(-80%)
$259b
projected overall lifetime cost since August ‘09
$68b
Lifetime cost excluding housing funds1 Disbursed
Recovered
$22b
Aug '09
Feb '10
Feb '11
Feb '12
FY2010 Midsession Review
FY2011 President's Budget
FY2012 President's Budget
FY2013 President's Budget
1 Unlike funds committed through TARP’s investment programs, TARP funds targeted to help responsible homeowners avoid foreclosure were not intended to be recovered.
Source: Treasury calculations.
U.S. DEPARTMENT OF THE TREASURY
Crisis Response
8 The Auto Industry Auto industry employment has grown since the rescue. Total private payrolls in motor vehicles and parts (manufacturing and retail trade), seasonally-adjusted Thousands of payrolls 2,450
Auto industry employment
+207,600 since June ’09 2,400
2,350
2,300
2,250
Post-restructuring of GM & Chrysler after June 2009
2,200 Jan 2009 Source: Bureau of Labor Statistics.
'10
'11
'12
U.S. DEPARTMENT OF THE TREASURY
Fiscal Policy
9 Causes of Deficits Since 2001 Changes in deficit projections since January 2001 CBO’s projected cumulative surpluses and actual cumulative deficits, January 2001 to August 2011
through 2011
8 trillion $8
6
Cumulative Surplus
4
Bush Admin. policies -$7.0 trillion
Tax cuts -$3,000b
In January 2001, CBO projected cumulative surpluses would total $5.9 trillion through 2011.
NOT DUE TO LEGISLATION1
29% Wars in Iraq & Afghanistan -$1,400b
2
Cost of Bush Admin. policies
-
59%
Other spending -$2,300b
Medicare Part D -$300b
(2)
Cumulative Deficit
Instead, cumulative deficits have totaled $6 trillion.
Obama Admin. policies2 -$1.4 trillion
(4)
(6)
Cost of Obama Admin. policies2
12%
through 2011 Recovery Act -$800b
Dec 2010 Tax Law -$250b
Other spending & (8) tax cuts 2001 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 1 CBO terms these factors “technical” and “economic”. They include all changes not due to the cost of new legislation, including updates to economic and demographic projections. -$410b 2 Only reflects effect of policies, including temporary policies, through 2011. Does not reflect deficit reduction proposed in the President’s FY2013 Budget going forward. Numbers may not sum due to rounding.
Source: Treasury calculations based on Congressional Budget Office data.
U.S. DEPARTMENT OF THE TREASURY
Fiscal Policy
10 The President’s Budget The President’s Budget cuts the deficit and stabilizes the debt. Federal budget deficits as a percent of GDP under the President’s FY2013 Budget
8%
Baseline reflecting policies as of January 2011 6%
4%
Total deficit in the President’s Budget
2%
Deficit that stabilizes debt-to-GDP1 0%
Deficit excluding interest in the President’s Budget -2% 2012
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
1 The deficit that stabilizes publicly-held federal debt as a percent of GDP depends on several fiscal and economic assumptions, including economic growth and the interest rates on Treasury securities. The President’s FY2013 Budget calculates it as 2.8% of GDP in the medium term.
Source: Office of Management and Budget.
U.S. DEPARTMENT OF THE TREASURY
Fiscal Policy
11 The Size of Government, 1983 and 20101 22.1% of Potential GDP2
22.4% of Potential GDP2
1.9% 4.8% 2.5% 1.3% 3.5% 3.1%
Spending (Outlays) Medicare, Medicaid, & other medical
Revenues Corporate Income Tax
16.4% of Potential GDP2
1.0% 1.8%
Interest on the debt Other Revenues
4.3%
Non-defense discretionary
1.4% Payroll (FICA) Tax
Social Security Defense discretionary
of Potential GDP2
1.2%
Other mandatory
3.9%
14.0%
5.7%
Individual Income Tax
5.6%
4.6% 4.6%
5.7%
1983
4.5%
In 2010, total federal spending made up about the same share of the economy as during the last severe downturn in 1983. But in 2010: • Health care made up a larger share of the budget. • Revenues were significantly lower.
2010
7.9% 5.8%
1983
2010
1 1983 and 2010 are compared because they had similar-sized output gaps (the difference between potential and actual GDP as a percent of potential GDP): 6.4% and 6.2%, respectively. 2 Potential GDP is the full-capacity output of the economy.
Source: Treasury analysis of Congressional Budget Office and Office of Management and Budget data.
U.S. DEPARTMENT OF THE TREASURY
Fiscal Policy
12 Discretionary Spending1 Discretionary spending is now on a path to its lowest level since the Eisenhower Administration. Security and non-security2 discretionary outlays as a share of potential GDP, historical and under the President’s FY 2013 Budget Percent of potential GDP
10%
Total Security
8%
Total Non-Security
6%
4%
2%
0% 1962
Projections under President’s FY2013 Budget
'67
'72
'77
'82
'87
'92
'97
'02
'07
'12
'17
'22
1 “Discretionary” spending is all federal spending subject to annual appropriations by Congress. It includes most governmental administrative costs as well as some assistance programs. By contrast, “mandatory” programs such as Medicare, Medicaid, and Social Security have permanent authorization and so are not subject to annual Congressional appropriations. 2 Definitions of security and non-security based on the President’s FY2013 Budget.
Source: Treasury analysis of Congressional Budget Office and Office of Management and budget data.
U.S. DEPARTMENT OF THE TREASURY
Fiscal Policy
13 Drivers of Long-Term Deficits Over the long term, demands on federal resources for medical care will increase.
The Affordable Care Act has helped curb costs…
Projected non-interest spending by category, percent of GDP1
Projected Medicare spending as a percent of GDP 12 percent of GDP
10 percent of GDP
10 8
9
2009 projection prior to the Affordable Care Act
6 Medicare & Medicaid
8
2011 projection
4
after the Affordable Care Act
2 7 6
Social Security
5
Discretionary
0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
…although challenges remain. Sources of projected federal spending on major mandatory health care programs and Social Security, 2011 to 2035.
4 3
Other mandatory
2 1 2011
'16
'21
'26
'31
'36
'41
'46
'51
16 percent of GDP 14 12 10 8 6 4 2 0 2011 2016
Due to excess health care cost growth1 Due to aging In the absence of aging or excess health care cost growth 2021
2026
2031
1 President’s FY2013 long-term projections, base case. 2 CBO defines “excess health care cost growth” as growth in health care costs that exceeds the growth rate of GDP per capita.
Source: Office of Management and Budget, Congressional Budget Office, Medicare trustees.
U.S. DEPARTMENT OF THE TREASURY
