Budget office projects 4.6% growth in Biden’s first year
The Congressional Budget Office expects the U.S. economy will grow at a 4.6% annual rate this year, with employment returning to pre-pandemic levels in 2024.
The 10-year outlook, issued Monday, says the economic recovery from the coronavirus has been boosted by an unprecedented wave of government spending to combat the outbreak, such that growth could pass its maximum sustainable level in early 2025 before returning to a long-run average of 1.7%. Based on the CBO’s projections, economic growth would be the strongest since 1999.
Although the growth estimates suggest a quick snapback in gross domestic product, the CBO shows that hiring will occur at a lag as consumer spending returns and employers become more comfortable with adding workers. The CBO projects that an average of 521,000 jobs will be added monthly this year, a pace that would fall to 145,000 in 2022.
Congress has spent $4 trillion to keep the economy stable since the pandemic first shuttered schools, offices, restaurants, gyms and other businesses, leading to the loss of roughly 10 million jobs and an economic decline of 3.5% last year.
The CBO estimates factored in the roughly $900 billion approved in December, but they excluded President Biden’s $1.9-trillion plan, because the projections are based on current law.
Biden’s supporters can point to the CBO’s projection of a three-year recovery in hiring as a need for more aid. But Republican lawmakers can simultaneously argue that less money is needed to boost the economy because the CBO estimates that the total economy will return to its pre-pandemic size in the middle of this year.
President Biden’s executive orders and other directives include such topics as the eviction, stimulus checks, food benefits, worker safety, student loans and anti-LGBTQ discrimination.
A group of 10 Republican lawmakers has countered the Biden plan with a $618-billion proposal that focuses on vaccinations, testing and direct payments to individuals earning less than $50,000 and couples earning less than $100,000. Biden is meeting with the lawmakers on Monday, possibly determining whether an aid package can be supported by members of both parties.
The CBO cautioned that its projections were highly uncertain, in large part because of the pace of the vaccinations and the risk of new variations of the coronavirus. A faster vaccination process — the goal of both aid proposals — would help hiring and growth.
A separate measure of economic growth in the CBO report comparing the fourth quarters said growth would be 3.7% this year, a partial reflection of some of the gains that have already occurred in the middle of last year.
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