Economy

CBO: Unemployment Will Remain High For Longer Without Stimulus

SK Ashby
Written by SK Ashby

The American economy is doing a little bit better than expected according to new estimates from the Congressional Budget Office (CBO), but things won't be "normal" for years to come.

The labor and consumer spending market won't look normal for year even if Congress passed a significant aid package next month, but it will take even longer without one. The CBO estimates that unemployment will remain elevated until 2024 because of permanent changes to the economy that will outlast the coronavirus pandemic.

The number of employed Americans will not return to its pre-pandemic levels until 2024, officials predicted, reflecting the prolonged difficulties of shaking off the virus and returning to full levels of economic activity. Officials said the rebound in growth and employment could be significantly accelerated if public health authorities were able to more rapidly deploy coronavirus vaccines across the population.

As it stands, the budget office sees little evidence of growth running hot enough in the years to come to spur a rapid increase in inflation. It forecast inflation levels below the Federal Reserve’s target of 2 percent for years to come, even with the Fed holding interest rates near zero.

With virtually no risk of inflation and basement-level interest rates accompanied by projections for long term unemployment, there's no good reason for Congress to not pass a significant aid or stimulus package.

With that said, I think this tells us why Republicans have chosen to cooperate even less than they did in 2009 when President Obama took office and passed his first stimulus package.

The CBO report more or less conveys that the economy will hum along at a reasonable pace in the years to come, but still leave many people behind. Republicans would gladly campaign on the latter fact in 2022 and 2024 if they can and, to that end, they are not willing to support positive economic policies that could materially improve anyone's lives.

To put it simply, they want the Biden years to be as underwhelming as possible so they can retake power.

The CBO also projects that growth will gradually slow to a crawl over the next decade without new progressive spending policies.

After this year, CBO said it expected U.S. real gross domestic product growth to slow to 2.9% in 2022 and 2.2% in 2023 -- a pace similar to the relatively strong growth years of 2018 and 2019, respectively.

Real GDP will average 2.3% for 2024 and 2025 and 1.7% for the 2026-2031 period, according to the CBO forecasts.

The bigger picture is that Democrats have a very narrow opportunity between the next two to four years (depending on the results of the midterm elections) to avoid another decade of economic mediocrity in which average people struggle to make progress.

Honestly, this is all so predictable it's at least a little depressing.