CBO PROJECTS HIGHER UNEMPLOYMENT, SLOW EXIT FROM INFLATION

The Congressional Budget Office said this week that it expects the U.S. economy to stagnate this year with the unemployment rate jumping to 5.1% — a bleak outlook that was paired with a 10-year projection that publicly held U.S. debt would nearly double to $46.4 trillion in 2033.

The office’s updated 10-year Budget and Economic Outlook outlined stark expectations for the decade ahead, where Social Security would be unable to pay full benefits to recipients in 2032 with a roughly 20 percent reduction in benefits across the board — and the net interest costs on U.S. debt would eclipse what the nation spends on defense.

“The debt trajectory is unsustainable,” CBO director Phillip Swagel told journalists at a press conference after the report’s afternoon release. The CBO can’t tell Congress what to do, he said, “but at some point, something has to give — whether it’s on spending or revenue.”

The latest figures seemed to affirm the worst fears of many U.S. consumers and businesses. But in a reminder that the U.S. economy has seldom behaved as anticipated through the pandemic and its aftermath, the employment forecast looks very different from the pace of hiring so far this year.

The CBO estimated that just 108,000 jobs will be added in 2023, but employers added 517,000 jobs in January alone. It also assumes that inflation will ease from 6.4% to 4.8% this year, far more pessimistic than Federal Reserve officials who in December said inflation would fall to 3.5%.

The CBO separately pointed to the risks of not increasing the government’s legal borrowing authority, noting that the Treasury Department could exhaust its current “extraordinary measures” to keep the government running while President Joe Biden and House Speaker Kevin McCarthy jostle over a deal.