The Next Four Years

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The CBO's annual summer outlook of the economy is not the stuff of summer reading. It all boils down to this:

CBO projects that the economy will grow by only 2.0 percent from the fourth quarter of 2010 to the fourth quarter of 2011; even with faster growth in subsequent years, the unemployment rate will not fall to around 5 percent until 2014.

But this guesstimate assumes that the Bush tax cuts disappear forever in 2011, which is about as likely as Warren Buffett hiring 10 million Americans to pave the entirety of the interstate highway system. Not gonna happen. Under more realistic assumptions ...

real growth of GDP in 2011 would be 0.6 to 1.7 percentage points higher than it is in the baseline forecast, and the unemployment rate at the end of 2011 would be 0.3 to 0.8 percentage points lower. However, later in the coming decade, real GDP would fall below the level in CBO's baseline because the larger budget deficits would reduce investment in productive capital.


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Derek Thompson is a senior editor at The Atlantic, where he oversees business coverage for TheAtlantic.com. More

Thompson has written for Slate, BusinessWeek, and the Daily Beast. He has also appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC.

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