CBO's budget and economic outlook: fiscal years 2004-2013: hearing before the Committee on the Budget, House of Representatives

Original publisher: Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2003. LC Number: KF27 .B8 2003j OCLC Number: (OCoLC)54359841 Subject: Budget -- United States. Excerpt: ... 11 ceipts and outlays as the policies get put into place. The denomi-nator reflects the performance of the economy, which is also af-fected by policy choices. And I wanted to spend the closing few minutes of my remarks talking about our outlook for the path of the economy for both the near-term and the long-term. Our projections have two pieces. The near-term projections are CBO's attempt to forecast to the best of its ability the cyclical re-covery of the economy from the recent recession and the dynamics of that recovery. Over the longer term, after 2 years, we make no attempt to anticipate business cycle fluctuations of any type, but instead focus on the long-term growth of potential GDP, the full employment level toward which the economy typically returns, and get the long-run path of the economy in some rough sense. Our short-term forecast does show that the economy does pick up in the near-term, rising to close to 4 percent real GDP growth in 2004. In the path of that recovery, unemployment comes down somewhat slowly, lingering in the neighborhood of 6 percent over the next 18 months. That reflects the net effect of two opposing forces. As the economy picks up, we do anticipate that job creation will rise and payroll employment numbers would improve. At the same time, however, our reading of the evidence is that during the recent cyclical downturn, a greater than typical number of individuals chose not to participate in the labor force. As the economy begins to grow more quickly and jobs begin to be created, those individuals will likely return to the labor force. That increase in the labor force participation will slow the decline in the unem-ployment rate in the absence of other influences. We expect that inflation will remain modest in the near-term and t...