- A marked contraction in the U.S. economy in calendar year 2009, with real (inflation-adjusted) gross domestic product (GDP) falling by 2.2 percent, a steep decline from a historical perspective.
- A slow recovery in 2010, with real GDP growing by only 1.5 percent.
- An unemployment rate that will exceed 9 percent early in 2010; the unemployment rate has been that high only twice in the past 50 years (in 1975, for one month, and in 1982-1983).
- A continued decline in inflation, both because energy prices have been falling and because inflation excluding energy and food prices—the core rate—tends to ease during and immediately after a recession; for 2009, CBO anticipates that inflation, as measured by the consumer price index for all urban consumers (CPI-U), will be only 0.1 percent.
- A drop in the national average price of a home, as measured by the Federal Housing Finance Agency’s purchase-only index, of an additional 14 percent between the third quarter of 2008 and the second quarter of 2010; the imbalance between the supply of and demand for housing persists, as reflected in unusually high vacancy rates and a low volume of housing starts.
- A decrease of more than 1 percent in real consumption in 2009, followed by moderate growth in 2010; the rise in unemployment, the loss of wealth, and tight consumer credit will continue to restrain consumption— although lower commodity prices will ease those effects somewhat.
- A financial system that remains strained, although some credit markets have started to improve; it is too early to determine whether the government’s actions to date have been sufficient to put the system on a path to recovery.
The CBO has released a full, accompanying report which I recommend everyone read as well. This report is going to be used as supporting evidence for a big plan. What's important to remember about this plan is the following assumption:
Under the standard assumption CBO uses for its estimates—namely, that current laws and policies regarding federal spending and taxation remain the same—we forecast the following:
In other words, this is without a stimulus plan, FYI. If there is no plan, then I agree with this scenario.
I should also add the following important caveat: there is no guarantee the fiscal plan will work as advertised, planned or desired. It's simply the best shot we have right now at solving the problem.