1. Economic Policy Division
The Economic Outlook
Economic Policy Division

2. Glass Half Full
Six years of steady growth

3. Real GDP Outlook

4. Glass Half Full Six years of steady growth
Housing essentially recovered

5. Glass Half Full Six years of steady growth
Housing essentially recovered
Financial sector largely recovered

6. Glass Half Full Six years of steady growth
Housing essentially recovered
Financial sector recovered
11 million jobs since start of recovery

7. Unemployment Rate August 5.1% Initial Unemployment Claims
Labor Market
Total Nonfarm Jobs
Household Employment
Unemployment Rate August 5.1%
Initial Unemployment Claims

8. Glass Half Full Six years of steady growth
Housing essentially recovered
Financial sector recovered
11 million jobs since start of recovery
Household net worth recovered

9. Household Net Worth
Household Wealth

10. Glass Half Full Six years of steady growth
Housing essentially recovered
Financial sector recovered
11 million jobs since start of recovery
Household net worth recovered
Corporate profits strong

11. U.S. Corporate Profits
SAAR, $billions

12. Glass Half Full Private construction up 16.9% Y/Y
New residential sales up 25.8% Y/Y
ISM non-manufacturing index at 59
Inflation flat – C-CPI-U at -0.1% Y/Y
Budget deficit halved

13. Glass Half Empty
Budget Deficits Huge and Poised to Soar

14. CBO’s Baseline Deficit
(August 2015)
Budget Deficit
Deficit to GDP

15. Glass Half Empty Budget deficits huge and poised to soar
Along with federal debt

16. Government Baseline Outside Debt
(August 2015)
Debt
Debt to GDP

17. Glass Half Empty Budget deficits huge and poised to soar
Along with federal debt
And nothing pending on entitlements

18. Glass Half Empty Budget deficits huge and poised to soar
Along with federal debt
And nothing pending on entitlements
Multiple local weaknesses

19. Glass Half Empty Multiple local weaknesses Flat wages
ISM manufacturing index at 51.1
Business investment in equipment flat Y/Y
At risk of deflation?

20. Glass Half Empty Budget deficits huge and poised to soar
Along with federal debt
And nothing pending on entitlements
Multiple local weaknesses
A persistent output gap

21. U.S. GDP Actual and Potential
Quarterly, Q to Q4 2016
Trillion $2009
Forecast

22. Glass Half Empty Budget deficits huge and poised to soar
Along with federal debt
And nothing pending on entitlements
A persistent output gap
And a downgraded future

23. U.S. GDP: Estimates of Potential
(Real $2013 dollars)

24. Why is the Glass Half Empty?
Despite historic fiscal and monetary stimulus?

25. Why is the Glass Half Empty?
Despite historic fiscal and monetary stimulus?
Administration’s anti-growth tax hikes
Anti-growth regulatory policies

26. Regulatory Overload
Health care: ACA regulation of health insurance benefit and payment parameters
Employee benefits: Expanded information reporting for service providers to employer-sponsored retirement other benefit plans
Energy efficiency: 14 regulations on energy efficiency standards for electrical equipment
Air quality: Reduction of CO2 emissions from electricity generation facilities
Ozone: National ambient air quality standards for ozone
Labor: Fair Labor Standards Act regulations increasing overtime pay threshold
Natural gas: Requirements for air emissions and control technology for new natural gas wells
And over 240 additional regulations across all federal agencies in just the past year

27. Why is the Glass Half Empty?
Despite historic fiscal and monetary stimulus?
Administration’s anti-growth tax hikes
Anti-growth regulatory policies
General sense of hostility toward businesses and economic growth

28. Good News! Sound policies can reverse effects of bad policies
Underlying theme: Do Less Harm

29. What Can We Do? Education reform Infrastructure investment
Comprehensive tax reform
Advance free trade
Energy market reform
Emphasize prudent, cost-effective regulation
Immigration reform
Entitlement reform

30. Reasons for Optimism
Proven resilience
The worst is over?

31. Future Concerns End-game regulatory surge Cloudy international picture
U.S. monetary policy

32. Future Concerns End-game regulatory surge
Health care: ACA regulation of health insurance benefit and payment parameters
Employee benefits: Expanded information reporting for service providers to employer-sponsored retirement other benefit plans
Energy efficiency: 14 regulations on energy efficiency standards for electrical equipment
Air quality: Reduction of CO2 emissions from electricity generation facilities
Ozone: National ambient air quality standards for ozone
Labor: Fair Labor Standards Act regulations increasing overtime pay threshold
Natural gas: Requirements for air emissions and control technology for new natural gas wells

33. Future Concerns
End-game regulatory surge
Cloudy international picture

34. Countries in or Near Recession
Outside of Europe:
Canada (-0.5%)
Japan (-0.3%)
Australia (0.2%)
South Africa (-0.3%)
Brazil (-1.6%)
Venezuela (-0.4% -- and 200% annual inflation)

35. Europe Debt crisis lingers Problems of currency union unresolved
Conflicts in governance
Now an immigration wave

36. China
Managed economy with multiple imbalances, multiple excesses

37. China Managed economy with multiple imbalances, multiple excesses
10 Words – huyou – data

38. China Managed economy with multiple imbalances, multiple excesses
10 Words – huyou – data
Trading by numbers

39. Future Concerns End-game regulatory surge Cloudy international picture
U.S. monetary policy

40. Future Concerns End-game regulatory surge Cloudy international picture
U.S. monetary policy
Not what the Fed should do
Or when the Fed will do it
But the economic implications of a policy change

41. “It Ain’t Necessarily So”
Future Concerns
End-game regulatory surge
Cloudy international picture
U.S. monetary policy implications:
“It Ain’t Necessarily So”

42. The Recent History of the Federal Funds Rate

43. Long Term Rates and the Funds Rate
Not a Forecast

44. The Greenspan Conundrum

45. The Greenspan Conundrum

46. A Possible Future Path for the Funds Rate
Not a Forecast

47. Bank Assets and Liabilities
Fed Policy
Bank Assets and Liabilities

48. Bank Assets and Liabilities
Fed Policy
Bank Assets and Liabilities
Not a Forecast

49. Bottom Line 6 years and counting – glass is still half full Recession?
Steady growth
Maybe with a new Administration, the economy can do even better
Following the pro-growth policies the Chamber’s laid out

50. What Can We Do to Fill the Glass?
Education reform
Infrastructure investment
Comprehensive tax reform
Advance free trade
Energy market reform
Emphasize prudent, cost-effective regulation
Immigration reform
Entitlement reform

51. Economic Policy Division
The Economic Outlook:
Economic Policy Division