clearn.png
Thursday September 29th, 2022 7:44AM

Congressional Budget Office says inflation to last into 2023

By The Associated Press
Related Articles
  Contact Editor

WASHINGTON (AP) — The Congressional Budget Office released an economic outlook Wednesday saying high inflation will persist into next year, likely causing the federal government to pay higher interest rates on its debt.

The nonpartisan agency expects the consumer price index to rise 6.1% this year and 3.1% in 2023. This forecast suggests that inflation will slow from current annual levels of 8.3%, yet it would still be dramatically above a long-term baseline of 2.3%.

The 10-year estimates do contain positive news as this year's annual budget deficit will be $118 billion lower than forecast last year. That's a byproduct of the end of pandemic-related spending and the solid job growth it helped to spur. As a share of the total economy, publicly held debt will drop through 2023. Still, the accumulated federal debt will likely continue to grow over the next decade to be equal to roughly 110% of U.S. gross domestic product.

The Federal Reserve has been trying to reduce inflation by raising its benchmark interest rates, causing the interest charged on 10-year U.S. Treasury notes to increase substantially in recent months. One consequence is that the government will be spending more money this year to service its debt. By 2032, the yearly interest payments will nearly be $1.2 trillion, or more than what the federal government spends on defense.

Still, the CBO cautions that its numbers "are subject to considerable uncertainty, in part because of the ongoing pandemic and other world events," including Russia's ongoing war in Ukraine. The report accounts at least for the first few weeks of the war, according to CBO.

Economists have said coronavirus relief programs issued by both the Biden and Trump administrations have contributed to higher inflation levels. But high prices have also been fueled by a delay in action by the Fed, supply chain disruptions and the tumult produced after Russia invaded Ukraine in February.

Ben Harris, the Treasury Department's assistant secretary for economic policy, tweeted Tuesday that the factors driving inflation also include soaring corporate profits, driven by a lack of business competition — as well as business not being fully prepared for the reopening of the economy as pandemic restrictions were lifted. The administration has emphasized that its plan put the U.S. economy into a stronger place relative to the rest of the world because unemployment is a low 3.6%.

“The American Rescue Plan has fostered an extraordinarily fast recovery and leaves us in a strong position to address the global challenges posed from supply chains and the economic fallout from Russia’s invasion of Ukraine,” he tweeted.

He said if Congress passed the president’s full agenda, labor force participation would rise and some of the impacts of inflation would be reduced.

With Biden’s $3.5 trillion economic and social spending bill, known as “Build Back Better,” now dead in a split Senate, Democrats face pressure to pass legislation ahead of November midterm elections.

The report says beyond 2032, “if current laws remained generally unchanged, deficits would continue to grow relative to the size of the economy over the following 20 years, keeping debt measured as a percentage of GDP on an upward trajectory throughout that period.”

The biggest drivers of debt rising in relation to GDP are increasing interest costs and spending for Medicare and Social Security, according to the report.

Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said in a statement that “looking ahead, we need to address the key drivers of our debt, which include high healthcare costs, an aging population and a tax code that is inadequate for what we have promised our citizens."

“Stabilizing our debt will help build a foundation for broad-based economic growth and make us better prepared for the challenges and opportunities of the future,” he said.

CBO Budget Director Phillip Swagel is set to testify Thursday to the House Budget Committee on the report.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told The Associated Press ahead of the release that the pandemic, war in Ukraine and other factors point to the importance of reducing the annual deficit.

“Unfortunately, the underlying story here is one of fiscally unsustainable positions and on top of that, we have this added challenge of inflation and a reminder that external shocks continue to come at us,” she said.

  • Associated Categories: Associated Press (AP), AP Online Headlines - Washington, AP Online Congress News, AP Business, AP Business - Economy, AP Business - Financial Markets
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Texas gunman warned online he was going to shoot up school
The governor of Texas says the gunman who killed 19 children and two teachers at an elementary school had warned on social media minutes before the attack that he was going to shoot up a school
3:05PM ( 13 minutes ago )
Desperation becomes sorrow after elementary school shooting
Desperation turned to heart-wrenching sorrow for families of grade schoolers killed after an 18-year-old gunman barricaded himself in their Texas classroom and began shooting, killing at least 19 fourth-graders and their two teachers
2:55PM ( 22 minutes ago )
Fed officials signal rates may head to 'restrictive' levels
Federal Reserve officials agreed when they met earlier this month that they might have to raise interest rates to levels that would weaken the economy as part of their drive to curb inflation, which has reached a four-decade high
2:52PM ( 25 minutes ago )
Associated Press (AP)
Negotiator tells Congress US still trying for Iran nuke deal
The United States’ top negotiator for Iran nuclear talks has made the case to lawmakers for sticking with Iran nuclear talks
2:30PM ( 47 minutes ago )
Davos updates | VW: Supply chain woes ease; orders backed up
Executives with German automaker Volkswagen say at the World Economic Forum meeting in Davos that supply chain problems exacerbated by the Russia-Ukraine war are easing but they’re dealing with a huge backlog of orders
2:00PM ( 1 hour ago )
Oz, McCormick race heads into recount in Pa. Senate primary
Pennsylvania’s top election official says the margin between the top two candidates in last week’s Republican primary for U.S. Senate is tight enough to trigger a recount
2:00PM ( 1 hour ago )
AP Online Headlines - Washington
FDA chief under fire for slow response to baby formula issue
The head of the Food and Drug Administration testified about a series of setbacks that led to a months-long delay in inspecting the plant at the center of a nationwide baby formula shortage
1:22PM ( 1 hour ago )
'Trump is in the past': Mounting losses show limits of power
Donald Trump began May with a decisive win for a favored candidate in Ohio, catapulting a Senate hopeful to a primary victory
1:11PM ( 2 hours ago )
Davos updates | Gore calls for gun control after US shooting
Former U.S. Vice President Al Gore is calling for stronger gun legislation in the wake of the mass shooting in Texas that killed 21 people, mostly children
1:06PM ( 2 hours ago )
AP Online Congress News
Scars of war seem to be everywhere in Ukraine after 3 months
No matter where Ukrainians live, the 3-month-old war never seems to be far away
2:36PM ( 41 minutes ago )
Amazon shareholders nix warehouse working conditions audit
Amazon shareholders have voted against a proposal calling for an independent audit of working conditions at the company’s warehouses
2:14PM ( 1 hour ago )
Seoul: N Korea fires suspected ICBM and 2 other missiles
South Korea says one of the three weapons North Korea test-launched into the sea was a suspected intercontinental ballistic missile
2:10PM ( 1 hour ago )
AP Business
Delegations from Sweden, Finland hold NATO talks in Turkey
Delegations from Sweden and Finland have held talks with senior Turkish officials in an effort to overcome Turkey’s objections to their joining NATO
11:51AM ( 3 hours ago )
Davos updates | Israeli president seeks economic partnership
Israeli President Isaac Herzog is calling on other nations to consider a “renewable Middle East” as a resource for sustainable food, water and energy solutions
11:08AM ( 4 hours ago )
Live updates | Switzerland to aid Ukraine with asset seizure
The Swiss government says it will initiate proceedings to confiscate more than 100 million francs ($104 million) in assets of a close associate of former Ukrainian President Viktor Yanukovych
10:50AM ( 4 hours ago )
AP Business - Economy
Brittney Griner's wife tells ABC she wants WNBA star home
Brittney Griner’s wife, Cherelle, wants President Joe Biden to secure her partner’s release, doing whate,ver is necessary to get the WNBA star home from Russia where she has been detained for more than three months
10:34AM ( 4 hours ago )
Wall Street points lower as investors hunker down
U.S. markets pointed toward more losses before the open on Wednesday, as investor pessimism becomes increasingly entrenched due to both macro global events and gloomy financial reports from governments and companies
8:41AM ( 6 hours ago )
Global stock markets higher after Wall St sinks
Global stock markets are higher after Wall Street sank on weak U.S. housing sales and a profit warning by a prominent social media brand
5:09AM ( 10 hours ago )
AP Business - Financial Markets
Texas gunman warned online he was going to shoot up school
The governor of Texas says the gunman who killed 19 children and two teachers at an elementary school had warned on social media minutes before the attack that he was going to shoot up a school
3:05PM ( 13 minutes ago )
Desperation becomes sorrow after elementary school shooting
Desperation turned to heart-wrenching sorrow for families of grade schoolers killed after an 18-year-old gunman barricaded himself in their Texas classroom and began shooting, killing at least 19 fourth-graders and their two teachers
2:55PM ( 22 minutes ago )
Fed officials signal rates may head to 'restrictive' levels
Federal Reserve officials agreed when they met earlier this month that they might have to raise interest rates to levels that would weaken the economy as part of their drive to curb inflation, which has reached a four-decade high
2:52PM ( 25 minutes ago )
Russia takes steps to bolster army, tighten grip on Ukraine
Russian President Vladimir Putin is trying to strengthen his control of southern Ukraine by giving residents of two regions a fast path to Russian citizenship
2:52PM ( 26 minutes ago )
EPA proposes restrictions in fight over Alaska mine
The U.S. Environmental Protection Agency is proposing restrictions that would block plans for a copper and gold mine in Alaska’s Bristol Bay region
2:48PM ( 29 minutes ago )