2. Real GDP Outlook
Percent Change, Annual Rate
20
15
10
5
0
-5
-10
1970 1975 1980 1985 1990 1995 2000 2005 2010
3. U.S. GDP Actual and Potential
Quarterly, Q1 1970 to Q4 2011
Real GDP Trillion 2005 Dollars Log Scale
$14.0-
Forecast
$11.5-
$9.4-
$7.7-
Actual
$6.3-
Potential
$5.2-
$4.2-
1970 1975 1980 1985 1990 1995 2000 2005 2010
Potential GDP estimated by Congressional Budget Office
4. Comparing Recessions
GDP GDP GDP Average monthly
GDP Growth in Growth in Growth in payroll employment Months from end
Loss the the the growth in 3 years of recession until
(Peak to Duration of following following following 3 following trough we reached prior
Trough Trough) Recession year 2 years years (thous.) employment peak
May 1954 (II) -2.5 (%) 10 (months) 7.9 (%) 5.0 (%) 4.0 116 13
April 1958 (II) -3.1 8 9.6 5.7 4.2 72 12
February 1961 (I) -0.5 10 7.5 5.6 5.8 117 10
November 1970 (IV) -0.2 11 4.5 5.7 5.2 103 6
March 1975 (I) -3.2 16 6.2 4.7 4.5 245 9
November 1982 (IV) -2.6 16 7.7 6.7 5.8 268 12
March 1991(I) -1.4 8 2.6 3.0 3.2 128 23
November 2001 (IV) +0.7 8 1.9 2.9 2.9 36 39
June 2009 (II) -4.7 18 2.5 2.2 2.2 74 N/A
5. Personal Consumption Outlook
Percent Change, Annual Rate
9
6
3
0
-3
Real Personal Consumption
-6
Expenditures
-9
1980 1985 1990 1995 2000 2005 2010
Trillion $
Percent Change
3 70
60
1.5
50 Household Wealth
0 40
30
-1.5
Real Disposable Income Per Capita
20
-3 10
1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010
15. Fed Policy
Billions $
3,000
Bank Assets and Liabilities
2,500
2,000
1,500
1,000
500
0
Jan Apr. July Oct. Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
2008 2009 2010 2011 2012
Excess Required Federal Reserve Assets Money Supply (M1)
17. Europe
Percent Change, Annual Rate
10.0
8.0 Real GDP
UK France
6.0
4.0 Germany Eurozone
2.0
0.0
-2.0
-4.0
2009 2010 2011
Source: Oxford Economics
18. Europe
Percent
12
Unemployment Rates
10
8
6
4
UK France Germany Eurozone
2
0
2009 2010 2010 2011 2011 2012
Source: Oxford Economics
19. Emerging Markets
Percent Change, Year to Year
14.0 Real GDP
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0 Mexico China India
-8.0
2009 2010 2010 2011 2011 2012
Percent
9 Unemployment Rates
8
7
6
5
4
3
2 Mexico China India
1
0
2009 2010 2010 2011 2011 2012
Source: Oxford Economics
20. The Fiscal Cliff
• Expiring 2001/2003 Tax Cuts – Impacts marginal tax rates, dividends, capital gains, the estate tax, PEP/Pease, the
marriage penalty, and the child tax credit. ($108 billion – CBO)
• Health Care Tax Increases – A provision of ObamaCare slaps a 3.8% surtax on all forms of investment
income, including capital gains and dividends income, resulting in a total tax rate of 23.8% of capital gains and a total
top rate of 43.8% on dividends income. ($836 billion/10 years – CBO & JCT)
• The End of AMT Patches – Congress generally “patches” the Alternative Minimum Tax (AMT) every year to help it
keep pace with inflation. As a result, just over four million tax returns currently pay the AMT. If a new patch is not
enacted retroactively for 2012, that number will increase to above 30 million for that year and would exceed 40 million
by the end of the decade. ($103 billion – CBO)
• The End of Jobs Measures – Both the two percent payroll tax holiday and extended unemployment benefit will
disappear at year’s end. ($89 billion – JCT)
• The End of Doc Fixes –At the end of the year, the current doc fix will end, leading to a nearly 30 percent immediate
reduction in Medicare physician payment. ($10 billion – CBO)
• The Expiration of Various “Tax Extenders” – various normal “extenders,” such as the research and experimentation
tax credit and the state and local sales tax deduction, expired at the end of 2011. Others, such as the production tax
credit, will expire at the end of 2012. Some of these extenders are likely to be reinstated retroactively at the end of this
year, but will disappear under current law. ($84 billion - CBO)
• Activation of the Sequestration – Owing to the failure of the Super Committee to find suitable spending cuts, the
Congress adopted a sequestration process that would cut $1.2 trillion over 10 years from government spending. The cuts
would begin on January 15, 2013. ($97 billion)
• Debt Ceiling – Given the current level of government spending and allowing the Treasury some leeway in financing
expenditures, it is likely that the government debt issuance will once again bump up against the debt limit between
November 2012 and February 2013.