WASHINGTON (MNI) – The following are excerpta from the U.S.
Congressional Budget Office “Budget and Economic Outlook, published
Tuesday:

Ooutcomes that are considerably worse than CBO’s forecast are also
possible. A significant worsening of the banking and fiscal problems in
Europe, for example, could lead to further turmoil in international
financial markets that could spill over to U.S. financial
marketsreducing wealth, severely constraining the availability of
credit, reducing hiring, and causing higher unemployment. Those
conditions could trigger a self reinforcing downward spiral, weakening
the growth of households’ income and diminishing consumers’ and
businesses’ confidence and, in turn, lessening spending by households
and businesses and therefore the need for workers.

Other events could also lead to outcomes worse than CBO projects. A
surge in oil prices or drop in households wealth could decrease the
demand for goods and services. Those conditions could discourage
businesses from investing and hiring, possibly triggering another
downward spiral of lower spending, confidence, and employment.

—

U.S. Budget Policy In Place That Improves Fiscal Outlook But are Subject
to Possible Change:

1) Provisions of the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 (Public Law 111-312,
referred to in this report as the 2010 tax act) that limited the reach
of the alternative minimum tax (AMT) expired on December 31, 2011. Other
provisions that extended the lower tax rates and expanded credits and
deductions originally enacted in the Economic Growth and Tax Relief
Reconciliation Act of 2001, the Jobs and Growth Tax Relief
Reconciliation Act of 2003, and the American Recovery and Reinvestment
Act of 2009 (ARRA, P.L. 111-5) are set to expire on December 31, 2012.

2) The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L.
112-78) continued for two months the reduced payroll tax originally
provided in the 2010 tax act, the availability of emergency unemployment
compensation enacted previously, and Medicare’s existing payment rates
for physicians’ services (rather than allowing those rates to drop by
27 percent as was scheduled to occur). All of those provisions are
currently scheduled to expire on February 29, 2012 (although legislation
to extend them again is being considered).

3) Provisions of the Budget Control Act of 2011 (P.L. 112-25) that
established automatic enforcement procedures designed to restrain both
discretionary and mandatory spending are set to take effect in January
2013. If fully implemented, those procedures will reduce discretionary
outlays by $845 billion (relative to projections with no automatic cuts)
over the 2013V 2022 period, CBO estimates. Mandatory outlays will be
$140 billion lower over the projection period as a result of the
automatic procedures, largely because of reductions in Medicare
spending.

** Market News International Washington Bureau: 202-371-2121 **

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