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  • CBO Budget and Economic Outlook: Fiscal Years 2012-2022

    The Congressional Budget Office has released its Budget and Economic Outlook for the next 10 years. For 2012, the CBO is projecting a deficit of $1.1 trillion. But over the next 10 years, the CBO projects that figure to drop to "under $200 billion and averaging 1.5 percent of GDP." This projection is based on current laws, including the scheduled expiration of some tax cuts: Much of the projected decline in the deficit occurs because, under current law, revenues are projected to shoot up by almost $800 billion, or more than 30 percent, between 2012 and 2014—from 16.3 percent of GDP in 2012 to 20.0 percent in 2014. That increase is mostly the result of of the recent or scheduled expirations of tax provisions, such as those initially enacted in 2001, 2003, and 2009 that lower income tax rates and those that limit the number of people subject to the alternative minimum tax (AMT). Under current law, CBO projects that revenues will continue to rise relative to GDP after 2014 largely because increases in taxpayers’ inflation-adjusted income will push more income into higher tax brackets and subject more of it to the AMT. Other important projections from the report are illustrated in the following slides from the CBO: Charts from CBO's January 2012 Budget and Economic Outlook View more presentations from Congressional Budget Office Read the full report here .

  • Retail Sales Rose 7.7 Percent in 2011

    Retail sales rose only slightly in December, according to the Commerce Department . Adjusted for seasonal and holiday variation, sales rose 0.1 percent from November. The numbers look better in comparison with December 2010, as sales this year were 6.5% higher. For the year, sales in 2011 outpaced sales in 2010 by 7.7 percent. From the Census Bureau : Read the full release here .

  • McKinsey: Growing Confidence Among Consumers in China

    Retailers in the US are relying on consumers spending and spending for the holidays, but the consumers that truly matter in the global economy are in China. The Chinese government has set consumption as a priority. This will require that Chinese consumers have more money and are confident in their family's economic situation. According to McKinsey's 2011 Annual Chinese Consumer Study , these conditions have been met. Take a look at the rise in confidence among Chinese consumers: The authors point out that spending will almost certainly rise along with that confidence. But sustained growth in consumption will depend more and more on Chinese consumers buying goods to replace products that they have bought in the past. This is behavior that we take for granted among consumers in developed economies like the US and Japan. But it is new ground in a lot of product sectors in China: A few categories, in particular big-ticket items such as cars, have significant growth potential through first-time buying. For example, China is the world’s largest auto market, with 11.7 million passenger cars sold in 2010 compared with 9.8 million in the United States. But the total number of cars sold per capita is 13 times smaller than in the United States, and most car buyers in China are still first-time buyers. Personal computers constitute another category still ripe for strong growth from first-time buyers. Ownership has risen sharply from 25 percent of urban households in 2006 to 44 percent today with much room for additional growth from new users. In poorer rural areas, only ten personal computers are shared among 100 households. As incomes continue to rise in China, and as the government’s consumption-boosting measures kick in, more and more people will be able to afford such items. For many categories that have been in China for more than ten years, however, and are widely affordable albeit at different price points, the headroom for growth from first-time buyers is limited. With the exception of very big-ticket and luxury items, as well as products that are relatively new to the Chinese such as breakfast cereals, many of the largest categories such as white goods, personal care, food and beverages, and apparel have now reached penetration levels of well over 50 percent of the urban population. This means that some categories may see falling growth rates. National sales of mobile handsets, for example, grew at around 7 percent a year between 2006 and 2010, compared with 21 percent during the previous five years, a reflection of the fact that 97 percent of urban households now own a mobile phone. In such cases, an essential component of capturing rising spending power will be to persuade consumers to buy more of the same thing—either by making more frequent purchases or buying in greater quantities—or to trade up to more expensive products in the same category. Refrigerators and washing machines serve as an example. Although over 90 percent of urban dwellers now own these items, the survey shows that the average time they keep either item before replacing it has dropped in the past two years from around seven years to six. In addition, the average amount spent has risen by 9 percent for refrigerators and 15 percent for washing machines. The survey again highlights how the importance of these other drivers of category growth differs both by category and region. Read the full report here .

  • Looking Back at When Federal Debt Seemed to be on its Way Out

    What a difference a decade makes. In a January 2001 report, the Congressional Budget Office projected that the US government would eliminate its debt within five years, and "be $2.3 trillion in the black," according to a new paper from the Pew Charitable Trusts . Of course, that did not happen, and the Pew paper sets out to explain why. Here is a helpful chart from the report: Read The Great Debt Shift Drivers of Federal Debt Since 2001 here . We learned about the Pew report from Planet Money . As it turns out, the CBO wasn't the only place a decade ago where economists were projecting the US government paying off its debt. Economists in the Clinton White House identified this potential problem as well. That's right, problem . These economists were concerned at how ending federal debt might set off a series of negative ripple effects through the economy. So Jason Seligman , who was working at the Council of Economic Advisers , authored a report on the potential effects of "too little" debt. The report was never published. But Planet Money's David Kestenbaum got his hands on the report. He and Alex Blumberg talked about the report with Seligman on the latest Planet Money podcast: Planet Money provides access to the report here .

  • eMarketer: Double-Digit Online Sales Growth Through 2011

    In a year of slow, slow growth, one area of the economy stands out. Online sales have been up double digits over last year. Here's a monthly breakdown from eMarketer : We'll be curious to see what the final August/back-to-school shopping numbers bring. And then it is on to holiday spending. But if spending remains steady with last year, 2011 will have brought substantial growth: Based on research and interviews with a variety of industry experts, eMarketer expects online holiday sales to be on par with or surpass last year’s results. That would mean growth of at least 12% this year, according to comScore’s historical data. The firm reported that online spending grew 12% on volume of $32.8 billion for the 2010 holiday season, which it defines as the months of November and December. Read Cautious Optimism for Holiday Season Spending here .

  • Lagarde: 'Global Risks Are Rising, But There Is a Path to Recovery'

    While those of us on the East Coast were watching the weather this weekend, top economists from around the globe were still at the Jackson Hole Economic Policy Symposium , listening to the new head of the IMF , Christine Lagarde give what Felix Salmon called "the most important speech of the meeting, by far." Lagarde gave her vision for what European and American leaders need to do to stave off a most damaging double-dip recession. From the speech: Two years ago, it became clear that resolving the crisis would require two key rebalancing acts—a domestic demand switch from the public to the private sector, and a global demand switch from external deficit to external surplus counties. On the first, the idea was that strengthened private sector finances would allow the engine of growth to switch back from the public to the private sector. On the second, the idea was that higher demand in surplus countries would make up for a lower spending path in deficit countries. But the actual progress on rebalancing has been timid at best, while the downside risks to the global economy are increasing. Those risks have been aggravated further by a deterioration in confidence and a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed. Developments this summer have indicated that we are in a dangerous new phase. The stakes are clear: we risk seeing the fragile recovery derailed. So we must act now. It is a matter of vision, courage and timing. Decisive action will bolster the confidence that is required to restore and rebalance global growth. We are not without options. We know what needs to be done to support growth, reduce debt, and prevent further financial crises. But we need a new approach—based on bold political action, with a comprehensive plan across all policy levers, implemented in a coordinated global way. Read the speech here .

  • Back to School Shoppers Spending Less

    The National Retail Federation is projecting a 3% drop in back-to-school spending this year. Given last year's big jump in spending, the drop is a big disappointment for retailers, especially in the electronics sector. While parents and students will focus most of their back to school spending on computers and other electronics, they will on average spend 11% on those goods than last year. The NRF surveyed nearly 9,000back-to-school shoppers and found some interesting, if not entirely surprising, ways in which the slow economic recovery is affecting their consumer choices. Here are the results: Chart: Back-to-School 2011 - How the Economy is Impacting B2S Tags: retail, back to school, national retail federation Powered By: iCharts | create, share, and embed interactive charts online Read the press release for the NRF report here .

  • St. Louis Fed Economists on Revenue, Spending, and the Federal Debt Today

    White House and Congressional leaders will meet again today to once again come to an agreement to make headway against the federal deficit andl allow for the debt ceiling to be raised. The sticking points, as always are over taxes and spending. Daniel Thornton and Kevin Kliesen of the St. Louis Fed have a new Economic Synopsis in which they briefly compare debt today to past years. And while it seems we can consider either lack or revenue or too much spending the culprit in years past, it is pretty clear to the authors that both are to blame now: From 1950 through 1974, on average, revenues remained rela- tively constant at about 18 percent of GDP—averaging 17.6 percent of GDP for 1950-74 and 18.2 percent of GDP for 1975-2007. In contrast, expenditures were above their 1950-74 average level in all but 5 of the 38 years from 1970 through 2007: On average, expenditures increased from 18.3 percent of GDP for 1950-74 to 20.8 percent of GDP for 1975-2007. In short, the average deficit as a share of GDP rose 1.9 percentage points from 1950-74 to 1975-2007, which is more than accounted for by the same period’s 2.5-percentage-point increase in spending as a share of GDP. Hence, the rise in the national debt from the 1970s through 2007 is entirely a consequence of the federal government’s increase of expenditures without an offsetting increase in revenues to pay for that additional spending. If nominal GDP increases at the same rate as the debt, the debt-to-GDP ratio remains constant. For 1960-74, the deficits were relatively small and nominal GDP growth relatively rapid, so the debt-to-GDP ratio declined. In con- trast, for 1975-2007, the deficits were larger and nominal GDP growth slowed, nearly doubling the debt-to-GDP ratio. As one might expect, the most recent experience is dif- ferent: The marked increase in the debt-to-GDP ratio during the past three years is a consequence of both an increase in expenditures and a reduction in revenue. Specifically, average expenditures increased to 23.2 percent of GDP while average revenue declined to 15.8 percent of GDP, which makes this contribution to the deficit about equally divided between increased expenditures and declining revenue. Read The Federal Debt: Too Little Revenue or Too Much Spending? here .

  • David Wessel on the Budget

    Wall Street Journal Economics Editor David Wessel is looking ahead to the White House's release of the annual budget on Monday, and he anticipates some emphasis on building a stronger economy as a means of reducing the deficit. Wessel is not expecting big proposals on dealing with the rising costs of Social Security, Medicare and Medicaid, in part because of the fear that any such proposals would be dead on arrival-- "Republicans will shoot them down and they'll be dead." Read Wessel's column here .

  • A Season of Online Shopping Growth

    If there were any doubts about the growth of online shopping, ComScore reports that Americans spent $28.36 online from November through December 19. That's a 12.2 percent increase over last year. And last weekend alone spending topped $900 million, a 17% increase over the last pre-Christmas weekend of 2009. Here's a look at the week-by-week breakdown: Read the full release here .

  • Citizen Solutions to the Growing National Debt

    NPR's Planet Money asked listeners and readers to look at charts like this one: And then they asked those listeners to put forward their ideas for cutting the federal budget. It is an interesting exercise, and an interesting podcast. Take a listen: PM also points us to the Committee for a Responsible Federal Budget , which has put together an elaborate interactive tool for citizens to try to problem solve the federal budget deficit. In the online simulation, one makes the hard choices that politicians are presented with, in an effort to build a federal budget. Click here to give it a shot.

  • The Real Option to Hold Cash

    Nick Rowe , Professor of Economics at Carleton University , takes real option theory to task at the Worthwhile Canadian Initiative blog. Rowe says that real option theory includes the option of doing nothing as one of its "neatest options." But this option overlooks the idea that doing nothing is indeed doing something--especially when cash is involved. You can't just do nothing with your income; you have to spend it on something. If all things you could spend it on were irreversible, then you can't talk about the option value of doing nothing, or postponing a decision. You have to decide now. You could insulate your house with R20, or buy a new car, or buy a holiday, but none of those expenditures is fully reversible. You can't return the holiday after you have enjoyed it; you can't re-sell the new car and get anything like what you paid for it. There is one thing you can spend your income on that is very reversible: cash. In fact, if we spend our income on cash, we don't even think of that as spending it at all. We think of that as not spending it. We think of holding cash as doing nothing. In fact, since we live in a monetary exchange economy, our income comes to us as cash anyway. So it's not like we make a decision to invest in cash today, and then reverse that decision next year. We have the cash already, and can decide to spend it now, or decide later to spend it later. Holding cash keeps our options open. Cash is the real real option -- to do anything. Talking about the option value of doing nothing only makes sense in a cash economy. If we invest in insulation we cannot reverse that decision next year. If we hold cash, we can reverse that decision next year. Holding cash is to hold the option. Holding insulation is to exercise that option, so you no longer hold the option. Read Cash as the real real option -- to do anything here .

  • Car and Gas Spending from Bundle.com

    Bundle has a new spending analysis available online. This time they are looking specifically at the average annual spending on gas and car expenses by city and state. And the data reveals some interesting trends. First, gas and car spending is considerably higher west of the Mississippi. Apart from the Research Triangle area in North Carolina, all the top ten cities in spending are west of the great river. And Arizona residents spend a lot on driving--with four of the top spending cities in the states. On average, Americans spend $5,477 on gas and car expenses per year, Bundle found. Read the article here . And get detailed regional from this infographic. ( Click here to download) (h/t Barry Ritholtz and Flowing Data )

  • Detailed Consumer Spending Comparisons, City by City

    Bundle is a relatively new website and tool for understanding household spending habits. It is a great way to compare what families in different cities are paying, on average, for food, shopping, and health care costs. It does not include mortgage and rent. For example, take a look at spending in Austin, TX, where people spend more on average than any other American city: The other end of the list is Detroit. Take a look: The data is a few months behind at the moment--it runs through December of last year--but still provides some interesting comparisons. Most people probably understand that spending varies based on geography--but just how widely that spending varies might surprise some. Check out the list of the top 25 spending cities here . (Hat tip: Kit Tisdale)

  • Big Think Black Friday Special: 'The Science of Spending'

    Big Think has pulled together a baker's dozen of videos for Black Friday viewing. The videos cover our collective issues with spending and saving. The third video in the collection features Lee Eisenberg , author of the new book Shoptimism: Why the American Consumer Will Keep Buying No Matter What . Here is Eisenberg discussing the history of splurging: You can watch the full Science of Spending series here .
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