Recent U.S. Economic Growth In Charts ppt

DEPARTMENT OF THE TREASURY Source: Bureau of Economic Analysis, Wall Street Journal.. Percentage point contribution to real quarterly GDP growth, by component The Components of Growth Si

Recent U.S Economic Growth

MAY 2012

In Charts

The Growth Story Since 2009

GROWTH SINCE 2009

Early May 2010

Cost of borrowing spikes across Europe Euro falls to four-year low against the dollar

Feb 2011

Egyptian President steps down Libyan conflict begins President Obama ratchets up sanctions on Libya

Oil prices pass $90/barrel

Apr 15, 2011

Government shutdown narrowly averted

Oct 28, 2011

Italian 10y bond yields close above 6 percent, remain near or above that level through late Jan 2012

Japanese earthquake/tsunami

Debt limit

European debt crisis

Oct 2010

Greece, Ireland Portugal bond spreads widen

1

U.S DEPARTMENT OF THE TREASURY

Source: Bureau of Economic Analysis, Wall Street Journal.

2008/09 financial crisis

Jul 2011

Greek, Irish, and Portuguese

spreads spike

Aug 2011

Oil prices fall below $90/barrel

Aug 2, 2011

Debt limit deal reached

Oct 2011

Oil prices pass $90/barrel

High oil prices High oil prices

 Despite the worst financial crisis since the Great Depression and a series of shocks in its

aftermath, the economy has gradually strengthened since mid-2009, though more work remains.

Real quarterly GDP growth

2008 Q4

-8.9%

2009 Q1 -6.7%

2009 Q2 -0.7%

2009 Q3 1.7%

2009 Q4 3.8%

2010 Q1 3.9% 2010 Q23.8%

2010 Q3 2.5% 2010 Q42.3%

2011 Q1 0.4% 2011 Q21.3%

2011 Q3 1.8%

2011 Q4 3.0%

2012 Q1 2.2%

-10

-5

0

+5

+10

Q1

2008

2009

2010

2011

2012

Personal consumption expenditures Gross private domestic investment Exports

Imports Government consumption and gross investment

Total GDP growth

+4.3 +3.8

+2.9

-3.5 -0.7

Total +6.8

-6 -4 -2 0 +2 +4 +6 +8

 U.S economic growth has been led by consumption, private sector investment, and exports.

Percentage point contribution to real quarterly GDP growth, by component

The Components of Growth Since 2009

GROWTH SINCE 2009

Source: Bureau of Economic Analysis.

2

U.S DEPARTMENT OF THE TREASURY

Cumulative contributions to growth since 2009 Q2,

by component

92

94

96

98

100

102

104

Q1

2008

2009

2010

2011

2012

 Growth in the U.S has outpaced that of other advanced economies affected by the global

financial crisis.

Real GDP, 2008 Q1 = 100

International Growth

GROWTH SINCE 2009

Source: Regional sources (see Notes section).

3

U.S DEPARTMENT OF THE TREASURY

U.S.

Euro area

Japan

U.K Germany

-6%

-4%

-2%

0%

2%

4%

2006 Q1

0

10

20

30

40

50

60

70

80

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

-$19.3 trillion

2007 Q2 - 2009 Q1

$80 trillion

 Despite challenges, growth in private demand has outpaced GDP growth since late 2010

Household net worth, inflation-adjusted (constant 2011 dollars)

Wealth, Savings, and Private Demand

UNWINDING THE CRISIS

Source: Federal Reserve Flow of Funds, Bureau of Economic Analysis.

4

U.S DEPARTMENT OF THE TREASURY

Year-on-year percent change in real GDP and final sales to private domestic purchasers

0%

1%

2%

3%

4%

5%

6%

7%

8%

80%

90%

100%

110%

120%

130%

140%

150%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Household debt-to-income

(left axis)

Household

wealth

Household debt and savings as a percent of disposable income

Household wealth has begun to come back from a sharp decline

in 2007-08, but has not fully returned

1

…and families are saving more than before the crisis.

2

Despite these drags

on spending, private demand has begun

to show stronger growth as the overhang of the financial crisis fades.

3

Household savings rate

(right axis)

Growth in final sales to private domestic purchasers

Growth in real GDP

recession

recession

recession

0.16 0.02 0.16

-0.08 -0.01

0.01

-0.34

-0.08

0.12

-0.19

-0.37

-0.49

0.05 -0.06

-0.33

-0.41 -0.34

-0.19 -0.26 -0.14

-0.90% -0.75% -0.60% -0.45% -0.30% -0.15% 0% +0.15% +0.30%

-300

-250

-200

-150

-100

-50

0

+50

+100

2007

Q1

State and local government contribution to real GDP growth

(right axis)

-15%

-10%

-5%

0%

+5%

-3,000

-2,000

-1,000

0 +1,000

Private sector job growth

(Thousands, left axis)

Private contribution to real GDP growth 1

(right axis)

 State and local governments have been forced to cut deeply and shed jobs in response to fiscal challenges…

Change in quarterly state and local employment, end-of-period (line, left axis)

Fiscal Drag

Change in state and local employment

(left axis)

State and local government contribution to real GDP growth, percentage points (bars, right axis)

+100 thousand

UNWINDING THE CRISIS

5

 …while private sector growth has continued.

Quarterly private sector changes in employment

and contributions to real GDP growth

Three Misconceptions About Recent Economic Growth

MISCONCEPTIONS

6

U.S DEPARTMENT OF THE TREASURY

Some analysts have asserted that the following

factors have been impediments to growth:

1.Regulations Have increased regulations or

regulatory uncertainty been a major factor in holding back growth?

2.Taxes Is a high tax burden – or fears of future

tax burdens – impeding growth?

3.Government Is government so large that it is

getting in the way of private sector-led growth?

But the facts do not support these assertions.

1,100

1,300

1,500

1,700

Jan

2008

 Regulations are not impeding business lending or investment.

Commercial and industrial loans outstanding, constant 2011 dollars (log scale)

Are Regulations Holding Back Growth?

MISCONCEPTIONS

Source: Federal Reserve, BEA.

7

U.S DEPARTMENT OF THE TREASURY

Percent change in real investment in equipment and software 11 quarters after NBER trough

$1,700 billion

2%

8%

19%

21%

21%

26%

28%

28%

+34%

38%

1980 Cycle 1957-58 Cycle

2001 Cycle 1969-70 Cycle

Average (excl 2007-09) 1960-61 Cycle 1973-75 Cycle 1990-91 Cycle 2007-09 Cycle 1981-82 Cycle

Jul 15, 2010

Wall Street reform enacted

+12%

($144b)

Since Oct 2010

Commercial and industrial loans

600

800

1,000

1,200

1,400

1,600

2007

Q1

 Regulations have not dampened corporate profits, even in the industries undergoing significant regulatory change, such as energy, health care, and finance

Corporate profits after tax, constant 2011 dollars (log scale)

Are Regulations Holding Back Growth?

MISCONCEPTIONS

Source: BEA, Barclay’s.

8

U.S DEPARTMENT OF THE TREASURY

S&P 500 Economic Sectors Index, trailing 12-month earnings per share

$1,600 billion

+57%

($570b)

Since 2009 Q1

After-tax corporate profits

-20 -10 0 10 20 30 40 50 60 70

Consumer Discretionary Industrials

Utilities Materials Telecommunications Services Information Technology Consumer Staples

Energy

Health Care

Financial

recession

recession

13

14

15

16

17

18

19

20

21

22

 From 2009 to the present, federal revenues relative to the economy have been at their lowest levels in 60 years.

Total federal revenues as a percentage of GDP (line, left axis)

Is a High Tax Burden Damaging Growth?

MISCONCEPTIONS

Source: OMB, BEA, NBER.

9

22 percent of GDP

Federal revenues

14.4%

of GDP

1950

15.4%

of GDP

2011

U.S DEPARTMENT OF THE TREASURY recession

 The President’s Budget proposes new revenues that amount to less than 1 percent of GDP.

Projected revenue raised in the President’s FY2013 Budget and projected cumulative GDP, Fiscal Years 2013 – 2022

How Large are Proposed Tax Changes?

MISCONCEPTIONS

10

CUMULATIVE

GDP

2013 - 2022

Total new revenue proposed in President’s FY2013 Budget, 2013 - 2022

<1% of GDP

 Letting the top two income tax brackets return to pre-2001 levels has a minimal impact on

small businesses with employees.

Projected revenue effect of reinstating 36 and 39.6 individual income tax brackets as proposed in the President’s FY2013 Budget, Fiscal Year 2013

Would Proposed Tax Changes Hurt Small Business?

MISCONCEPTIONS

11

Total income of high-income

filers in the top two brackets2

$1.2 trillion 13% of total income

Total income of high-income filers in the

top two brackets who own small

businesses with employees3

$400 billion 4% of total income

Small business income of high-income filers in the top two brackets who own small businesses with employees

$113 billion 1% of total income

New revenue4from small business income of

high-income filers in the top two brackets who

own small businesses with employees

$2.9 billion

<0.03% of total income

Total income1of all filers

$9 trillion

Source: Treasury analysis See Notes section for methodology. U.S DEPARTMENT OF THE TREASURY

1%

2%

3%

4%

5%

 Federal employment is at historic lows relative to the overall workforce.

Federal civilian employment as a percentage of the labor force*

Has Government Grown?

MISCONCEPTIONS

Federal civilian employment

1.8%

February 2012

* Periods after 1980 exclude temporary Census workers

12

recession

 Investors remain confident that the U.S government will meet its real fiscal obligations, as

demonstrated by…

5-year sovereign credit default swap prices

Is There Concern About the Size of Government?

MISCONCEPTIONS

Source: Bloomberg, Federal Reserve Bank of Cleveland, Treasury. U.S DEPARTMENT OF THE TREASURY 0

50

100

150

200

250

300

Germany

One-, five-, and ten-year U.S inflation expectations

-1 0 1 2 3

Jan 2009

France

United States

300 basis points

1-yr inflation expectations

10-yr inflation expectations

5-yr inflation expectations

3 percent

…low cost of insurance against default and…

1

…low inflation expectations.

2

13

NChart 1

Oil prices are West Texas intermediate crude oil spot prices

Chart 3

Regional sources

Euro Area: Statistical Office of the European Communities

Japan: Cabinet Office of Japan

U.K.: Office for National Statistics

U.S.: Bureau of Economic Analysis

“Euro Area” consists of the following 17 European Union member countries who have adopted

the euro (European Monetary Union): the 11 original members - Austria, Belgium, Finland,

France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain - and Greece

(from January 2001), Slovenia (from January 2007), Cyprus and Malta (from January 2008),

Slovakia (from January 2009) and Estonia (from January 2011)

Chart 5

“Private contribution to real GDP growth” defined as the sum of the contributions of real

personal consumption expenditures, real gross private domestic investment, and real exports to

overall annualized quarterly real GDP growth, in percentage points

Chart 10

1 “Income” defined as adjusted gross income

Chart 10 cont.

2 “High-income filers” are those who would be subject to the top two individual income tax brackets under the President’s FY2013 Budget proposal

3 “Small business owners” defined as filers a) with business income and deductions of less than $10 million, and b) who employ other individuals See Knittel et al, “Methodology to Identify Small Businesses and Their Owners”, Office of Tax Analysis Technical Paper 4, August 2011

4 “New revenue” includes revenues raised in Fiscal Year 2013 by reversing the EGTRAA/JGTRAA rate cuts on the top two individual income tax brackets to small business income of high-income filers who own small businesses with employees

U.S Department of the Treasury, Office of Tax Analysis calculations Revenue estimate excludes increased revenue that would come from the expiration of other upper-income EGTRAA/JGTRAA tax cut provisions such as those affecting itemized deductions, personal exemptions, qualified dividends, and capital gains

The calculation of the additional revenue from small business employers takes into account the variation among taxpayers in the importance of small business income Since the highest income classes pay most of the added tax but are less dependent on small employer income, the small employer share of the total tax increase is lower than the small business share of total income

U.S DEPARTMENT OF THE TREASURY