fear the path that we are speeding down will only make the situation worse we're now debating this summer about to create a brand new entitlement program before the other three that are exploding just within the next decade at every during the second half of this year but the hardships caused by the recession will persist for some time the growth in output later this year and next year is likely to be sufficiently weak point rate will probably continue to rise into the second half of next year and above ten percent economic growth over time will ultimately bring unemployment rate back down to the neighborhood of five percent seen before this downturn began but that process is likely to take a number of years on the positive side the fiscal stimulus provided by the federal government is now beginning to boost the economy and financial markets show clear signs of improvement since the fall and winter moreover the sharp productions seen manufacturing production will keep him in t leaner levels than would have occurred otherwise so that upturns in sales when they come will lead to faster and larger increases in output however many factors will temper the strength of the recovery the loss of household we of financial institutions persistently weak growth in the rest of the world a surplus of housing units and low utilization of manufacturing capacity how much those factors will dampen the recovery is uncertain they may be overcome relatively quickly by the jumpstart provided by the stimulus and improvements in consumer and business confidence or they may cause the economy to slump again next year at the effects of the stimulus begin to wane recently released data are consistent with c b s forecast in march the gross domestic product will bottom out this year indeed why the majority of economic forecasters share that view however c v s assessment of developments in the financial system and the non financial parts of our economy and other economies suggest that the initial stages the economic recovery are likely to be more tepid than we had earlier projected ceo's march forecast of roughly three percent growth in real g d p in two thousand and ten is more optimistic than the current consensus as is the agency's march were cast for a peak unemployment rate of about nine and a half percent we are now beginning the process of updating our previous forecast chart shows the confidence region around our mark forecast a real g the darker areas are the more likely outcomes and the progressively lighter areas are less likely outcomes uncertainties especially great in economic forecasting though around turning points and in unfamiliar conditions such as the current financial crisis were over even if the economy returns to positive growth this year as we and almost all other forecasters expect the loss in output in income during this downturn will be as shown in the next slide depicting our march forecast the difference between the economies actual and potential output what could be produced of all factors for production labor and capital were being fully utilized will average seven percent of g d p this year and next that's about a trillion dollars per year of lost output and the gap enough it will not close until two thousand and thirteen based on current information our next forecast is likely to show even larger shortfalls now but over the next two years by this measure the current recession and its aftermath will be the most severe economic downturn of the post war period the persistence of high unemployment in our forecast does not stem from  failure of fiscal stimulus we expect that the stimulus legislation will boost g d p a little more than dollar per dollar of reduced tax collections and increase outlays however as large as the stimulus package is the contraction underlying private demand is far larger so the stimulus will offset only part of the contraction let me conclude with a few words about the budget outlook most experts believe that larger budget deficits are appropriate during recessions because higher spending and lower taxes can bring the levels of resource use and output closer to the economies potential from that perspective the extremely large deficit this year roughly one point seven trillion dollars or nearly twelve percent of p and c d s market projection serves a purpose however most experts also believe persistent large budget deficits reduce capital cumulation and thereby slow the growth of output and incomes in the medium and long run thus the large deficit that we project for the year after the economy has returned to full employment so in the next slide are more worrisome moreover the sharp increase in debt this year and in the next few years the last slide please raises the risk that investors might lose confidence in government debt as a safe haven this risk heightens the importance of putting the budget on a sustainable path as the economy returns to full employment thank you have to take your question half and three quarters percent to the end of this year and that reflects the initial burst of tax reductions and spending increases but the effect wanes over time as the stimulus package year but less so at the end of next year than this year and even less so than that of two thousand and eleven that's really a design feature of the stimulus package was to provide the biggest boost up front but the effect of the advantage is that as those  effect wanes the economy will slow again unless private demand picks up and of course the expectation in the package what the private to me and would pick up we are not forecasting as our basic outlook in the economy but as i said the testimony that continued growth depends on private demand coming up as the stimulus package wanes and that is i think a reasonable forecast and to get the best yes but i would say it's not as the deficit per se it is the recline the deficit from this year to next in our forecast reflects partly the strength of the economy and also as i said some waning of the effects of the stimulus so the demand would build up over time that's what we've seen in past recoveries but the timing of that increase in private demand is very uncertain and that and that raises the question about whether the growth overall growth not faltering still takes a long time to catch up for the weak growth last year and this year that catching up process bringing the level of output back up to the potential level of output that corresponds to bring the unemployment rate down from its current level around nine percent and we bring that back down toward the five percent which is a more standard outside of recession and that's the process we think will take a number of years unusual circumstances when decisions are made in real time hindsight offers lessons or information that would have been helpful if it had been known at the time but the recovery package as i said of the fourth quarter of this year and then and then tapering off to some extent next year and even more in two thousand and eleven the effects of the tarp and the financial and the actions the federal reserve are harder to quantify and count the dollars that have moved but the effects on are harder to quantify but again i think a very widely held view that the aggressive actions in the fall and winter helped the financial system to step back from the edge of the abyss and has had those actions have brought down household borrowing rates particularly mortgage rates that brought down corporate borrowing rates and that  supply of credit has helped the economy in a very important ways the uncertainty going forward that i highlighted in our forecast is whether that help is enough to make the economy strong again is one of my colleagues said to me those actions have stabilized to help the financial system at a low level of stable is a lot better than where it looked like it might be only a few months ago but the fact is stabilized a low level of hell discussed that it was difficult to increase government outlays in the categories of the ways that were being proposed overnight and some of the tax changes are having a larger initial  the spending changes take a little longer and you're seeing that now in the numbers it's very early to judge whether our assumptions were precisely right we didn't forecast always on a monthly basis and we're really only a few months to package but economy in different ways with different speeds so the details matter a lot about the sorts of tax cuts of the sorts of spending increases but a broad generalization would be the tax cuts work more storm or we're close to having enough capital and are now making plans to raise capital but i should emphasize the uncertainty there these banks have trillions of dollars of assets and even a small misjudgment in the value of those assets under a given economic scenario can have a world a different kind of capital they need to raise having said that i think the consensus view is that there's a lot more losses to be realized but that the losses that are losses can be realized over time so a lot of the media losses have been realized and the consensus view is that the losses they are going to suffer to a large extent by earnings they will have over the next several years and that they will world now entering our country now certainly than there is demand for and there is a lot of concern about the effects of that matters directly for construction but also on the financial side  and it's not even the it's not just a matter of whether people can meet their current interest but whether they will be able to financing to rollover loans as they come do given that there's been a tightening of credit standards exposure banks have you seen or done any analysis on kind of exposure to that segment of the banking system and just give me kind of an assessment of your risk is small medium sized banking system should that shoes drop  could surpass two hundred billion dollars that's a good deal of money it's spread among a large number of banks on the left these are not city groups and bank of america so it's losses that level would likely exceed the revenue that those banks would otherwise take in that there would be no reduction in their capital over time and i think a number of those banks might find themselves with capital low enough that regulators would become very concerned with not trying to calculate the this and i think the judgment of most economists is that the increase in interest rates are likely to to be on till we come out of the slump but the factors force as you describe i think are the pressures which are that people will get greater risk tolerance will be more demand for funds by the private sector as the economy improves and that will tend to divert investor interest i wonder if we're not of behind great britain with respect to the state of our finances and what i mean when i say that is  suggests very clearly that that is not a path that will to most americans like a continuation of what is happening now what is the path that would feel like tightening that's what requires to get to that dark line which is you see we use the debt as a share of g d p above what is in at any point in my lifetime the top line is our estimate of the president's budget released in march that shows the debt to g d p rising because the annual deficits exceed the growth rate of the economy and it poses the risk that you raise congressman that at some point people may decide that the u s is not the safest no i don't think that we are that close to that point right now at the moment the u s government can borrow money at probably low interest rates on the there are special factors and those factors will wane as we discussed it's very difficult to assess how quickly they will wane and there can be a range of views about that i think in sharply and quickly than you thought possible because maybe a situation like that hard to know when sentiment will turn but it could turn quickly and that's a rest now on your question about the new entitlement naturally given that picture policy changes that make the medium and long run budget deficit worse increase that risks that we just discussed whether a particular piece of legislation does that is one that will try to judge when the legislation is constructed  i don't think in principle it's a matter of whether you're paying for something in little pieces or big pieces it's more a question that's what you suggested about the permanence of various pieces of this ability and that's a difficult thing to judge we don't produce budget estimates that go out beyond ten years normally i think that the question you're getting at is something to be paid for within ten years and not beyond that and we don't normally produce formal estimates of that i think it's appropriate for you and the other members to judge yourselves what you think the political dynamic may be around certain changes that are being made but i would i would i do want to say one quick positive word on behalf of changes in medicare reimbursements med pac congressional established agency studies very closely with a great deal of rigor reimbursements in medicare and the cost the providers receive and we don't duplicate that work but we have to measure spectra what they do i think in the overnight health care does not and in that sense can be less urgent next year will be much like this year but in fact the inertia in the way the system works is viewed by most analysts as an argument inaction that the sorts of thoroughgoing changes that are desirable in the health care system in the views of most experts will not happen overnight and one needs to therefore get started  most analysts will tell you the reason these thoroughgoing changes are needed in the views of most analysts is not just that health care costs are rising but that a lot of the money that is being spent on health care is  viewed by experts as not contributing that much to people's health and one of the most dramatic examples of this is that the amount of money that medicare spends in different regions of the country per patient after controlling for differences in their ages and other aspects of their physical conditions and after controlling for differences underlying cost of living medicare will still spend much more twice as much in some areas the country as in others and but people don't seem to be any healthier in the areas where more money is being spent so there's a widespread view that a lot of money going into the healthcare system is not being used very effectively in terms of producing good health outcomes and that  with a rapidly growing share of the economy devoted to health care that many people believe that urgent action is needed both on behalf of the private in the private sector and for the government budget and but in the budget  nobody who started the problem disputes the fact that expanding health insurance coverage to number of additional american could be done without spending federal money i think nobody disputes the fact that there could be changes in the way we run our current federal health programs medicare particular no way that would save money and as i suggested as a balancing of those actions  deficits outside of recessions are damaging to a country's long economic prospects and i don't think anybody has actually defended those deficits over the ten years as a virtue and there is rate of decline has lessened so we're going downhill but there are signs that we're that we're reaching a leveling out and of course people who know it sometimes it goes out and then things happen sometimes you turn up the other recession now on this chart i noticed that that rollercoaster drop didn't begin on january twenty second one two thousand and nine when president barack obama was sworn in it actually i think the aren't able to pay for their insurance or get the coverage they want some americans don't even have any of that whatsoever and the president said let's move some we're not prepared to move we'd rather have status ask if we could be smart the way i think we were in this economic recovery package to help with the recession corralling the cost of health care to help us get out of this economic recession and also help us  massive budget deficit we've been reducing the past the federal spending on health costs is absolutely essential to bringing down the deficit in the long run if you look at the path of the deficit under that we estimate for the president's budget tax revenue is about the same share of g d p there has been on average historically in this country all spending apart from social security medicare and medicaid by particular by the federal government this was a key metric by which the incoming administration wished to measure the results of stimulus later in the report the authors provided chart from which we could visualize the outcomes our economy increase employment by point nine million to two point three million but now we've had a little over three months to evaluate the impact of this legislation so far the results have not been all that promising let's look at the chart to possibilities but they were wrong and the projections of where we would be even with it they were wrong and they were aware they would be without it they were wrong and where we are right now having done it and spent almost eight hundred billion dollars outside out the door and actually in the ground so the seamless legislation include both the revenue and spending provisions on the estimate that we formed last winter and i had in front of the letter to senator grassley in march we estimate that about three quarters of the total amount of money tax cuts and spending increases would have flowed out by the end of fiscal year two thousand and ten which is next september so three quarters out by dan so the spending part as i look just at the fourth quarter on a fourth quarter basis the biggest effect is this year and then it means next year we actually look at this on a quarterly frequency chart with more columns we find a little more effect in the first half of next year and then actually shows if you look at you can see the forecast these are private sector forecasts something called the blue chip which surveys private forecasters emissions that increase in price is created by the cap the limits imposed will raise the price of products that embody a lot of carbon emissions and is by raising the price of those products that businesses and households will change their behavior develop new technologies in ways that economize on carbon emissions that's the point of that sort of plan when the government sets this cap and then has a set of allowances to distribute is holding something of great value because the ability to emit emissions will be valuable when the and distribution of those allowances matters critically for the distributional effects of the cap and trade plan if you give an allowance to a business then it can  will pass that price along in general to customers giving an allowance with no strings attached is not prevented from raising the price it doesn't ensure that it continues to hire the workers hiring to do the production is producing it's just imposing caps on their emissions or taxes or establishing cap and trade systems or in other ways moving down this path but i think again it is not controversial that other countries would need to be brought into such a system put the price on carbon emissions and don't get other countries on board or do some adjustments at our border to address that differential or do anything else to help those manufacturers then they would be a disadvantage i'm trying to suggest here there ago expects total employment to be only modestly affected by a cap and trade program to reduce greenhouse gas emissions and we go on to explain that except during recessions of course most americans who are interested in working can find a job and that's a very desirable feature of our labor market economic system the biggest effects of cap and trade are felt regionally and in particular nature of trying to limit carbon emissions is trying to change the production structure of the economy and some jobs are lost and some jobs are created and it's the process of helping work for communities from one world th the loss last month was very large initial claims for unemployment insurance for me quite high including this morning's data longer that persists and the more that drains income from households the wors the economic prospects are and you also raise that i think a different important issue which is that these are aggregate numbers economy as a whole that is the distribution of income of course has become much whiter over the last several health costs i think is a very grim picture and under that we are in the process right now of producing a formal analysis of the economic effects the president's budget plan to release next month overall weakness in private demand in house and business spending is being offset to some extent by greater government spending lower taxes and that most experts would have said was the role of the school policy same time  and i think most experts would say that one needed the combination of actions to address the different aspects of the a gambling problem i think further actions at this point you know the immiseration is trying to implement a plan to reduce mortgage foreclosures analysts have wrestled now for two years with what one might do and a half at least one might do on the housing foreclosure front and it is a very difficult problem to solve and it's difficult for various reasons including particularly that underwriting standards the stands for getting into housing became so lax that there are unfortunately a number of people who are in houses they cannot reasonably afford and they were counting on appreciation or other good things to happen that are not happening so not everybody who is in the house can plausibly stay in it were over among those who with some amount of help might be able to stay in the house in a way that might be viewed as socially beneficial helping them also changes the incentives of all the other people who are currently struggling but meeting their around nine and a half percent if we were writing down a new forecast today we would put off that we would raise it so that we would now currently we expect the uncertainties that that's around this but we think it will be a slow painfully slow recovery because there is still a substantial overhang of housing because the financial system although it has crawled back from the edge of the abyss is still in a weakened state because households aloft a lot of well to house prices and stock prices and also be pulling back on their spending because economies around the world enough but the man for our products for me and all those