Recent U.S. Economic Gr

MAY 2012

In 
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

Japanese 

earthquake/tsunami

Debt 

European debt c

Oct. 2010

Greece, Ireland Portugal 

bond spreads widen 

1

Source: Bureau of Economic Analysis, Wall Street Journal. 

2008/09 financial crisis

Jul. 20

Greek, Irish, and Portug

spreads s

Au

Oi

below 

High oil pric

 Despite the worst financial crisis since the Great Depression and a series oaftermath, the economy has gradually strengthened since mid-2009, though 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 Q2

3.8%

2010 Q3

2.5%

2010 Q4

2.3%

2011 Q1

0.4%

2011 Q2

1.3%
-15

-10

-5

0

+5

+10

Q1

2008

Q2 Q3 Q4 Q1

2009

Q2 Q3 Q4 Q1

2010

Q2 Q3 Q4 Q1

2011

Personal consumption expendituresGross private domestic investmentExportsImportsGovernment consumption and grossinvestmentTotal GDP growth

+4.3 +3

-6-4-2

0

+2+4+6+8

 U.S. economic growth has been led by consumption, private sector investPercentage point contribution to real quarterly GDP growth, by component

The Components of Growth Since 2009GROWTH SINCE 2009

Source: Bureau of Economic Analysis.

2

Cumulative contribuby component 
90

92949698

100102104

Q1

2008

Q2 Q3 Q4 Q1

2009

Q2 Q3 Q4 Q1

2010

Q2 Q3 Q4 Q1

2011

Q2 

 Growth in the U.S. has outpaced that of other advanced economies affecte

financial crisis.

Real GDP, 2008 Q1 = 100

International GrowthGROWTH SINCE 2009

Source: Regional sources (see Notes section).

3
-8%

-6%-4%-2%

0%2%4%

2006

Q1

'07 '08 '09 

0

1020304050607080

'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 sHousehold net worth, inflation-adjusted (constant 2011 dollars)

Wealth, Savings, and Private DemandUNWINDING THE CRISIS

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

4

Year-on-year percent change in real GDP and 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 

GD

recession

recession
0.25

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

 -300 -250 -200 -150 -100

 -50

0

+50

+100

2007

Q1

'08 '09 '10 '11 

State 

gov

cont

real G

(r

-15%-10%-5%0%+5%

-3,000-2,000-1,000

0

+1,000

'07 '08 '09 '10 '11 '12

Private sector job growth (Thousands, left axis)

Private contribution to 

real GDP growth1

(right axis)

 State and local governments have been forced to cut deeply and shed jobs 

challenges... 

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

Fiscal Drag

Source: BLS, BEA. 

Change in state 

and local 

employment

(left axis)

State a

real GDP growth

+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 

MISCONCEPTIONS

6

Some analysts have asserted that the follofactors have been impediments to growth1.Regulations. Have increased regulatio

regulatory uncertainty been a major factholding back growth?

2.Taxes. Is a high tax burden – or fears o

tax burdens – impeding growth?

3.Government. Is government so large th

getting in the way of private sector-led g

But the facts do not support these asserti
1,100 

1,300 1,500 1,700 

Jan

2008

'09 '10 '11 '12

 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

Percent change in real investment in equipmNBER trough $1,700 billion

2%

8%

1980 Cycle

1957-58 Cycle

2001 Cycle

1969-70 Cycle

Average

(excl. 2007-09)

1960-61 Cycle1973-75 Cycle1990-91 Cycle2007-09 Cycle1981-82 Cycle

Jul. 15, 2010Wall Street reform enacted

+12%

($144b)

Since Oct. 2010

Commercial 

and industrial 

loans
600 

800 

1,000 1,200 1,400 1,600 

2007

Q1

'08 '09 '10 '11

 Regulations have not dampened corporate profits, even in the industries u

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

S&P 500 Economic Sectors Index, trailing 12

$1,600 billion

+57%

($570b)

Since 2009 Q1

After-tax 

corporate profits

-20-10

0

10203040506070

'05 '06 '07 '08 

Consumer DiscretionaryIndustrialsUtilitiesMaterialsTelecommunications ServicesInformation TechnologyConsumer Staples

recession
12

13141516171819202122

1946 '51 '56 '61 '66 '71 '76 '81 '86 '91 '96 

 From 2009 to the present, federal revenues relative to the economy have blevels 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

recession
 The President’s Budget proposes new revenues that amount to less than 1 

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

Source: Office of Management and Budget. 

CUMULATIVE

GDP

2013 - 2022
 Letting the top two income tax brackets return to pre-2001 levels has a mi

small businesses with employees.Projected revenue effect of reinstating 36 and 39.6 individual income tax brackets as proposed in the President’s FY2013 Budge

Would Proposed Tax Changes Hurt Small BuMISCONCEPTIONS 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 highincome filers in the top two 

brackets who own small 

businesses with employees

$113 billion

New revenue 1% of total income 4 from 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

To

Source: Treasury analysis. See Notes section for methodology. 
0%

1%2%3%4%5%

'48 '52 '56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 

 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

Source: OMB, BEA, BLS. 

Federal 

civilian

employment

* Periods after 1980 exclude temporary Census workers.

12

recession
 Investors remain confident that the U.S. government will meet its real fisca

demonstrated by...5-year sovereign credit default swap prices

Is There Concern About the Size of GovernmMISCONCEPTIONS

Source: Bloomberg, Federal Reserve Bank of Cleveland, Treasury. 

0

50

100150200250300

'10 '11 '12

Germany

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

-1

0123

Jan

2009

'10 

France

United States

300 basis points

1-yr inflation expectations

10-yr inflationexpectations

5-yr infl

3 percent

...low cost of insurance against default and...

1

13
N Notes

Chart 1Oil prices are West Texas intermediate crude oil spot prices.Chart 3Regional sourcesEuro Area: Statistical Office of the European CommunitiesJapan: Cabinet Office of JapanU.K.: Office for National StatisticsU.S.: Bureau of Economic Analysis“Euro Area” consists of the following 17 European Union member countries who have adoptedthe 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 realpersonal consumption expenditures, real gross private domestic investment, and real exports tooverall annualized quarterly real GDP growth, in percentage points.Chart 101 “Income” defined as adjusted gross income.

Chart 10 cont.2 “High-income filers” are those who would be subbrackets under the President’s FY2013 Budget propos3 “Small business owners” defined as filers a) with than $10 million, and b) who employ other indivi

Identify Small Businesses and Their Owners”, Office 2011.4 “New revenue” includes revenues raised in EGTRAA/JGTRAA rate cuts on the top two individuincome of high-income filers who own small businessU.S. Department of the Treasury, Office of Tax Analysincreased revenue that would come from the expiratiotax cut provisions such as those affecting itemized ddividends, and capital gains.The calculation of the additional revenue from small variation among taxpayers in the importance of sincome classes pay most of the added tax but are lthe small employer share of the total tax increase is lincome.