The Federal Reserve and Congress are set to continue their contentious discussions on the pace and impact of monetary policy in the months ahead.
But a new report from the nonpartisan Congressional Budget Office (CBO) shows that the country is facing a possible collapse of economic activity in 2020 if policymakers continue to slow the pace of economic growth.
In a statement, CBO Director Douglas Elmendorf said that the 2018 economic outlook for 2020 “has not changed significantly.”
He added, however, that the nation is “at risk of an extended economic downturn that could cause significant disruptions in the lives of millions of Americans.”CBO also released a new, more detailed economic outlook, forecasting that by 2026, the nation will have lost roughly one-third of its economic activity and will see an economic contraction of between 3.1% and 4.2%.
The recession will hit hardest in the Midwest, the South, and the West, where growth will be weaker than it is today.
But if policymakers do not slow economic growth to a manageable level by then, the economic impact will be even greater, Elmendorfer said.CBO forecasts that the average person will lose about $5,000 annually.
The average worker, by contrast, will gain about $30,000.
The difference between the two groups of workers will have a substantial impact on the economy’s future economic health.
The CBO report also forecasts that between 2022 and 2023, the U.S. economy will lose more than $2 trillion in annual gross domestic product, or about 14.7% of GDP, as people lose their jobs and businesses close down.
The CBO also projects that between 2021 and 2024, the United States will see a “very sharp decline in the value of the dollar” as it loses about 7.6% of its GDP.
But even if economic growth does not accelerate to the same level as it has in recent years, Elmenderfer warned that the U,S.
will be in a “much more difficult position” if it does not cut back on spending and raise taxes.
He added that the tax burden will fall even further, especially on the middle class and those making less than $30K a year.
In an interview with CNBC on Thursday, Elmierffed, the former head of the Congressional Budget Bureau, predicted that the next downturn could hit the middle classes the hardest.
He said that people are already paying too much in taxes, which could lead to a recession that is more damaging than the one in 2016.
In the meantime, Elmemberf said, he hopes that lawmakers will make the right choices on how to address the economic impacts of the next recession.
“We’re going to have to look to the next decade to see if we can manage a situation that is better than it was,” he said.
“The good news is that we have some good ideas on how we’re going about that, and there are some ideas that we’re seeing through the legislative process,” Elmendorff said.