WASHINGTON, Aug. 24 (UPI) -- The Congressional Budget Office said Wednesday U.S. economic growth will stay "well below" its potential for several years.
The CBO said in its Budget and Economic Outlook Update the $1.3 trillion budget deficit for 2011 is the third-largest shortfall in 65 years -- eclipsed only by the deficits of the two previous years. The CBO said the deficit, amounting to 8.5 percent of the nation's gross domestic product, is largely the result of the prolonged financial crisis and recession.
"Although economic output began to expand again two years ago, the pace of the recovery has been slow, and the economy remains in a severe slump," the CBO said.
"Recent turmoil in financial markets in the United States and overseas threatens to prolong the slump. CBO expects that the recovery will continue but that real [inflation-adjusted] GDP will stay well below the economy's potential -- a level that corresponds to a high rate of use of labor and capital -- for several years."
The report said real GDP will increase by 2.3 percent this year and 2.7 percent in 2011.
"Under current law, federal tax and spending policies will impose substantial restraint on the economy in 2013, so CBO projects that economic growth will slow that year before picking up again, averaging 3.6 percent per year from 2013 through 2016," the report states.
