The

U.S. Economy
In Charts

U.S. DEPARTMENT OF THE TREASURY

February 2012

The Economy

1 Economic Growth I
Private sector employment has grown for 23 straight months.
Monthly private non-farm payrolls, seasonally-adjusted
Jan 12

The economy has grown for 10 straight quarters.

Annualized real GDP growth
2011 Q4

+257k

+3.0%

Private payrolls

+3.7 million
since Feb 10

+2.4% average growth

over past 10 quarters
Pre-crisis average (Dec 2001 Nov 2007)

Jan 09

2008 Q4

-839k
Jan 2008 '09 '10 '11 '12 2008 Q1

-8.9%
'09 '10 '11

Source: Bureau of Labor Statistics, Treasury calculations.

U.S. DEPARTMENT OF THE TREASURY

The Economy

2 Economic Growth II
The private sector is leading growth.
Annualized change in quarterly GDP (value-added) by sector, inflation-adjusted
+5 Private
Nonfarm businesses

AVERAGE ANNUALIZED GROWTH SINCE 2009 Q2 +3.3%

Government 0
Federal, state, & local

+0.0%

Government employment is shrinking.

-5
Monthly federal, state, and local non-Census payrolls Seasonally-adjusted 22,000

Whats happening?

Business output has grown at a 3.3% average annual rate since mid-2009. Governments contribution to the economy has declined, largely due to state and local budget cuts.
Jan 2012

-10
21,000 Jan 2008

-598k
since Jan 09

-15 2008 Q1

'09

'10

'11

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Treasury calculations.

U.S. DEPARTMENT OF THE TREASURY

The Economy

3 Economic Growth III

Overall business investment is growing
Gross private domestic business investment, inflation-adjusted, 2009 Q1 = 100
140 130 120 110 100 90 2008

Corporate profits are up.

Corporate profits after tax, inflation-adjusted, 2009 Q1 = 100
180 160 140 120

+29%

+76%

since 2009 Q1

since 2009 Q1

100 80 60 2008

'09

'10

'11

'09

'10

'11

as are investments in equipment & software.

Private investment in equipment and software, inflation-adjusted, 2009 Q1 = 100
140 130 120 110 100 90 2008

Exports have been a source of strength.

Gross exports, inflation-adjusted, 2009 Q1 = 100
140 130 120 110

+30%

since 2009 Q1

+23%
'09 '10

since 2009 Q1

100 90 2008

'09

'10

'11

'11

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Treasury calculations.

U.S. DEPARTMENT OF THE TREASURY

The Economy

4 Challenges Remain, More Work Ahead

Unemployment has fallen but remains high.
Total unemployed and unemployed 27 weeks or longer, seasonally-adjusted
Percent of labor force

Median household income has declined over the past decade.

Median household income, inflation-adjusted, 1967 to 2010
$ 60,000

10 8 6 4 2 0 Jan '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '67
Recessions

Total unemployment

55,000 50,000 45,000 40,000 1967 '72 '77 '82

1999: $53,252
Recessions

Long-term Unemployment (27 weeks+)

2010: $49,445

'87

'92

'97

'02

'07

Projections of growth in advanced economies have declined.

IMF World Economic Outlook projections of real GDP growth for advanced economies
5 percent 4 3 2 1 0 2010 Q1 Jan 2011 projection Jan 2012 projection

Housing has not yet recovered.

S&P/Case-Shiller U.S. national home price index, 2000 Q1 = 100

150

100

50

0 2011 Q1 2012 Q1 2013 Q1 1987 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 Q1 U.S. DEPARTMENT OF THE TREASURY

Source: Bureau of Labor Statistics, Census Bureau, International Monetary Fund, Standard & Poors.

Crisis Response

5 The Inherited Crisis

Private sector job losses
Change in monthly private non-farm payrolls Seasonally-adjusted
Jan 08

Economic growth
Annualized change in quarterly real GDP

Projections of inherited deficits

Projected 2001 deficit in January 2001 and 2009 deficit in February 2009
2.7% 2.7% of GDP surplus ($281 billion)

+1.3%

2009
as of Feb. 2009 -1.8%

2001
as of Jan. 2001 -3.7%

Jan 09

-839k

-8.9%
Q1 2008 Q2 2008 Q3 2008 Q4 2008

-9.2% 9.2% of GDP deficit ($1.3 trillion)

Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Treasury calculations based on Congressional Budget Office and Office of Management and Budget data.

U.S. DEPARTMENT OF THE TREASURY

Crisis Response

6 The Recovery Act

Average annual Recovery Act household benefit assistance to state from the Recovery Act and local governments
Inflation-adjusted 2011 dollars Billions of nominal dollars
Education Medicaid Other

Effect of the Recovery Act on employment

Estimates, 2009Q1 to 2011Q2
CEA (Model approach) CBO (Midpoint) IHS Global Insight

$1,731

$120 120 billion

100 Benefits $1,244 Tax cuts 80 3,000,000 60 2,500,000 2,000,000 40 $344 1,000,000 20 500,000 0 2009 2010 2011 2009 2010 2011 2009 Q1 '10 '11 1,500,000 Moody's Economy.com Macroeconomic Advisers

Source: Treasury calculations based on Bureau of Economic Analysis and Council of Economic Advisers data.

U.S. DEPARTMENT OF THE TREASURY

Crisis Response

7 The Financial Rescue

TARPs bank programs have generated positive returns.
Funds disbursed and recovered under TARP bank programs, Through February 2012

The projected overall cost of TARP has fallen dramatically.

Estimated lifetime cost of TARP, by date of projection $341b

+$14b
positive returns

$291b

-$273b
(-80%)
projected overall lifetime cost since August 09

$245b

$259b

Lifetime cost excluding housing funds1 Disbursed Recovered Aug '09 FY2010 Midsession Review Feb '10 FY2011 President's Budget Feb '11 FY2012 President's Budget

$68b
$22b Feb '12 FY2013 President's Budget

1 Unlike funds committed through TARPs investment programs, TARP funds targeted to help responsible homeowners avoid foreclosure were not intended to be recovered.

Source: Treasury calculations.

U.S. DEPARTMENT OF THE TREASURY

Crisis Response

8 The Auto Industry

Auto industry employment has grown since the rescue.
Total private payrolls in motor vehicles and parts (manufacturing and retail trade), seasonally-adjusted
Thousands of payrolls 2,450

Auto industry employment

+207,600
since June 09 2,400

2,350

2,300

2,250

Post-restructuring of GM & Chrysler after June 2009

Jan 2009 '10 '11 '12

2,200

Source: Bureau of Labor Statistics.

U.S. DEPARTMENT OF THE TREASURY

Fiscal Policy

9 Causes of Deficits Since 2001

Changes in deficit projections since January 2001
CBOs projected cumulative surpluses and actual cumulative deficits, January 2001 to August 2011
8 trillion $8

Bush Admin. policies -$7.0 trillion

through 2011

Cumulative Surplus

In January 2001, CBO projected cumulative surpluses would total $5.9 trillion through 2011.

Tax cuts -$3,000b

NOT DUE TO LEGISLATION1

29%
Wars in Iraq & Afghanistan -$1,400b Medicare Part D -$300b

Cost of Bush Admin. policies Instead, cumulative deficits have totaled $6 trillion.

59%

Other spending -$2,300b

(2)

Cumulative Deficit

(4)

Obama Admin. policies2 -$1.4 trillion

(6)

Cost of Obama Admin. policies2

12%

through 2011 Recovery Act -$800b

Dec 2010 Tax Law -$250b

Other spending & (8) tax cuts 2001 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 1 CBO terms these factors technical and economic. They include all changes not due to the cost of new legislation, including updates to economic and demographic projections. -$410b
2 Only reflects effect of policies, including temporary policies, through 2011. Does not reflect deficit reduction proposed in the Presidents FY2013 Budget going forward. Numbers may not sum due to rounding.

Source: Treasury calculations based on Congressional Budget Office data.

U.S. DEPARTMENT OF THE TREASURY

Fiscal Policy

10 The Presidents Budget

The Presidents Budget cuts the deficit and stabilizes the debt.
Federal budget deficits as a percent of GDP under the Presidents FY2013 Budget

8%

Baseline reflecting policies as of January 2011

6%

4%

2%

Deficit that stabilizes debt-to-GDP1

0%

Total deficit in the Presidents Budget

Deficit excluding interest in the Presidents Budget

-2% 2012 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

1 The deficit that stabilizes publicly-held federal debt as a percent of GDP depends on several fiscal and economic assumptions, including economic growth and the interest rates on Treasury securities. The Presidents FY2013 Budget calculates it as 2.8% of GDP in the medium term.

Source: Office of Management and Budget.

U.S. DEPARTMENT OF THE TREASURY

Fiscal Policy

11 The Size of Government, 1983 and 20101 22.1%

of Potential GDP2

22.4%
of Potential GDP2

1.9% 4.8% 2.5% 1.3% 3.5% 3.1% 3.9% 4.3%

Spending (Outlays)
Medicare, Medicaid, & other medical Interest on the debt

Revenues
Corporate Income Tax Other Revenues

16.4%
of Potential GDP2

1.0% 1.8%

14.0%
of Potential GDP2

Other mandatory Non-defense discretionary Social Security Defense discretionary Individual Income Tax Payroll (FICA) Tax

1.2% 1.4% 5.7% 5.6%

4.6% 4.6% In 2010, total federal spending made up about the same share of the economy as during the last severe downturn in 1983. But in 2010: Health care made up a larger share of the budget. Revenues were significantly lower. 7.9%

5.7%

5.8%

4.5%

1983

2010

1983

2010

1 1983 and 2010 are compared because they had similar-sized output gaps (the difference between potential and actual GDP as a percent of potential GDP): 6.4% and 6.2%, respectively. 2 Potential GDP is the full-capacity output of the economy.

Source: Treasury analysis of Congressional Budget Office and Office of Management and Budget data.

U.S. DEPARTMENT OF THE TREASURY

Fiscal Policy

12 Discretionary Spending1
Discretionary spending is now on a path to its lowest level since the Eisenhower Administration.
Security and non-security2 discretionary outlays as a share of potential GDP, historical and under the Presidents FY 2013 Budget
Percent of potential GDP

10%

8%

Total Security

Total Non-Security

6%

4%

2%
Projections under Presidents FY2013 Budget

0% 1962

'67

'72

'77

'82

'87

'92

'97

'02

'07

'12

'17

'22

1 Discretionary spending is all federal spending subject to annual appropriations by Congress. It includes most governmental administrative costs as well as some assistance programs. By contrast, mandatory programs such as Medicare, Medicaid, and Social Security have permanent authorization and so are not subject to annual Congressional appropriations. 2 Definitions of security and non-security based on the Presidents FY2013 Budget.

Source: Treasury analysis of Congressional Budget Office and Office of Management and budget data.

U.S. DEPARTMENT OF THE TREASURY

Fiscal Policy

13 Drivers of Long-Term Deficits

Over the long term, demands on federal resources for medical care will increase.
Projected non-interest spending by category, percent of GDP1
10 percent of GDP 9 8 7 6 5 4 3 2 1 2011 '16 '21 '26 '31 '36 '41 '46 '51 Other mandatory 16 percent of GDP 14 12 10 8 6 4 2 0 2011 2016 Social Security Discretionary Medicare & Medicaid

The Affordable Care Act has helped curb costs

Projected Medicare spending as a percent of GDP
12 percent of GDP 10 8 6 4 2 2011 projection
after the Affordable Care Act

2009 projection
prior to the Affordable Care Act

0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

although challenges remain.

Sources of projected federal spending on major mandatory health care programs and Social Security, 2011 to 2035.
Due to excess health care cost growth1 Due to aging In the absence of aging or excess health care cost growth
2021 2026 2031

1 Presidents FY2013 long-term projections, base case. 2 CBO defines excess health care cost growth as growth in health care costs that exceeds the growth rate of GDP per capita.

Source: Office of Management and Budget, Congressional Budget Office, Medicare trustees.

U.S. DEPARTMENT OF THE TREASURY