The sobering economic report Wednesday from the nonpartisan Congressional Budget Office should not surprise Floridians struggling to hold on to their jobs and homes. It is not a pretty picture, and even more depressing, it is not projected to get brighter for years. That is why it is imperative that President Barack Obama and congressional Republicans return to work after Labor Day and compromise on an ambitious plan to create jobs and further reduce the federal deficit with a combination of spending cuts and more revenue.
There are a few glimmers of hope in the CBO report. The projected $1.3 trillion budget deficit for 2011 is $116 billion lower than March's projection, and it is down slightly from the previous two years. The budget deficits would decline by $3.3 trillion over the next decade, a step in the right direction even if deficit spending would continue. But even these projections are rosier than the political realities of Washington.
The reason? The projections assume all of the Bush-era tax cuts expire at the end of next year; the payroll tax reduction disappears; fixes to ease the impact of the alternative minimum tax end; and expanded unemployment benefits run out. That scenario is not likely to happen, and there are good reasons why it shouldn't. But the result of extending those policies would be dramatically higher federal deficits, so that is not a viable option either.
As the CBO points out, the problem is broader than the federal budget balance sheet. It expects the economic recovery will continue to be frustratingly slow, with the national unemployment rate of 9.1 percent declining to 8.5 percent by the fourth quarter of 2012 and remaining above 8 percent through 2014. While inflation will continue to be low, the CBO "expects the pace of growth to be restrained for several more years by the lingering effects of overbuilding, the financial crisis and the recession.'' None of this adds up to a flashy re-election brochure for Obama, but neither does it justify the Republicans' slash-and-burn approach to federal spending.
Republican reaction in Washington to the CBO report was predictable. They called the federal stimulus a failure, when most economic studies conclude it had a positive impact in saving jobs and mitigating the recession. They demanded deeper budget cuts, when those cuts should be joined with more revenue. But they are finally picking up on Gov. Rick Scott's mantra and the top-ranked issue in public opinion polls: jobs, jobs, jobs.
As Scott pointed out in last week's visit to the St. Petersburg Times editorial board, Florida is not going to dramatically lower its 10.7 percent unemployment rate by luring large employers from other states. More jobs are going to be created by businesses that are already here. Eliminating Florida's corporate income tax and cutting regulations, as the governor proposes, are not going to trigger significant job growth. Sweeping federal tax reform, public investment and more access to capital for businesses that want to expand would have a greater impact.
The nation did not get into this financial mess overnight, and it will take time to climb out of it. But there can be a brighter future than the CBO report suggests if the president and congressional Republicans compromise on a bold plan to create jobs and reduce the federal deficit — and stop fighting the old battles.