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How is the US economy going to look in 3 to 5 years?

The Congressional Budget Office (CBO) submitted an in-depth nonpartisan analysis for the U.S. Congress in its January 26, 2015 report, The Budget and Economic Outlook: 2015 to 2025, that projected the U.S. economy will grow at a solid pace over the next few years – a gross domestic product (GDP) increase of 2.5% annually until 2018.

Its projection came from analyzing economic activity as it is tied to current laws in the U.S.

While the CBO report is comprehensive, it does not take into account the significant emerging changes in medicine, the female economy, the millennial generation, and the next POTUS; all of which will contribute positively to an economy that will be stronger than CBO’s anticipation of 2.5% solid growth.

First let us review a summary of CBO’s report then move on to look at the factors that will substantially contribute to a robust U.S. economy.

Summary of CBO’s The Budget and Economic Outlook: 2015 to 2025 report.

Economic Growth Over the Next Few Years

The federal budget deficit, which has fallen sharply during the past few years, is projected to hold steady relative to the size of the economy through 2018. Beyond that point, however, the gap between spending and revenues is projected to grow, further increasing federal debt relative to the size of the economy—which is already historically high.

Those projections by CBO, based on the assumption that current laws governing taxes and spending will generally remain unchanged, are built upon the agency’s economic forecast. According to that forecast, the economy will expand at a solid pace in 2015 and for the next few years—to the point that the gap between the nation’s output and its potential (that is, maximum sustainable) output will be essentially eliminated by the end of 2017. As a result, the unemployment rate will fall a little further, and more people will be encouraged to enter or stay in the labor force. Beyond 2017, CBO projects, real (inflation-adjusted) gross domestic product (GDP) will grow at a rate that is notably less than the average growth during the 1980s and 1990s.

Rising Deficits After 2018 Are Projected to Gradually Boost Debt Relative to GDP

CBO estimates that the deficit for this fiscal year will amount to $468 billion, slightly less than the deficit in 2014 (see the table below). At 2.6 percent of GDP, this year’s deficit is projected to be the smallest relative to the nation’s output since 2007 but close to the 2.7 percent that deficits have averaged over the past 50 years.

Although the deficits in CBO’s baseline projections remain roughly stable as a percentage of GDP through 2018, they rise after that. The deficit in 2025 is projected to be $1.1 trillion, or 4.0 percent of GDP, and cumulative deficits over the 2016–2025 period are projected to total $7.6 trillion. CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year—more than twice what it was at the end of 2007 and higher than in any year since 1950 (see figure below). By 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.


In CBO’s projections, outlays rise from a little more than 20 percent of GDP this year (which is about what federal spending has averaged over the past 50 years) to a little more than 22 percent in 2025 (see figure below). Four key factors underlie that increase:

  • The retirement of the baby-boom generation,
  • The expansion of federal subsidies for health insurance,
  • Increasing health care costs per beneficiary, and
  • Rising interest rates on federal debt.

Consequently, under current law, spending will grow faster than the economy for Social Security; the major health care programs, including Medicare, Medicaid, and subsidies offered through insurance exchanges; and net interest costs. In contrast, mandatory spending other than that for Social Security and health care, as well as both defense and nondefense discretionary spending, will shrink relative to the size of the economy. By 2019, outlays in those three categories taken together will fall below the percentage of GDP they were from 1998 through 2001, when such spending was the lowest since at least 1940 (the earliest year for which comparable data have been reported).


Revenues are projected to rise significantly by 2016, buoyed by the expiration of several provisions of law that reduced tax liabilities and by the ongoing economic expansion. In CBO’s projections, based on current law, revenues equal about 18½ percent of GDP in 2016 and remain between 18 percent and 18½ percent through 2025. Revenues at that level would represent a greater share of the economy than their 50-year average of about 17½ percent of GDP but would still be less than outlays by growing amounts over the course of the decade. Revenues from the individual income tax are expected to rise relative to GDP—mostly because people’s income will move into higher tax brackets as income gains outpace inflation, to which those brackets are indexed. But those increases are expected to be offset by reductions relative to GDP in revenues from the corporate income tax and other sources.

Changes From CBO’s Previous Budget Projections

The deficit that CBO now estimates for 2015 is essentially the same as what the agency projected in August. CBO’s estimate of outlays this year has declined by $94 billion, or about 3 percent, from the August projection because of a number of developments, including higher-than-expected receipts from auctions of licenses to use the electromagnetic spectrum for commercial purposes. But CBO’s estimate of revenues has dropped almost as much—by $93 billion, also about 3 percent—mostly because of the enactment of legislation that retroactively extended a host of expired tax provisions through December 2014.

Over the 2015–2024 period, deficits are now projected to total about $175 billion less than CBO’s August estimate for that period. The current projections of revenues and outlays for those years are both lower than previously estimated, outlays a little more so.

The Longer-Term Outlook

When CBO last issued long-term budget projections (in July 2014), it projected that, under current law, debt would exceed 100 percent of GDP 25 years from now and would continue on an upward trajectory thereafter—a trend that could not be sustained. (The 10-year projections presented here do not materially change that outlook.) Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments; restraining economic growth in the long term; giving policymakers less flexibility to respond to unexpected challenges; and eventually heightening the risk of a fiscal crisis.

Economic Growth Over the Next Few Years

In CBO’s estimation, increases in consumer spending, business investment, and residential investment will drive the economic expansion this year and over the next few years. The growth in those categories of spending will derive mainly from increases in hourly compensation, rising wealth, the recent decline in crude oil prices, and a step-up in the rate of household formation (as people are more willing and able to set up new homes). As measured by the change from the fourth quarter of the previous year, real GDP will grow by about 3 percent in 2015 and 2016 and by 2½ percent in 2017, CBO expects (see figure below).

The Degree of Slack in the Economy Over the Next Few Years

The difference between actual GDP and CBO’s estimate of potential GDP—which is a measure of slack for the whole economy—was about 2 percent of potential GDP at the end of 2014. During the next few years, CBO expects, actual GDP will rise more rapidly than its potential, gradually eliminating that slack. For the labor market in particular, CBO anticipates that slack will dissipate by the end of 2017. By CBO’s projections, increased hiring will reduce the unemployment rate from 5.7 percent in the fourth quarter of 2014 to 5.3 percent in the fourth quarter of 2017, which is close to the expected natural rate of unemployment (that is, the rate arising from all sources except fluctuations in the overall demand for goods and services). That increased hiring will also encourage more people to enter or stay in the labor force, boosting the labor force participation rate (which is the percentage of people who are working or actively looking for work).

Economic Growth in Later Years

The agency’s projections beyond the next few years are not based on estimates of cyclical developments in the economy, because the agency does not attempt to predict economic fluctuations that far into the future; instead, those projections are based on estimates of underlying factors that affect the economy’s productive capacity.

For 2020 through 2025, CBO projects that real GDP will grow by an average of 2.2 percent per year—a rate that matches the agency’s estimate of the potential growth of the economy in those years. Potential output is expected to grow much more slowly than it did during the 1980s and 1990s primarily because the labor force is anticipated to expand more slowly than it did then. Growth in the potential labor force will be held down by the ongoing retirement of the baby boomers; by a relatively stable labor force participation rate among working-age women, after sharp increases from the 1960s to the mid-1990s; and by federal tax and spending policies set in current law.

Inflation and Interest Rates

The elimination of slack in the economy will eventually remove the downward pressure on the rate of inflation and on interest rates that has existed for the past several years. By CBO’s estimates, the rate of inflation as measured by the price index for personal consumption expenditures will move up gradually to the Federal Reserve’s goal of 2 percent, hitting that mark in 2017 and beyond. Interest rates on Treasury securities, which have been exceptionally low since the recession, will rise considerably in the next few years, CBO expects, but remain lower than they were, on average, in previous decades. Between 2020 and 2025, the projected interest rates on 3-month Treasury bills and 10-year Treasury notes are 3.4 percent and 4.6 percent, respectively.

Changes From CBO’s Previous Economic Projections

Last August, CBO projected real GDP growth averaging 2.7 percent per year for 2014 through 2018; CBO now anticipates that real GDP growth will average 2.5 percent annually over that period. The revision mainly reflects a reduction in CBO’s estimate of potential output and therefore of the current amount of slack in the economy. On the basis of the current projection of potential output, CBO now forecasts that real GDP in 2024 will be roughly 1 percent lower than the level estimated in August. In addition, the sharper-than-anticipated drop in the unemployment rate in the second half of last year caused CBO to lower its projection of that rate for the next few years.

Now let us turn to significant factors that will contribute to a robust U.S. economy that exceeds CBO’s gross domestic product (GDP) projections.

• The Millennials

In April of 2015 Beth Ann Bovino, Standard & Poor’s US chief economist, reported that the Millennials, born from 1981 to 1997, could account for $1.4 trillion in spending (30% of total retail sales) by 2020.

Bovino projects the US economy will continue to strengthen, and this largest living generation which has the highest levels of education of any generation in U.S. history will make up half the workforce by 2020.

She predicts wages will increase by 3% in the year 2016 which translates to the possibility that Millennials will soon have more earning power. “That’s a strength for Millennials as they continue to participate in the job market,” says Bovino. She projects the Millennials “..will buy the houses, cars and big ticket items that will further stimulate economic growth.”

• The Female Economy

To get a clear perspective of how women are impacting the U.S. economy, let us look at the past predictions of women and their growing economic power as written in an article titled The Female Economy by Michael J. Silverstein and Kate Sayre in the September 2009 issue of the Harvard Business Review.

They open the article with this bold statement:

Women now drive the world economy.

Globally, they control about $20 trillion in annual consumer spending, and that figure could climb as high as $28 trillion in the next five years. Their $13 trillion in total yearly earnings could reach $18 trillion in the same period. In aggregate, women represent a growth market bigger than China and India combined—more than twice as big, in fact. Given those numbers, it would be foolish to ignore or underestimate the female consumer.

Their article features the findings of a comprehensive study by the Boston Consulting Group in 2008 of how women felt about their work, their lives, and how they were being served by businesses.

More than 12,000 women, from more than 40 geographies and a variety of income levels and walks of life, responded to their survey. The women answered 120 questions about their education and finances, homes and possessions, jobs and careers, activities and interests, relationships, and hopes and fears, along with their shopping behavior and spending patterns in some three dozen categories of goods and services.

The findings of the study reveal where women are, and will continue to be, a force that will directly impact the U.S. economy.

Women are increasingly gaining influence in the work world. As we write, the number of working women in the United States is about to surpass the number of working men. Three-quarters of the people who have lost jobs in the current recession are men. To be fair, women are still paid less, on average, than men, and are more likely to work part-time—factors that have helped insulate them somewhat from the crisis. Nevertheless, we believe that as this recession abates, women not only will represent one of the largest market opportunities in our lifetimes but also will be an important force in spurring a recovery and generating new prosperity.

This study reports women make the decision in the purchases of 94% of home furnishings, 92% of vacations, 91% of homes, 60% of automobiles, and 51% of consumer electronics.

It identifies the areas of greatest potential to appeal to female customers where money can be made:

Any company would be wise to target female customers, but the greatest potential lies in six industries. Four are businesses where women are most likely to spend more or trade up: food, fitness, beauty, and apparel. The other two are businesses with which women have made their dissatisfaction very clear: financial services and health care.

What might women and the economy look like? The study reports the number of working women has been increasing by about 2.2% a year. There will be changes in the positions women will hold.

At nearly every major consumer company, most middle managers are women. It’s only a matter of time before they rise to more-senior positions. Already, women own 40% of the businesses in the United States, and their businesses are growing at twice the rate of U.S. firms as a whole.

Silverstein and Sayre close their article with this statement: “Meeting women’s needs is the key to breakout growth, loyalty, and market share.”

• Emerging Changes in the Field of Medicine

In the past fifteen years a new field of medicine with different names but the same goals has been emerging and may erupt into mainstream awareness by 2020.

This field of medicine is known as Age Management, Anti-Aging, Optimal Health, Preventative, and Regenerative Medicine. The goals are optimal health through combining fitness and nutrition with bioidentical hormone therapies enabling patients to live healthy active lives to the maximum human life span of what some doctors in this field confidently state is 120 years.

Dr. Diana Schwarzbein, endocrinologist, founder of The Endocrinology Institute of Santa Barbara, opens chapter one of her book, The Schwarzbein Principle II The Transition, with this question: “Did you know that the maximum life span for the human race is 120 years, yet most of us do not even live to be 100 years old?”

Dr. Schwarzbein has created a bioidentical hormone replacement protocol where women in menopause and post menopause begin to menstruate again; and the health of internal organs such as the heart as well as the metabolic processes go through a regenerative process that reverses accelerated aging that comes from a loss of hormones.

Patients come to look decades younger than their chronological age.

The doctors, too, exemplify optimal health and the reversal of aging. Dr. Jeffrey Life, medical doctor in the field of Age Management Medicine, is 78 years of age (in the year 2016), and is as fit as a 28 year old. He has an active practice in Nevada, USA.

Dr. Life wrote several books, one is titled The Life Plan. This book serves as a guide to fitness and to youthfulness.

People from all over the world are flying in to the U.S. to be seen by some of these doctors calling attention once again to the U.S. as innovative leader in quality of life; this time in the field of medicine.

Within the next five years, patients will contribute to the U.S. economic growth through the purchases of compounded bioidentical hormones, fitness apparel and exercise equipment, high quality organic foods, transportation to and from doctors appointments, and personal care products.

Since patients will look, and be, physiologically younger than the outdated models of aging, they will spend money on beauty care products. The health and personal products industry is already creating more and more hair and body care products targeted to men. Skin care products targeting both women and men are titled, Regenerative Moisturizer, Anti-Aging Night Cream, and Skin Repairing Night Serum.

Revenues of Beauty and Personal Care Products businesses are up and annual sales are rising as a result.

Two examples taken from Household and Personal Products Industry (HAPPI) magazine April and May 2016 issues show:

  1. LVMH Perfumes & Cosmetics business group recorded revenues of $4.9 billion. Profit from recurring operations within Perfumes & Cosmetics increased 26%. (April 2016 issue, Financial News section.)
  2. Ulta Beauty posted fourth quarter net sales increased 21.1% to $1.3 billion. (May 2016 issue, Financial News section.)

These are two out of hundreds of thousands of businesses in the beauty and personal products industry that are recording millions and even billions of dollars increase in net sales. This industry is booming as a direct result of the emergence of the new medical model of Age Management, Optimal Health, Preventative, Anti-Aging and Regenerative Medicine. People want to look good as they live longer in optimal health and with the physical mobility, the vitality, of youthfulness.

• The Next President of the United States

Both Donald Trump and Hillary Clinton are strongly qualified to be the next POTUS.

Trump has extensive international and national businesses and real estate. Like no other present or past presidential candidate, he has first hand experience in employing thousands of people nationally and globally. He knows the job market, finance, business, the banking world, large scale construction, and what it takes to be extraordinarily successful.

He wants to put his vast knowledge and experiences to work for the people of the United States and he believes he is the only candidate that can make America rich again. He might be right.

Hillary Clinton has extensive state and national political experience. As First Lady of Arkansas for 12 years she co-founded the Arkansas Advocates for Children and Families and chaired the Arkansas Educational Standards Committee to reform the state’s education system.

As First Lady of the United States she worked to create the Adoption and Safe Families Act and the Foster Care Independence Act.

She was elected to Congress as the first female senator from New York.

She was appointed as Secretary of State by Barrack Obama.

Her experiences and sensitivity to the factors that impact women in the workplace, women’s issues, and the state of national health care make her ideally suited to the position of the first woman to be POTUS.

Hillary Clinton and Donald Trump both have superlative experiences and training that will enable either to lead the United States into a stronger economy.

The strength of the highly educated Millennials in the work force; the emergence of a new field of medicine that stands apart from the traditional medical model of treatment of disease and instead shines as a distinct much needed medical model that powerfully serves people in preventative, age management and regenerative medicine; the economic power of The Female Economy; two exceptionally qualified presidential candidates; all combine to not only support, but also enhance, the CBO’s projection that the U.S. economy will grow at a solid pace over the next few years.

The growth can already be seen in 2016 and will be pronounced within the next 5 years.

We are at a historic point where these multiple factors combine to produce unprecedented health and wealth in the United States of America, the global leader of quality of life.