Now that US Congress provides "solutions" on a month to month basis with outcomes delayed until the 11th hour and 59th minute, the Treasury funds itself paycheck to paycheck, hedge fund LPs only allow a daily lock up and demand liquidity statistics (as in how much of the entire book can be sold on an hour's notice), and all that matters is what happens in the next few hours, it is JPM's turn to raise Q1 GDP... at the expense of future growth. Because nobody really cares about the future anymore: after all following yesterday's lowering of Q3 GDP, US debt/GDP is now 100.04%. But nobody wants to talk about that because, once again, it's about the future. And we are having enough issues with the present as is. Here is JPM's Michael Feroli just hiking his short-term forecast, knowing too well he will eventually have to lower future growth. But that is tomorrow's, and thus, someone else's problem. In the meantime, #40dollars sure goes a long way.
Following their "Airing of Grievances," Congress today approved a two-month extension of expiring payroll tax and unemployment benefit measures. This extension removes a significant fiscal headwind that had been holding back 12H1 growth in our forecast. Because it is only a two-month extension, the acute fiscal tightening is only pushed back for a short while, however our forecast now assumes that lawmakers will follow through on the stated desire of Congressional leadership to extend these measures for the entire year. The change in fiscal policy mostly affects growth in the first half of the year, for which we are revising up the average annualized real GDP growth rate from 1.0% to 2.5%, due to better personal income and consumption outcomes. The measures to pay for the two-month extension -- higher GSE mortgage fees -- mostly exert their drag after 2012. We assume whatever measures pay for the remaining ten-month extension similarly defer the pain until later years in the ten-year budget planning horizon. Our fiscal year 2012 budget deficit forecast is revised up from $1,000 billion to $1,150 billion. Obviously today isn't the most ideal time to be changing forecasts, but it is the day Congress chose to change policy. Below is an update to our forecast spreadsheet.