From the Congressional Budget Office’s new report, “The Budget and Economic Outlook: Fiscal Years 2009 to 2019“:

Under an assumption that current laws and policies regarding federal spending and taxation remain the same, CBO forecasts the following:

• A marked contraction in the U.S. economy in calendar year 2009, with real (inflation-adjusted) gross
  domestic product (GDP) falling by 2.2 percent.
• A slow recovery in 2010, with real GDP growing by only 1.5 percent.
• An unemployment rate that will exceed 9 percent early in 2010.

And the eye-popping news, which takes the wind out of the stimulus sails:

CBO projects that the deficit this year will total $1.2 trillion, or 8.3 percent of GDP. Enactment of an economic stimulus package would add to that deficit.

In CBO’s baseline, the deficit for 2010 falls to 4.9 percent of GDP, still high by historical standards. 

More …

• USA Today, “Budget Deficit to Reach $1.2 Trillion“
• Bloomberg, “CBO Said to Project Deficit This Year Will Exceed $1 Trillion“
• Washington Post, “Obama: Trillion-Dollar Deficits ‘for Years to Come’“

CBO Director Peter R. Orszag does a nice job using the budget office’s blog site for updates about his presentations, speeches, testimony, etc. (Although…Director Orszag, put your name on the home page! It’ll help the spelling-challenged.) This post, “Lecture on health care policy at Stanford,” pointed to a very interesting talk at the Center for Health Policy and the Center for Primary Care and Outcomes Research at Stanford University, with lots of discussion of the causes of rising health care costs.

My remarks touched upon a theme that I will be discussing in more detail in other lectures later this fall: that just as the field of economics suffered because it mostly ignored psychology for too long, so too much of medical science and health policy has been largely ignoring the crucial role of expectations, beliefs, and norms. Perhaps the most compelling example involves the placebo effect, which tends to be dismissed as a statistical annoyance rather than examined in and of itself as a powerful force — often more potent empirically than the ‘medical’ intervention formally being studied.

Orszag’s slides are here .