Matthew C Klein, Columnist

Obama's Budget Has Bad News for Shareholders

President Obama's latest budget contains some intriguing economic forecasts. Stock market bulls better hope those forecasts are wrong.

April 10, 2013 at 8:37 PM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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President Barack Obama's latest budget contains some intriguing economic forecasts. Stock market bulls better hope those forecasts are wrong.

According to the boffins in the Office of Management and Budget, corporate income in 2023 will be more than 13 percent lower than it is today -- and that's before accounting for inflation and taxes. This decline is not predicted to be smooth. Instead, the forecasters predict steady earnings growth until the beginning of 2018. Profits are then projected to fall by nearly a third over the following six years. That's a surprisingly steep decline.