This presentation provides an overview of the Congressional Budget Office’s most recent budget and economic projections, which were published on August 21. In those projections, the federal budget deficit is nearly $1 trillion in 2019 and averages $1.2 trillion each year between 2020 and 2029. Because of persistently large deficits, federal debt held by the public is projected to grow steadily, reaching 95 percent of gross domestic product (GDP) in 2029. Real GDP is projected to grow by 2.3 percent in 2019, supporting strong labor market conditions that feature low unemployment and rising wages. Economic growth is projected to slow to an average of 1.8 percent through 2029, which is less than the long-term historical average. That slowdown occurs primarily because the labor force is expected to grow more slowly than it has in the past.

1. Congressional Budget Office
Presentation to the American Association for Budget and Program Analysis
November 13, 2019
Christina Hawley Anthony
Chief, Projections Unit, Budget Analysis Division
Robert Arnold
Chief, Projections Unit, Macroeconomic Analysis Division
An Overview of the Budget and Economic
Outlook From 2019 to 2029

2. 1
CBO
To provide the Congress with objective, nonpartisan, and timely analyses of
legislative proposals and of budgetary and economic issues to support the
Congressional budget process
CBO’s Role in the Budget Process

3. 2
CBO
CBO’s Process for Developing the
Budget Baseline

4. 3
CBO
The baseline is a benchmark for measuring the budgetary effects of proposed
changes in federal revenues or spending.
 It is not a prediction of future outcomes.
 It is based on the assumption that current laws and policies generally remain
the same.
 It incorporates CBO’s economic projections, which are also based on current
laws and policies.
The Baseline

5. 4
CBO
The principles and rules mainly come from law, budget resolutions, House and
Senate rules, and the 1967 Report of the President’s Commission on Budget
Concepts.
A key law is the Balanced Budget and Emergency Deficit Control Act, section
257.
 It defines the baseline: “The baseline refers to a projection of current-year
levels of new budget authority, outlays, revenues, and the surplus or deficit into
the budget year and the outyears based on laws enacted through the
applicable date.”
 It sets out rules for projecting spending and receipts.
 It requires an assumption of full funding for entitlements.
 It specifies the treatment of expiring programs and certain excise taxes.
How the Baseline Is Constructed

6. 5
CBO
The baseline is a neutral benchmark for measuring the budgetary effects of
proposed changes in federal revenues and mandatory spending.
It serves as the basis for:
 Cost estimates for proposed legislation
 CBO’s analyses of the President’s annual budget
 CBO’s volume of policy options that would reduce the deficit
 Other reports (including those describing CBO’s long-term budget projections)
 Assessments of historical and projected trends in the budget
It is often a starting point for budget resolutions.
How CBO and the Congress Use the Baseline

7. 6
CBO
CBO’s Current Economic Projections

8. 7
CBO
GDP = gross domestic product.
Growth of GDP and Potential Real GDP

9. 8
CBO
The Output Gap

10. 9
CBO
The Unemployment Rate and the Natural Rate of Unemployment

11. 10
CBO
The Labor Force Participation Rate

12. 11
CBO
PCE = personal consumption expenditures.
Inflation

13. 12
CBO
Interest Rates

14. 13
CBO
Factors Underlying the Growth of Potential GDP

15. 14
CBO
CBO’s Current Budget Projections

16. 15
CBO
Total Deficits and Surpluses

17. 16
CBO
Total Revenues and Outlays

18. 17
CBO
* = between zero and 0.05 percent of gross domestic product.
Changes in Projected Revenues From 2019 to 2029

19. 18
CBO
Changes in Projected Outlays From 2019 to 2029

20. 19
CBO
Total Deficit, Primary Deficit, and Net Interest

21. 20
CBO
Federal Debt Held by the Public

22. 21
CBO
The projections presented here were first published in Congressional Budget Office,
An Update to the Budget and Economic Outlook: 2019 to 2029 (August 2019),
www.cbo.gov/publication/55551.
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