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An Overview of The Budget and Economic Outlook: 2019 to 2029

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This presentation provides an overview of the Congressional Budget Office’s most recent budget and economic projections, which were published on January 28. In those projections, the federal budget deficit is about $900 billion in 2019 and exceeds $1 trillion each year beginning in 2022. Because of persistently large deficits, federal debt held by the public is projected to grow steadily, reaching 93 percent of gross domestic product (GDP) in 2029.

Real GDP is projected to grow by 2.3 percent in 2019—down from 3.1 percent in 2018—as the effects of the 2017 tax act on the growth of business investment wane and federal purchases decline sharply in the fourth quarter of the year. Economic growth is projected to slow to an average of 1.7 percent through 2023 and to average 1.8 percent from 2024 to 2029.

Presentation by Christina Hawley Anthony, Chief of the Projections Unit in CBO’s Budget Analysis Division, Robert Arnold, Chief of the Projections Unit in CBO’s Macroeconomic Analysis Division, and Joshua Shakin, Chief of the Revenue Estimating Unit in CBO’s Tax Analysis Division, at a joint seminar with the Congressional Research Service.

Published in: Government & Nonprofit

An Overview of The Budget and Economic Outlook: 2019 to 2029

  1. 1. Congressional Budget Office A Joint Seminar by the Congressional Budget Office and the Congressional Research Service January 31, 2019 Christina Hawley Anthony, Chief, Projections Unit, Budget Analysis Division Robert Arnold, Chief, Projections Unit, Macroeconomic Analysis Division Joshua Shakin, Chief, Revenue Estimating Unit, Tax Analysis Division An Overview of The Budget and Economic Outlook: 2019 to 2029 For more details, see www.cbo.gov/publication/54918.
  2. 2. 1 CBO The Congressional Budget Office
  3. 3. 2 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
  4. 4. 3 CBO CBO’s Process for Developing the Budget Baseline
  5. 5. 4 CBO  A detailed projection for the current year and the ensuing 10 years of federal spending, revenues, net spending for interest, and the resulting deficits and surpluses  Based on CBO’s economic forecast  Incorporates the assumption that current laws governing taxes and spending generally remain in place  Not a forecast of future budgetary outcomes; those depend on future Congressional action and other factors  Generally provided two or three times a year  Reported in the annual Budget and Economic Outlook and subsequent reports What Is CBO’s Baseline?
  6. 6. 5 CBO  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. – Defines the baseline – Sets out rules for projecting spending and receipts – Requires an assumption of full funding for entitlements – Directs the treatment of expiring programs and certain excise taxes How Is the Baseline Constructed?
  7. 7. 6 CBO  A neutral benchmark for measuring the budgetary effects of proposed changes in federal revenues and mandatory spending  Basis for: – Cost estimates for proposed legislation – CBO’s analyses of the President’s annual budget – CBO’s budget options volume – Other reports (including those describing CBO’s long-term budget projections) – Assessments of multiyear budget trends  Often a starting point for budget resolutions How Do CBO and the Congress Use the Baseline?
  8. 8. 7 CBO CBO’s Current Budget and Economic Outlook
  9. 9. 8 CBO  Deficits and debt  Economic projections  Revenues  Spending  Policy alternatives Baseline Projections
  10. 10. 9 CBO Deficits and Debt
  11. 11. 10 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Deficits
  12. 12. 11 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Revenues and Outlays
  13. 13. 12 CBO Debt Held by the Public
  14. 14. 13 CBO Changes in CBO’s Baseline Projection of the 10-Year Deficit Since Spring 2018
  15. 15. 14 CBO Economic Projections
  16. 16. 15 CBO GDP = gross domestic product. Real GDP and Potential Real GDP
  17. 17. 16 CBO GDP = gross domestic product. The Output Gap
  18. 18. 17 CBO GDP = gross domestic product. Factors Underlying the Growth of Potential GDP
  19. 19. 18 CBO The Unemployment Rate and the Natural Rate of Unemployment
  20. 20. 19 CBO Inflation
  21. 21. 20 CBO Interest Rates
  22. 22. 21 CBO Revenues
  23. 23. 22 CBO Total Revenues
  24. 24. 23 CBO Other revenue sources consist of excise taxes, remittances from the Federal Reserve System, customs duties, estate and gift taxes, and miscellaneous fees and fines. Revenues, by Major Source
  25. 25. 24 CBO Real bracket creep is the process in which, as income rises faster than inflation, an ever-larger proportion of income becomes subject to higher tax rates. Growth in Individual Income Tax Receipts in CBO’s Baseline Projections
  26. 26. 25 CBO Source: Congressional Budget Office, using estimates by the staff of the Joint Committee on Taxation. Outlays, Revenues, and Tax Expenditures in 2019
  27. 27. 26 CBO Source: Congressional Budget Office, using estimates by the staff of the Joint Committee on Taxation. Budgetary Effects of the Largest Tax Expenditures in 2019
  28. 28. 27 CBO Spending
  29. 29. 28 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Federal Outlays, by Category
  30. 30. 29 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Major Changes in Projected Outlays From 2019 to 2029
  31. 31. 30 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Outlays for People Age 65 or Older as a Share of Total Noninterest Outlays
  32. 32. 31 CBO Policy Alternatives
  33. 33. 32 CBO Alternative Paths for Discretionary Budget Authority
  34. 34. 33 CBO Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. This table shows detail from Table 5-1. Alternatives That Affect Revenues
  35. 35. 34 CBO Values are adjusted to exclude the effects of shifts in the timing of payments that occur when October 1 (the first day of the fiscal year) falls on a weekend. Projected Deficits Under CBO’s Baseline and an Alternative Fiscal Scenario

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