1. Congressional Budget O ice
The Budget and Economic Outlook:
Fiscal Years 2012 to 2022
Presentation to the National Economists Club
Douglas W. Elmendorf
Director
February 9, 2012

2. Congressional Budget O ice
The Economic Outlook
2

3. Real Gross Domestic Product
( Trillions of 2005 dollars)
18 Actual Projected
16
Potential GDP
14
GDP
12
10
8
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
C O N G R E S S I O N A L B U D G E T O F F I C E 3

4. Gap Between GDP and Potential GDP
( Trillions of 2005 dollars)
0.4
Actual Projected
0.2
$2.6 $3.1
Trillion Trillion
0
-0.2
-0.4
-0.6
-0.8
-1.0
-1.2
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
C O N G R E S S I O N A L B U D G E T O F F I C E 4

5. Unemployment Rate
(Percent)
12 Actual Projected
10
8
6
4
2
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 5

6. In ation
(Percentage change in prices from previous year)
12 3.5
Actual Projected Actual Projected
3.0
10
2.5
2.0
8
1.5
6 1.0
0.5
4 Overall
Core 0
2010 2011 2012 2013
2
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 6

7. Interest Rates
(Percent)
16 Actual Projected
14
12
10
10-Year Treasury Notes
8
6
4
2
3-Month Treasury Bills
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 7

8. Congressional Budget O ice
The Budget Outlook
8

9. Def i cits or Surpluses, Historically and As Projected
in CBO’s Baseline
(Percentage of GDP)
4 Actual Projected
2
0
CBO’s Baseline
-2 Projection
-4
-6
-8
-10
-12
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 9

10. What Policy Assumptions Underlie the Baseline and
the Alternative Fiscal Scenario?
Baseline Projections: Current law
Alternative Fiscal Scenario:
– All expiring tax provisions (other than the payroll tax reduction) are extended.
– The alternative minimum tax (AMT) is indexed for in ation after 2011.
– Medicare’s payment rates for physicians’ services are held constant at current level.
– The automatic spending reductions required by the Budget Control Act do not
take e ect (although the original caps on discretionary appropriations remain in
place).
C O N G R E S S I O N A L B U D G E T O F F I C E 10

11. Def i cits or Surpluses, Historically and As Projected
in CBO’s Baseline and Under the Alternative Fiscal Scenario
(Percentage of GDP)
4
Actual Projected
2
0
CBO’s Baseline
-2 Projection
-4
-6
Alternative
-8 Fiscal Scenario
-10
-12
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 11

12. Def i cits Projected in CBO’s Baseline and Under the
Alternative Fiscal Scenario
(Percentage of GDP)
8
7
6
Additional Debt Service
5
Prevent Spending Cuts
4
3
Extend Tax Policies
2
1
Baseline
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 12

13. Federal Debt Held by the Public, Historically and
As Projected in CBO’s Baseline and Under the
Alternative Fiscal Scenario
(Percentage of GDP)
140 Actual Projected
120
Alternative
100 Fiscal Scenario
80
60
CBO’s Baseline
Projection
40
20
0
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
C O N G R E S S I O N A L B U D G E T O F F I C E 13

14. Components of Mandatory Spending
(Percentage of GDP)
8 Actual Projected
7
6 Major Federal
Health Care Programs
5 Social Security
4
3
2
Other Mandatory
1
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 14

15. Social Security Bene ciaries
(In Millions, at End of Calendar Year) Actual Projected
80 Actual Projected
70
60
50
Total
40
Old-Age and Survivors Insurance
30
20
Disability Insurance
10
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 15

16. Discretionary Outlays, by Category
(Percentage of GDP)
12
Actual Projected
Total Discretionary
10
8
Defense
6
4
Nondefense
2
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 16

17. Revenues Projected in CBO’s Baseline and
Under the Alternative Fiscal Scenario
(Percentage of GDP)
28
Actual Projected
26
24
22 Average, CBO’s Baseline
1972-2011 Projection
20 (17.9%)
18
Alternative
Fiscal Scenario
16
14
0
1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022
C O N G R E S S I O N A L B U D G E T O F F I C E 17

18. Selected Major Tax Expenditures in 2012, Compared
with Other Categories of Revenues and Outlays
(Percentage of GDP)
8
Revenues Outlays
6
Payroll Tax
Expenditures
4
Individual
Income Tax
Expenditures
2
0
Individual Social Corporate Income Selected Major Medicare Defense Social
Income Taxes Insurance Taxes and Tax Expenditures Security
Taxes Other Revenues
C O N G R E S S I O N A L B U D G E T O F F I C E 18

19. E ects of Selected Major Tax Expenditures
from 2013 to 2022
Exclusion of Employers’ Contributions for
Health Care, Health Insurance Premiums, Individual Income Tax E ect Payroll Tax E ect
and Long-Term Care Insurance Premiums
Net Exclusions of Pension
Contributions and Earnings
Income Exclusions
Exclusion of Capital Gains at Death
Exclusion of Untaxed Social Security
and Railroad Retirement Bene ts
Deduction for Mortgage Interest
on Owner-Occupied Residences
Deductions
Deduction for State and Local Taxes
Deduction for Charitable Contributions
Reduced Tax Rates on Dividends
and Long-Term Capital Gains Preferential Rates
Earned Income Tax Credit
Credits
Child Tax Credit
0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Percentage of Gross Domestic Product
C O N G R E S S I O N A L B U D G E T O F F I C E 19

20. Components of the Federal Budget as Shares of GDP:
1972-2011 Average and 2022 Projection Under the
Alternative Fiscal Scenario
(Percentage of GDP)
30
1972–2011 Average
25 24.4
2022 Projection Under the
Alternative Fiscal Scenario 21.0
20
17.9 18.3
15
12.8
11.4
10
7.3 7.8
6.1
5 3.8
3.0
2.2
0
Social Security and All Other Net Interest Total Outlays Total Revenues De cit
Major Federal Programs
Health Care Programs
C O N G R E S S I O N A L B U D G E T O F F I C E 20