CBO makes baseline economic and budget projections covering the next 10 years and also the next 30 years. The projections incorporate the assumption that current laws generally do not change. To produce the 30-year economic projections, CBO uses its policy growth model, which relies on a standard economic framework that focuses on the inputs that drive growth in the supply side of the economy: the amount of labor, the productive services provided by capital, and total factor productivity.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, and Jeffrey Werling, Assistant Director of CBO's Macroeconomic Analysis Division, at the 2019 Social Security Technical Panel.
CBO makes baseline economic and budget projections covering the next 10 years and also the next 30 years. The projections incorporate the assumption that current laws generally do not change. To produce the 30-year economic projections, CBO uses its policy growth model, which relies on a standard economic framework that focuses on the inputs that drive growth in the supply side of the economy: the amount of labor, the productive services provided by capital, and total factor productivity.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, and Jeffrey Werling, Assistant Director of CBO's Macroeconomic Analysis Division, at the 2019 Social Security Technical Panel.
Since 2007, federal debt held by the public has more than doubled in relation to the size of the economy, and it will keep growing significantly if the large annual budget deficits projected under current law come to pass. The Congress faces an array of policy choices as it confronts the challenges posed by such large and growing debt.
Presentation by Robert Shackleton, an analyst in CBO’s Macroeconomic Analysis Division, to the NABE Foundation’s 18th Annual Economic Measurement Seminar.
In 2020, CBO estimates a deficit of $1.0 trillion, or 4.6 percent of gross domestic product (GDP). Under current law, the projected gap between outlays and revenues increases to 5.4 percent of GDP in 2030. Federal debt held by the public is projected to rise over the coming decade, from 81 percent of GDP in 2020 to 98 percent of GDP in 2030. It continues to grow thereafter, in CBO’s projections, reaching 180 percent of GDP in 2050, well above the highest level ever recorded in the United States.
In 2020, inflation-adjusted GDP is projected to grow by 2.2 percent, largely because of continued strength in consumer spending and a rebound in business fixed investment. Output is projected to be higher than the economy’s maximum sustainable output this year to a greater degree than it has been in recent years, leading to higher inflation and interest rates after a period in which both were low, on average. Continued strength in the demand for labor keeps the unemployment rate low and drives employment and wages higher. If current laws governing federal taxes and spending generally remained in place, the economy would expand at an average annual rate of 1.7 percent over the next decade, roughly the same rate as its potential growth.
CBO regularly publishes economic projections that are consistent with current law—providing a basis for its estimates of federal revenues, outlays, deficits, and debt. A key element in CBO’s projections is its forecast of potential (maximum sustainable) output, which is based mainly on estimates of the potential labor force, the flow of services from the capital stock, and potential total factor productivity in the nonfarm business sector.
This presentation describes CBO’s most recent 10-year potential output projections. It also discusses possible underlying causes for the slowdown of growth in total factor productivity.
Presentation by Robert Shackleton, an analyst in CBO’s Macroeconomic Analysis Division, at the NABE Foundation’s 15th Annual Economic Measurement Seminar.
Presentation by Christina Hawley Anthony, Chief of the Projections Unit in CBO’s Budget Analysis Division, to the National Conference of State Legislatures Base Camp.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, at the Seminar on Forecasting at George Washington University.
Under current law, CBO projects that economic activity will expand at a modest pace this year and then grow more slowly in subsequent years.
CBO uses several models to analyze the effects of fiscal policy. In CBO’s view, changes in fiscal policy affect the economy in both the short and long term:
Short-term effects are driven by changes in the demand for goods and services (such as consumption and investment) and changes in supply-side factors (such as growth in productivity and the supply of labor), as well as by the interactions between them.
Long-term effects are primarily driven by changes in supply-side factors such as national saving, productivity, and people’s incentives to work, save, and invest.
The life-cycle growth model (also called an overlapping-generations, or OLG, model) is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. CBO uses the model to analyze the effects of fiscal policy on the following:
People’s incentives to work and save; the distribution of income, wealth, consumption, and taxes across households; and
the well-being of different generations of households.
The life-cycle growth model is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. For example, the model can analyze the effects of changes to the Social Security system.
This infographic provides an overview of CBO's report, The 2016 Long-Term Budget Outlook. Gain quick insight into why CBO projects a substantial imbalance in the federal budget beyond the next 10 years.
Presentation by Ben Page, CBO's Fiscal Policy Studies Unit Chief, at the National Tax Association 108th Annual Conference on Taxation.
CBO’s long-term budget projections generally reflect current law and estimates of future economic conditions and demographic trends. Those projections depend on estimates of the future paths of mortality rates, productivity, interest rates, and health care costs, among many other variables. To illustrate some of the uncertainty about long-term budgetary outcomes, CBO constructed alternative projections showing what would happen to the budget if those factors differed from the values used in the extended baseline.
Presentation by Elizabeth Cove Delisle, an analyst in CBO's Budget Analysis Division, with Natalie Tawil, an analyst in CBO's Microeconomic Studies Division, to the Council of Large Public Housing Authorities.
In 2014, the federal government provided about $50 billion in housing assistance specifically designated for low-income households. This presentation describes the ways in which the federal government provides housing assistance to low-income households, provides information about the households that receive assistance, and lists some policy options for altering that assistance.
Presentation by Ben Page, CBO's Fiscal Policy Studies Unit Chief, at the National Tax Association 108th Annual Conference on Taxation.
In May, the Congress adopted a concurrent resolution on the budget for fiscal year 2016. That resolution requires CBO, to the greatest extent practicable, to incorporate macroeconomic effects into its 10-year cost estimates for major legislation that Congressional committees approve. Such estimates must also include, when practicable, a qualitative assessment of the budgetary effects for the following 20 years. Incorporating such macroeconomic feedback into cost estimates is often called dynamic scoring. This presentation describes how CBO will prepare such estimates.
Since 2007, federal debt held by the public has more than doubled in relation to the size of the economy, and it will keep growing significantly if the large annual budget deficits projected under current law come to pass. The Congress faces an array of policy choices as it confronts the challenges posed by such large and growing debt.
Presentation by Robert Shackleton, an analyst in CBO’s Macroeconomic Analysis Division, to the NABE Foundation’s 18th Annual Economic Measurement Seminar.
In 2020, CBO estimates a deficit of $1.0 trillion, or 4.6 percent of gross domestic product (GDP). Under current law, the projected gap between outlays and revenues increases to 5.4 percent of GDP in 2030. Federal debt held by the public is projected to rise over the coming decade, from 81 percent of GDP in 2020 to 98 percent of GDP in 2030. It continues to grow thereafter, in CBO’s projections, reaching 180 percent of GDP in 2050, well above the highest level ever recorded in the United States.
In 2020, inflation-adjusted GDP is projected to grow by 2.2 percent, largely because of continued strength in consumer spending and a rebound in business fixed investment. Output is projected to be higher than the economy’s maximum sustainable output this year to a greater degree than it has been in recent years, leading to higher inflation and interest rates after a period in which both were low, on average. Continued strength in the demand for labor keeps the unemployment rate low and drives employment and wages higher. If current laws governing federal taxes and spending generally remained in place, the economy would expand at an average annual rate of 1.7 percent over the next decade, roughly the same rate as its potential growth.
CBO regularly publishes economic projections that are consistent with current law—providing a basis for its estimates of federal revenues, outlays, deficits, and debt. A key element in CBO’s projections is its forecast of potential (maximum sustainable) output, which is based mainly on estimates of the potential labor force, the flow of services from the capital stock, and potential total factor productivity in the nonfarm business sector.
This presentation describes CBO’s most recent 10-year potential output projections. It also discusses possible underlying causes for the slowdown of growth in total factor productivity.
Presentation by Robert Shackleton, an analyst in CBO’s Macroeconomic Analysis Division, at the NABE Foundation’s 15th Annual Economic Measurement Seminar.
Presentation by Christina Hawley Anthony, Chief of the Projections Unit in CBO’s Budget Analysis Division, to the National Conference of State Legislatures Base Camp.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, at the Seminar on Forecasting at George Washington University.
Under current law, CBO projects that economic activity will expand at a modest pace this year and then grow more slowly in subsequent years.
CBO uses several models to analyze the effects of fiscal policy. In CBO’s view, changes in fiscal policy affect the economy in both the short and long term:
Short-term effects are driven by changes in the demand for goods and services (such as consumption and investment) and changes in supply-side factors (such as growth in productivity and the supply of labor), as well as by the interactions between them.
Long-term effects are primarily driven by changes in supply-side factors such as national saving, productivity, and people’s incentives to work, save, and invest.
The life-cycle growth model (also called an overlapping-generations, or OLG, model) is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. CBO uses the model to analyze the effects of fiscal policy on the following:
People’s incentives to work and save; the distribution of income, wealth, consumption, and taxes across households; and
the well-being of different generations of households.
The life-cycle growth model is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. For example, the model can analyze the effects of changes to the Social Security system.
This infographic provides an overview of CBO's report, The 2016 Long-Term Budget Outlook. Gain quick insight into why CBO projects a substantial imbalance in the federal budget beyond the next 10 years.
Presentation by Ben Page, CBO's Fiscal Policy Studies Unit Chief, at the National Tax Association 108th Annual Conference on Taxation.
CBO’s long-term budget projections generally reflect current law and estimates of future economic conditions and demographic trends. Those projections depend on estimates of the future paths of mortality rates, productivity, interest rates, and health care costs, among many other variables. To illustrate some of the uncertainty about long-term budgetary outcomes, CBO constructed alternative projections showing what would happen to the budget if those factors differed from the values used in the extended baseline.
Presentation by Elizabeth Cove Delisle, an analyst in CBO's Budget Analysis Division, with Natalie Tawil, an analyst in CBO's Microeconomic Studies Division, to the Council of Large Public Housing Authorities.
In 2014, the federal government provided about $50 billion in housing assistance specifically designated for low-income households. This presentation describes the ways in which the federal government provides housing assistance to low-income households, provides information about the households that receive assistance, and lists some policy options for altering that assistance.
Presentation by Ben Page, CBO's Fiscal Policy Studies Unit Chief, at the National Tax Association 108th Annual Conference on Taxation.
In May, the Congress adopted a concurrent resolution on the budget for fiscal year 2016. That resolution requires CBO, to the greatest extent practicable, to incorporate macroeconomic effects into its 10-year cost estimates for major legislation that Congressional committees approve. Such estimates must also include, when practicable, a qualitative assessment of the budgetary effects for the following 20 years. Incorporating such macroeconomic feedback into cost estimates is often called dynamic scoring. This presentation describes how CBO will prepare such estimates.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, at the Australian Treasury Research Institute's conference, Modelling for Public Policy Analysis: Emerging Trends and Future Directions.
If current laws governing federal taxes and spending did not change, the United States would face steadily increasing federal budget deficits and debt over the next 30 years, according to projections by CBO. As a result, CBO estimates, public debt would reach 145 percent of GDP by 2047, higher than any percentage previously recorded in the United States.
Federal tax and spending policies can affect the economy through their impact on federal borrowing, private demand for goods and services, people’s incentives to work and save, and federal investment, as well as through other channels. CBO has devoted significant effort to developing analytical tools that enable it to assess the macroeconomic effects of fiscal policies and how such effects, or “macroeconomic feedback,” would affect the federal budget. CBO analyzes the economic effects of federal fiscal policies in current law as well as significant proposed changes in those policies.
On March 7, 2016, Wendy Edelberg, an Associate Director for Economic Analysis at CBO, will present at the University of Chicago Booth School of Business.
CBO has devoted significant effort to developing analytical tools that enable it to assess the macroeconomic effects of fiscal policies and how such effects, or "macroeconomic feedback," would affect the federal budget. When CBO incorporates such effects in its cost estimates of major legislation, the approach is often called dynamic scoring. This presentation describes how CBO prepares estimates of macroeconomic feedback, and provides a case study on proposed legislation to repeal the Affordable Care Act.
Presentation by Wendy Edelberg, CBO’s Assistant Director for Macroeconomic Analysis, to the Wharton School of the University of Pennsylvania.
CBO has devoted significant effort to developing analytical tools that enable it to assess the macroeconomic effects of fiscal policies and how such effects, or "macroeconomic feedback," would affect the federal budget. This presentation describes the tools CBO uses to estimate the long-term economic effects of fiscal policies.
This slide deck outlines the models CBO uses to assess the budgetary effects of alternative economic scenarios such as those presented in CBO’s Current View of the Economy in 2023 and 2024 and the Budgetary Implications (November 2022).
The Budget and Economic Outlook is one of the flagship publications of the Congressional Budget Office. The report provides economic and federal budget projections that incorporate the assumption that current laws governing federal spending and revenues generally remain in place. Those baseline projections cover the 10-year period used in the Congressional budget process. The report generally describes the differences between the current projections and previous ones; compares the economic forecast with those of other forecasters; and shows the budgetary impact of some alternative policy assumptions. This presentation describes how the report is produced and how it can be used for economic analysis, providing examples from the April 2018 edition.
Presentation by Jeffrey F. Werling, Assistant Director of CBO’s Macroeconomic Analysis Division, to the National Association of Forensic Economics, at the Southern Economic Association Annual Meetings, November 18, 2018.
Presentation by Wendy Edelberg, CBO’s Assistant Director for Macroeconomic Analysis, and Teri Gullo, CBO's Assistant Director for Budget Analysis, at the Center on Budget and Policy Priorities.
CBO makes baseline economic and budget projections covering the next 10 years and also the next 30 years. The projections incorporate the assumption that current laws generally do not change. To produce the 30-year economic projections, CBO uses its policy growth model, which relies on a standard economic framework that focuses on the inputs that drive growth in the supply side of the economy: the amount of labor, the productive services provided by capital, and total factor productivity.
CBO supports the Congressional budget process by providing the Congress with objective, nonpartisan, and timely analyses of legislative proposals and of budgetary and economic issues. From a macroeconomic perspective, CBO produces work in two areas. First, it provides baseline economic forecasts over 10- and 30-year projection windows. Second, it analyzes the short-term and longer-term effects on the overall economy of some proposed changes in federal tax and spending policies. This presentation describes that work and provides recent examples of forecasts and analysis.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, at the National Bureau of Economic Research conference, Economics of Infrastructure Investment.
Federal investment in physical capital, education, and research and development boosts private-sector productivity gradually, CBO estimates. The overall macroeconomic and budgetary effects of federal investment depend on how that spending is financed.
Presentation by Wendy Edelberg, CBO’s Assistant Director for Macroeconomic Analysis, and Teri Gullo, CBO's Assistant Director for Budget Analysis, to Congressional Staff.
CBO provides formal, written estimates of the cost of virtually every bill approved by Congressional committees to show how the bill would affect spending or revenues over the next 5 or 10 years, depending on the type of spending involved. In May, the Congress adopted a concurrent resolution on the budget for fiscal year 2016 that requires CBO, to the greatest extent practicable, to incorporate macroeconomic effects into its 10-year cost estimates for major legislation that Congressional committees approve. Such estimates must also include, when practicable, a qualitative assessment of the budgetary effects for the following 20 years. Incorporating such macroeconomic feedback into cost estimates is often called dynamic scoring. This presentation describes how CBO will prepare such estimates.
Presentation by Jared Jageler, David Adler, Noelia Duchovny, and Evan Herrnstadt, analysts in CBO’s Microeconomic Studies and Health Analysis Divisions, at the Association of Environmental and Resource Economists Summer Conference.
Presentation by Mark Hadley, CBO's Chief Operating Officer and General Counsel, at the 2nd NABO-OECD Annual Conference of Asian Parliamentary Budget Officials.
Presentation by Daria Pelech, an analyst in CBO’s Health Analysis Division, at the Center for Health Insurance Reform McCourt School of Public Policy, Georgetown University.
This slide deck highlights CBO’s key findings about the outlook for the economy as described in its new report, The Budget and Economic Outlook: 2024 to 2034.
Presentation by CBO analysts Rebecca Heller, Shannon Mok, and James Pearce, and Census Bureau research economist Jonathan Rothbaum at the American Economic Association Annual Meeting, Committee on Economic Statistics.
Presentation by Eric J. Labs, an analyst in CBO’s National Security Division, at the Bank of America 2024 Defense Outlook and Commercial Aerospace Forum.
Presentation by Elizabeth Ash, William Carrington, Rebecca Heller, and Grace Hwang of CBO’s Labor, Income Security, and Long-Term Analysis and Health Analysis divisions to the Children’s Health Group, American Academy of Pediatrics.
Presentation by Molly Dahl, Chief of CBO’s Long-Term Analysis Unit, at a meeting of the National Conference of State Legislatures’ Budget Working Group.
In the President’s 2024 budget request, total military compensation is $551 billion, including veterans' benefits. That amount represents an increase of 134 percent since 1999 after removing the effects of inflation.
Many ways to support street children.pptxSERUDS INDIA
By raising awareness, providing support, advocating for change, and offering assistance to children in need, individuals can play a crucial role in improving the lives of street children and helping them realize their full potential
Donate Us
https://serudsindia.org/how-individuals-can-support-street-children-in-india/
#donatefororphan, #donateforhomelesschildren, #childeducation, #ngochildeducation, #donateforeducation, #donationforchildeducation, #sponsorforpoorchild, #sponsororphanage #sponsororphanchild, #donation, #education, #charity, #educationforchild, #seruds, #kurnool, #joyhome
Jennifer Schaus and Associates hosts a complimentary webinar series on The FAR in 2024. Join the webinars on Wednesdays and Fridays at noon, eastern.
Recordings are on YouTube and the company website.
https://www.youtube.com/@jenniferschaus/videos
Jennifer Schaus and Associates hosts a complimentary webinar series on The FAR in 2024. Join the webinars on Wednesdays and Fridays at noon, eastern.
Recordings are on YouTube and the company website.
https://www.youtube.com/@jenniferschaus/videos
Russian anarchist and anti-war movement in the third year of full-scale warAntti Rautiainen
Anarchist group ANA Regensburg hosted my online-presentation on 16th of May 2024, in which I discussed tactics of anti-war activism in Russia, and reasons why the anti-war movement has not been able to make an impact to change the course of events yet. Cases of anarchists repressed for anti-war activities are presented, as well as strategies of support for political prisoners, and modest successes in supporting their struggles.
Thumbnail picture is by MediaZona, you may read their report on anti-war arson attacks in Russia here: https://en.zona.media/article/2022/10/13/burn-map
Links:
Autonomous Action
http://Avtonom.org
Anarchist Black Cross Moscow
http://Avtonom.org/abc
Solidarity Zone
https://t.me/solidarity_zone
Memorial
https://memopzk.org/, https://t.me/pzk_memorial
OVD-Info
https://en.ovdinfo.org/antiwar-ovd-info-guide
RosUznik
https://rosuznik.org/
Uznik Online
http://uznikonline.tilda.ws/
Russian Reader
https://therussianreader.com/
ABC Irkutsk
https://abc38.noblogs.org/
Send mail to prisoners from abroad:
http://Prisonmail.online
YouTube: https://youtu.be/c5nSOdU48O8
Spotify: https://podcasters.spotify.com/pod/show/libertarianlifecoach/episodes/Russian-anarchist-and-anti-war-movement-in-the-third-year-of-full-scale-war-e2k8ai4
A process server is a authorized person for delivering legal documents, such as summons, complaints, subpoenas, and other court papers, to peoples involved in legal proceedings.
ZGB - The Role of Generative AI in Government transformation.pdfSaeed Al Dhaheri
This keynote was presented during the the 7th edition of the UAE Hackathon 2024. It highlights the role of AI and Generative AI in addressing government transformation to achieve zero government bureaucracy
Understanding the Challenges of Street ChildrenSERUDS INDIA
By raising awareness, providing support, advocating for change, and offering assistance to children in need, individuals can play a crucial role in improving the lives of street children and helping them realize their full potential
Donate Us
https://serudsindia.org/how-individuals-can-support-street-children-in-india/
#donatefororphan, #donateforhomelesschildren, #childeducation, #ngochildeducation, #donateforeducation, #donationforchildeducation, #sponsorforpoorchild, #sponsororphanage #sponsororphanchild, #donation, #education, #charity, #educationforchild, #seruds, #kurnool, #joyhome
This session provides a comprehensive overview of the latest updates to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly known as the Uniform Guidance) outlined in the 2 CFR 200.
With a focus on the 2024 revisions issued by the Office of Management and Budget (OMB), participants will gain insight into the key changes affecting federal grant recipients. The session will delve into critical regulatory updates, providing attendees with the knowledge and tools necessary to navigate and comply with the evolving landscape of federal grant management.
Learning Objectives:
- Understand the rationale behind the 2024 updates to the Uniform Guidance outlined in 2 CFR 200, and their implications for federal grant recipients.
- Identify the key changes and revisions introduced by the Office of Management and Budget (OMB) in the 2024 edition of 2 CFR 200.
- Gain proficiency in applying the updated regulations to ensure compliance with federal grant requirements and avoid potential audit findings.
- Develop strategies for effectively implementing the new guidelines within the grant management processes of their respective organizations, fostering efficiency and accountability in federal grant administration.
Canadian Immigration Tracker March 2024 - Key SlidesAndrew Griffith
Highlights
Permanent Residents decrease along with percentage of TR2PR decline to 52 percent of all Permanent Residents.
March asylum claim data not issued as of May 27 (unusually late). Irregular arrivals remain very small.
Study permit applications experiencing sharp decrease as a result of announced caps over 50 percent compared to February.
Citizenship numbers remain stable.
Slide 3 has the overall numbers and change.
2. 1
The Policy Growth Model (PGM) is one in a suite of models that the Congressional
Budget Office uses to analyze how economic growth and the federal budget
interact:
How estimates of economic growth affect projections of federal budget variables,
such as spending, tax rates, and deficits.
– For example, more rapid growth of productivity leads to higher incomes and
tax revenues.
How changes in those federal budget variables, in turn, affect economic growth.
– For example, increased marginal tax rates on labor income lead households
to reduce their hours worked on net, lowering economic growth.
– By contrast, reduced federal deficits lead to lower interest rates and,
therefore, more private investment, boosting economic growth.
The Role of the Policy Growth Model
3. 2
The Long-Term Budget Outlook (various years),
www.cbo.gov/about/products/major-recurring-reports#2
The Long-Term Budget Outlook Under Alternative Scenarios for Fiscal Policy
(August 2018), www.cbo.gov/publication/54325
The Deficit Reductions Necessary to Meet Various Targets for Federal Debt
(August 2018), www.cbo.gov/publication/54181
The Macroeconomic and Budgetary Effects of Federal Investment (June 2016),
www.cbo.gov/publication/51628
Budgetary and Economic Outcomes Under Paths for Federal Revenues and
Noninterest Spending Specified by Chairman Price (March 2015),
www.cbo.gov/publication/49977
Recent CBO Analyses Using the Policy Growth Model
5. 4
PGM accounts for the effects of changes in the labor force, productive capital, and total
factor productivity (or TFP, the residual growth not attributable to the growth of potential
hours or capital services) on U.S. economic activity, or gross domestic product (GDP).
PGM includes parameters (variables that are typically fixed over time) that are used to
estimate how the number of hours worked, saving, investment in productive capital,
and GDP change in response to economic shocks and changes in fiscal policy:
Some parameters in PGM are used to estimate how GDP changes in response to
changes in inputs to production, such as labor and capital, as well as changes in
productivity.
Other parameters in PGM are used to estimate how people respond (in terms of the
numbers of hours they work and the amounts they save, both domestically and
abroad) when the federal government’s tax rates, spending, and deficits change.
Variables and Parameters
6. 5
For information about how potential output is projected in CMAC, see Robert Shackleton, Estimating and Projecting Potential Output Using CBO’s Forecasting Growth Model, Working
Paper 2018-03 (Congressional Budget Office, February 2018), www.cbo.gov/publication/53558.
A major focus of CBO's analysis is potential (maximum sustainable) output.
Potential output is CBO's primary measure of the economy's fundamental ability to supply
goods and services.
Labor and capital determine output, which affects federal taxes, spending, deficits, and
debt; those, in turn, influence the supply of labor and accumulation of capital.
Focusing on the relationship between potential output and inputs of labor and capital thus
helps maintain consistency between CBO's projections of the supply of labor, capital
accumulation, federal taxes, spending, deficits, and debt.
CBO’s baseline projection of potential output is determined using the agency’s
macroeconomic forecasting model (CMAC), which includes representations of different
productive sectors.
The six sectors—nonfarm and farm business sectors, households and nonprofits, and the
federal government and state and local governments—have different production functions.
The nonfarm business sector (NFB) constitutes about 75 percent of potential output.
PGM reproduces CBO’s economic baseline using a single economywide production function,
simplifying the analysis of fiscal policy.
Potential Output in CBO’s Modeling Framework
7. 6
Production is characterized by an equation that describes how inputs can be transformed into
output. Specifically, growth of real (inflation-adjusted) potential GDP 𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑡𝑡
∗
is a log-linearized
Cobb-Douglas production function:
𝑑𝑑𝑙𝑙𝑙𝑙𝑙𝑙 𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑡𝑡
∗
= 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑(𝐴𝐴𝑡𝑡
∗
) + 1 − 𝛼𝛼 × 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑(𝐻𝐻𝑡𝑡
∗
) + 𝛼𝛼 × 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑(𝐾𝐾𝑡𝑡)
𝐻𝐻𝑡𝑡
∗
is an index of labor supply defined in terms of economywide potential hours.
𝐾𝐾𝑡𝑡 is the flow of services from nonfarm business capital and owner-occupied residential
housing.
𝐴𝐴𝑡𝑡
∗
is an index of economywide potential TFP.
The factor shares α and (1 − α) are derived from historical economywide average shares of
labor and capital income.
𝑑𝑑𝑙𝑙𝑜𝑜𝑔𝑔 is the growth rate expressed in logarithms.
The Equation for Production in the Policy Growth Model
9. 8
*For an explanation of how CBO estimates the response of labor, see Congressional Budget Office, How the Supply of Labor Responds to Changes in Fiscal Policy (October 2012),
www.cbo.gov/publication/43674.
In PGM, an increase in after-tax wage rates, relative to those in the baseline, induces
an increase in potential employment and potential hours worked. A decrease in wage
rates has the opposite effect.
After-tax wage rates are determined by the capital-labor ratio, TFP, and the marginal
tax rate. A rise in the capital-labor ratio, an increase in TFP, or a decrease in the
marginal tax rate will raise the after-tax wage rate.
In CBO’s estimation, a 1 percentage-point increase in the after-tax wage rate results in
a 0.2 percentage-point increase in hours worked. That is, the elasticity of hours worked
with respect to the after-tax wage rate is estimated to be 0.2.*
That central estimate includes an effect of additional labor income on hours worked,
which is roughly a 0.05 percentage-point decrease in hours worked for a 1 percentage-
point increase in the wage rate. That is, the elasticity of 0.2 includes both the income
effect and the substitution effects.
The Behavior of the Supply of Labor in the Policy Growth Model
10. 9
In PGM, the response of private domestic saving is determined by a single
parameter and the deviation of the after-tax 10-year interest rate from its baseline
value.
The after-tax interest rate is determined by the capital-labor ratio, TFP, and the
marginal tax rate on interest income.
The 10-year interest rate has a one-to-one relationship with the return on capital.
A fall in the capital-labor ratio makes capital scarce relative to labor, raising the
return on capital and the 10-year interest rate.
A rise in TFP raises the return on capital and the 10-year interest rate.
Lower marginal tax rates on interest income raise the after-tax 10-year interest
rate.
For every 1 percent increase in the after-tax interest rate, the private domestic
saving rate increases by 0.2 percent in PGM. That is, the elasticity of the saving
rate with respect to the after-tax interest rate is estimated to be 0.2.
The Behavior of the Supply of Private Domestic Saving in
the Policy Growth Model
12. 11
Domestic investment is financed both by private domestic saving and the saving of
foreigners. A portion of the productive domestic (within U.S. borders) capital stock is
owned by foreigners.
The return on foreign-owned capital generates a flow of payments to foreigners.
As the return on domestic productive capital rises or falls, the payment to foreign
owners of domestic capital does the same.
Meanwhile, U.S.-owned capital abroad generates income for U.S. nationals. The
volume of and return on U.S.-owned capital abroad are fixed in the model and do not
respond to economic or policy shocks.
Net foreign investment reflects whether the stock of foreign-owned domestic capital
rises or falls relative to the stock of U.S.-owned capital abroad.
Gross national product (GNP), a measure of national income, is equal to GDP plus net
income from abroad.
The Behavior of Net Foreign Investment in the
Policy Growth Model
14. 13
*See Jonathan Huntley, The Long-Run Effects of Federal Budget Deficits on National Saving and Private Domestic Investment, Working Paper 2014-02 (Congressional Budget Office,
February 2014), www.cbo.gov/publication/45140.
In PGM, changes in the federal deficit, relative to the federal deficit in the baseline,
have a proportional effect on national saving (domestic private saving plus public
saving), net foreign investment, and ultimately private investment.
An increase in the deficit initially reduces national saving in PGM by the same amount.
However, CBO estimates that part of the change in the deficit is financed by increases
in private domestic saving and net foreign investment.* An increase in the federal
deficit of one dollar leads to:
An increase, or offset, in private saving of 43 cents (so national saving falls by
57cents) and
An increase, or offset, in net foreign investment of 24 cents.
Taken together, those estimates generate a 33-cent decrease in private investment.
The Response of Private Investment to Federal Deficits in the
Policy Growth Model
18. 17
Short Term: Changes in fiscal policies affect the overall economy primarily by influencing
the demand for goods and services by consumers, businesses, and governments, which
leads to changes in output relative to potential output.
Long Term: Changes in fiscal policies affect output primarily by altering national saving,
federal investment, and people’s incentives to work and save, as well as businesses’
incentives to invest, thereby changing potential output.
Macroeconomic Analysis of Fiscal Policy
19. 18
Policy analyses, or simulations, in PGM are carried out relative to the baseline. A simulation
might be used to investigate a variety of economic or budgetary questions related to fiscal policy:
How the federal debt changes in response to different projections of economic growth.
How economic growth changes in response to changes in fiscal policy or exogenous variables
(those not determined within the model) from their baseline values.
– How changes to marginal tax rates on interest income would affect the level of capital and,
therefore, total output.
– How changes to federal spending would affect output, interest rates, and federal debt.
Each simulation specifies values for all the parameters governing behavior in the model,
including the response of:
The supply of labor to changes in the after-tax wage rate,
Private domestic saving to changes in the after-tax return on capital,
Net foreign investment to changes in national saving, and
Private domestic saving to changes in the deficit.
Creating a Simulation in the Policy Growth Model
20. 19
How the Policy Growth Model Creates a Simulation Relative to the
Baseline
22. 21
Congressional Budget Office, The 2021 Long-Term Budget Outlook (March 2021), www.cbo.gov/publication/56977.
In The 2021 Long-Term Budget Outlook, CBO used PGM to examine the economic and
fiscal implications of slower or faster TFP growth.
Slower growth of TFP in the NFB sector and its economywide equivalent reduces overall
economic growth, and the ratio of federal debt to GDP grows more quickly. That reduction
lowers the rate of return on capital, decreasing interest rates (and interest payments) on
federal debt. That feedback partly offsets the more rapid growth of the debt-to-GDP ratio.
Faster growth of TFP in the NFB sector has the opposite effect on federal debt and interest
payments on the debt.
Sensitivity of Economic Growth and Federal Debt to Productivity
Growth in the 30-Year Projections
Percent
Scenario
TFP Growth
in NFB,
2021-2051
Economywide
TFP Growth,
2021-2051
Real
GDP Growth,
2021-2051
Debt-to-GDP Ratio,
2051
Slower Growth 0.6 0.5 1.3 252
Baseline 1.1 0.8 1.8 202
Faster Growth 1.6 1.1 2.2 156
23. 22
Congressional Budget Office, The 2021 Long-Term Budget Outlook (March 2021), www.cbo.gov/publication/56977.
Federal Debt If TFP Growth in the Nonfarm Business Sector
Differed From the Values Underlying CBO’s Projections
24. 23
Also in 2021, CBO projected economic and budgetary outcomes under two scenarios in which
interest rates on federal debt are higher and lower by a differential that increases by 5 basis
points per year (before accounting for macroeconomic effects) relative to the rates underlying the
agency’s extended baseline.
CBO’s analyses of sensitivity to interest rates started with a change in the average rate on
federal debt while using the same 10-year Treasury rate. Then, the analyses accounted for the
effects on capital and other macroeconomic factors in the alternative projections, which affected
both rates.
The Scenarios CBO Used to Examine the Sensitivity of Budget
Projections to Interest Rates
25. 24
Congressional Budget Office, The 2021 Long-Term Budget Outlook (March 2021), www.cbo.gov/publication/56977.
CBO then examined the effect of higher or lower interest rates on federal debt.
Higher interest rates on federal debt result in larger deficits and a larger stock of debt,
causing the debt-to-GDP ratio to grow more quickly. Rising debt crowds out private
investment, slowing GDP growth and causing the debt-to-GDP ratio to grow even more
quickly.
Lower interest rates on federal debt result have the opposite effect on deficits and the stock
of debt.
Sensitivity of Economic Growth and Federal Debt to Interest Rates
in the 30-Year Projections
Percent
Scenario
Interest Rate on Federal Debt
(After accounting for
macroeconomic effects), 2051
Real
GDP Growth,
2021-2051
Debt-to-GDP Ratio,
2051
Higher Rates 6.6 1.7 260
Baseline 4.6 1.8 202
Lower Rates 2.7 1.8 160
26. 25
Congressional Budget Office, The 2021 Long-Term Budget Outlook (March 2021), www.cbo.gov/publication/56977.
Federal Debt If Interest Rates Differed From the Values Underlying
CBO’s Projections
27. 26
*See Felix Reichling and Charles Whalen, Assessing the Short-Term Effects on Output of Changes in Federal Fiscal Policies, Working Paper 2012-08 (Congressional Budget Office,
May 2012), www.cbo.gov/publication/43278.
The Extended Alternative Fiscal Scenario
CBO used a suite of models to analyze an alternative fiscal scenario in The 2019
Long-Term Budget Outlook.
Under current law, several federal tax and spending provisions expire over the next
10 years.
In the alternative fiscal scenario, CBO estimated the effects of extending those
provisions relative to the amounts in the current-law baseline.
Policies included postponing scheduled cuts in discretionary spending and
increases in taxes, which raised deficits and lowered marginal tax rates relative to
amounts in the baseline.
To consider the short-run effects of the increases in spending and taxes, the agency
used its short-term model.* Those results were merged with the results of PGM.
In CBO’s analysis, higher federal deficits decreased investment and GDP.
28. 27
*See Congressional Budget Office, “An Overview of CBO’s Life-Cycle Growth Model” (February 2019), www.cbo.gov/publication/54985.
In The 2019 Long Term Budget Outlook, CBO also analyzed a payable-benefits scenario
for Social Security, under which benefits were limited to the amounts payable from
revenues received by the program’s trust funds.
CBO estimated the effects of reducing benefits upon the then-projected exhaustion of
the trust fund for the Old-Age, Survivors, and Disability Insurance program in 2032.
To consider the effects of reduced benefits on retirement decisions (perhaps to
increase saving or retire at an older age), the agency used its life-cycle model.* To
analyze the effects of the unanticipated drop in spending in 2032, the agency used its
short-term model. Results from both models were merged with results from PGM to
create projections of the debt-to-GDP ratio and GNP per capita.
In CBO’s analysis:
– Lower federal spending and higher saving raised investment and GDP. The effect
of workers’ retiring later also raised the supply of labor and GDP.
– The debt-to-GDP ratio was significantly lower than its baseline value because of
lower deficits and higher GDP.
The Payable-Benefits Scenario
29. 28
Congressional Budget Office, The 2019 Long-Term Budget Outlook (June 2019), www.cbo.gov/publication/55331.
Federal Debt Under Three Fiscal Scenarios
30. 29
Congressional Budget Office, The 2019 Long-Term Budget Outlook (June 2019), www.cbo.gov/publication/55331.
Output per Person Under Three Scenarios
31. 30
This document was prepared to enhance the transparency of CBO’s work and to
encourage external review of that work. In keeping with CBO’s mandate to provide
objective, impartial analysis, the document makes no recommendations.
Aaron Betz and Robert Shackleton prepared the document with guidance from Jeffrey
Werling and Devrim Demirel.
Jeffrey Kling and Mark Doms reviewed the document. Julie Topoleski provided helpful
comments. John Skeen was the editor, and R. L. Rebach was the graphics editor. It is
available on CBO’s website (www.cbo.gov/publication/57017).
About This Document