Presentation by Keith Hall, CBO Director, to the National Association for Business Economics. In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Office’s estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level. CBO anticipates that the economy will expand solidly this year and next. Increases in demand for goods and services are expected to reduce the quantity of underused labor and capital, or “slack,” in the economy—thereby encouraging greater participation in the labor force by reducing the unemployment rate and pushing up compensation. That reduction in slack will also push up inflation and interest rates. Over the following years, CBO projects, output will grow at a more modest pace, constrained by relatively slow growth in the nation’s supply of labor. Nevertheless, in those later years, output is anticipated to grow more quickly than it has during the past decade.

1. Congressional Budget Office
The 2016 Budget and Economic Outlook
Presentation to the
National Association for Business Economics
March 7, 2016
Keith Hall
Director
This presentation draws on The Budget and Economic Outlook: 2016 to 2026 (January 2016), www.cbo.gov/publication/51129.

2. 1CONGRESSIONAL BUDGET OFFICE
Budget Outlook

3. 2CONGRESSIONAL BUDGET OFFICE
Total Deficits or Surpluses
Percentage of Gross Domestic Product

4. 3CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public
Percentage of Gross Domestic Product

5. 4CONGRESSIONAL BUDGET OFFICE
Total Revenues and Outlays
Percentage of Gross Domestic Product

6. 5CONGRESSIONAL BUDGET OFFICE
Total Outlays
Percentage of Gross Domestic Product

7. 6CONGRESSIONAL BUDGET OFFICE
Components of the Total Increase in Outlays in
CBO’s Baseline Between 2016 and 2026
Total Increase
in Outlays:
$2.5 Trillion
All Other Programs
(17%)
Net Interest
(23%)
Social Security
(28%)
Major Health Care Programs
(32%)Medicare
(20%)
Other
(12%)

8. 7CONGRESSIONAL BUDGET OFFICE
Projected Debt Held by the Public and Net Interest
Billions of Dollars
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
0
100
200
300
400
500
600
700
800
900
0
5,000
10,000
15,000
20,000
25,000
Net Interest (Left axis)
Debt Held by the Public (Right axis)

9. 8CONGRESSIONAL BUDGET OFFICE
Projected Outlays in Major Budget Categories
Percentage of Gross Domestic Product
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
0
1
2
3
4
5
6
7
Social Security
Major Health
Care Programs
Net Interest
5.9
5.2
2.5
Discretionary 6.6
Other Mandatory 3.0

10. 9CONGRESSIONAL BUDGET OFFICE
Total Revenues
Percentage of Gross Domestic Product
18.2
Average Revenues,
1966 to 2015
(17.4%)
Total Revenues
Actual Projected
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026
0
5
10
15
20
25

11. 10CONGRESSIONAL BUDGET OFFICE
Spending and Revenues Projected in CBO’s Baseline,
Compared With Actual Values in 1966 and 1991
Percentage of Gross Domestic Product

12. 11CONGRESSIONAL BUDGET OFFICE
Economic Outlook

13. 12CONGRESSIONAL BUDGET OFFICE
Growth of Real Gross Domestic Product
Percent, Fourth Quarter to Fourth Quarter

14. 13CONGRESSIONAL BUDGET OFFICE
Rates of Short- and Long-Term Unemployment
Percent

15. 14CONGRESSIONAL BUDGET OFFICE
Labor Force Participation Rates
Percent

16. 15CONGRESSIONAL BUDGET OFFICE
Hourly Labor Compensation
Percentage Change

17. 16CONGRESSIONAL BUDGET OFFICE
Inflation
Percentage Change in PCE Price Indexes

18. 17CONGRESSIONAL BUDGET OFFICE
Interest Rates on Treasury Securities
Percent