Presentation by Keith Hall, CBO Director, at the Forecasters Club of New York. 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. To analyze the state of the budget in the long term, CBO has extrapolated its 10-year baseline projections an additional two decades. If current laws governing taxes and spending remain in place, the outlook for the budget would steadily worsen over the long term, with revenues falling well short of spending. CBO is in the process of completing a detailed update of its long-term projections; but in January the agency did a simplified update. On that basis, budget deficits are projected to rise steadily and federal debt held by the public is projected to exceed 130 percent of GDP by 2040. To put the federal budget on a sustainable path for the long term, lawmakers would have to make major changes to tax policies, spending policies, or both – by reducing spending for large benefit programs below the projected amounts, letting revenues rise more than they would under current law, or adopting some combination of those approaches. The size of such changes would depend on the amount of federal debt that lawmakers considered appropriate.

1. Congressional Budget Office
The 2016 Budget Outlook
Presentation at the
Forecasters Club of New York
New York City, NY
June 29, 2016
Keith Hall
Director
This presentation draws on Updated Budget Projections: 2016 to 2026 (March 2016), www.cbo.gov/publication/51384,
Budgetary and Economic Outcomes Under Paths for Federal Revenues and Noninterest Spending Specified by
Chairman Price, March 2016 (March 2016), www.cbo.gov/publication/51260, and The Budget and Economic Outlook:
2016 to 2026 (January 2016), www.cbo.gov/publication/51129.

2. 1CONGRESSIONAL BUDGET OFFICE
CBO’s Budget Projections Through 2026
as of March 2016

3. 2CONGRESSIONAL BUDGET OFFICE
Total Deficits or Surpluses
Percentage of GDP
Actual Projected
Deficits
Surpluses
Average
Deficit,
1966 to 2015
(-2.8%)
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026
-10
-8
-6
-4
-2
0
2
4
-10
-8
-6
-4
-2
0
2
4

4. 3CONGRESSIONAL BUDGET OFFICE
Total Revenues and Outlays
Percentage of GDP
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026
0
4
8
12
16
20
24
28
0
4
8
12
16
20
24
28
Outlays
Revenues
Average Outlays,
1966 to 2015
(20.2%)
Average Revenues,
1966 to 2015
(17.4%)
Actual Projected

5. 4CONGRESSIONAL BUDGET OFFICE
Components of the Total Increase in Outlays in
CBO’s Baseline Between 2016 and 2026

6. 5CONGRESSIONAL BUDGET OFFICE
Projected Net Interest Outlays

7. 6CONGRESSIONAL BUDGET OFFICE
Projected Outlays in Major Budget Categories
Percentage of GDP

8. 7CONGRESSIONAL BUDGET OFFICE
Major Changes in Projected Revenues From 2016 to 2026

9. 8CONGRESSIONAL BUDGET OFFICE
Tax Expenditures and Other Budget Categories in 2016

10. 9CONGRESSIONAL BUDGET OFFICE
CBO’s Budget Projections Through 2040
as of January 2016

11. 10CONGRESSIONAL BUDGET OFFICE
Federal Debt, Spending, and Revenues
Percentage of GDP

12. 11CONGRESSIONAL BUDGET OFFICE
Uncertainty About Projections of Debt
■ Even if future tax and spending policies match the policies
specified in current law, budgetary outcomes will undoubtedly
differ from CBO’s projections.
■ Unexpected changes in the economy, demographics, and other
key factors will occur.

13. 12CONGRESSIONAL BUDGET OFFICE
Components of Federal Spending

14. 13CONGRESSIONAL BUDGET OFFICE
Changes in the Population, by Age Group

15. 14CONGRESSIONAL BUDGET OFFICE
Projected Spending, Compared With Past Averages

16. 15CONGRESSIONAL BUDGET OFFICE
Total Revenues

17. 16CONGRESSIONAL BUDGET OFFICE
Projected Spending, Revenues, and Deficits, Compared
With Past Averages
Percentage of GDP

18. 17CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public
Percentage of GDP

19. 18CONGRESSIONAL BUDGET OFFICE
A Likely Range for CBO’s Projection of Debt
■ The extended baseline represents CBO’s best projection of
federal debt relative to GDP 25 years from now under
current law, but the amount could be higher or lower.
■ Last year, CBO considered a wide range of possible values
for key factors such as interest rates, health care costs, and
productivity.
■ That analysis concluded that federal debt would probably
be at least as high as it is today and would most likely be
much higher.
■ This year, federal debt is projected to be even higher than
it was in last year’s analysis.

20. 19CONGRESSIONAL BUDGET OFFICE
A Sustainable Path for the Long Term
■ Lawmakers would have to make major changes to tax
policies, spending policies, or both.
■ The size of such changes would depend upon the
amount of federal debt that lawmakers considered
appropriate.

21. 20CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public Under Various
Budget Scenarios