Congressional Budget Office

CBO’s Recent Budget and Economic Projections

Presentation to the American University

Department of Economics

April 26, 2016

Keith Hall Director

This presentation draws on Updated Budget Projections: 2016 to 2026 (March 2016), www.cbo.gov/publication/51384, and The Budget and Economic Outlook: 2016 to 2026 (January 2016), www.cbo.gov/publication/51129.

1 CO N GR ES S IO N A L B UDGE T O F F IC E

The Congressional Budget Office, along with the House and Senate Budget Committees, was created by the Congressional Budget and Impoundment Control Act of 1974 to play an important role in the budget process of the United States.

2 CO N GR ES S IO N A L B UDGE T O F F IC E

CBO was created to provide the Congress with analysis of budgetary and economic issues in an objective and impartial manner. The agency is strictly nonpartisan.

3 CO N GR ES S IO N A L B UDGE T O F F IC E

CBO’s Products and Activities

Baseline budget projections and economic forecasts covering the 10-year period used in the Congressional budget process

Analysis of the President’s budget

Cost estimates for legislation, including analyses of federal mandates

Scorekeeping for enacted legislation

Long-term budget projections

Analytic reports examining specific federal programs, aspects of the tax code, and budgetary and economic challenges

4 CO N GR ES S IO N A L B UDGE T O F F IC E

CBO does not:

Make policy recommendations

Enforce budget rules

Write legislation

Implement programs or regulations

Evaluate historical performance of government programs

5 CO N GR ES S IO N A L B UDGE T O F F IC E

CBO’s Estimates

• CBO’s cost estimates generally focus on the next 5 or 10 years but sometimes look out 20 years or more.

• They are meant to reflect the middle of the distribution of possible outcomes.

6 CO N GR ES S IO N A L B UDGE T O F F IC E

The estimates incorporate behavioral responses to the extent feasible, on the basis of the available evidence.

They are open to new information and may change as a result, and they include explanations of the analysis to the extent feasible.

7 CO N GR ES S IO N A L B UDGE T O F F IC E

Growth of Real Gross Domestic Product

Percent, Fourth Quarter to Fourth Quarter

8 CO N GR ES S IO N A L B UDGE T O F F IC E

Labor Force Participation Rates

Percent

9 CO N GR ES S IO N A L B UDGE T O F F IC E

Interest Rates on Treasury Securities

Percent

10 CO N GR ES S IO N A L B UDGE T O F F IC E

Total Deficits or Surpluses

Percentage of Gross Domestic Product

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

11 CO N GR ES S IO N A L B UDGE T O F F IC E

Federal Debt Held by the Public

Percentage of Gross Domestic Product

12 CO N GR ES S IO N A L B UDGE T O F F IC E

Total Revenues and Outlays

Percentage of Gross Domestic Product

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

13 CO N GR ES S IO N A L B UDGE T O F F IC E

Components of the Total Increase in Outlays in CBO’s Baseline Between 2016 and 2026

Total Increasein Outlays:$2.5 Trillion

All Other Programs(17%)

Net Interest(23%)

Social Security(28%)

Major Health Care Programs(32%)Medicare

(20%)

Other(12%)

14 CO N GR ES S IO N A L B UDGE T O F F IC E

Projected Outlays in Major Budget Categories

Percentage of Gross Domestic Product

15 CO N GR ES S IO N A L B UDGE T O F F IC E

Spending and Revenues Projected in CBO’s Baseline, Compared With Actual Values in 1966 and 1991 Percentage of Gross Domestic Product