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1 1 (2020)

handle is hein.congrec/cboautof0001 and id is 1 raw text is: FEBRUARY 2020 Automatic Stabilizers in the Federal Budget: 2020 to 2030 Federal revenues and outlays regularly respond to cyclical movements in the economy in ways that tend to dampen those movements; the budget mechanisms that drive that process are known as automatic stabilizers. Those mecha- nisms help stabilize the economy automatically, without any legislated changes in tax or spending policies. In this report, the Congressional Budget Office projects the budgetary effects of those automatic stabilizers-as well as the size of deficits without them-from 2020 to 2030 and provides historical estimates of the stabilizers' effects since 1970.1 Like the agency's current economic forecast and budget projections on which this analysis is based, the projections presented here reflect the assump- tion that current law will generally remain unchanged.2 1. Data going back to 1965 are available at www.cbo.gov/ publication/51139, as are the agency's previous estimates of the effects of automatic stabilizers. 2. For the agency's current economic forecast and budget projections, see Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030 (January 2020), www.cbo.gov/ publication/56020. In the past, the analysis included in this report has appeared as an appendix in the annual Budget and Economic Outlook. This year, however, it is published separately because the timing of recent legislation forestalled its inclusion in that larger report. The key takeaways from CBO's analysis of the effects of automatic stabilizers are as follows: * From 2020 to 2023, the economy operates above its potential in CBO's forecast, and automatic stabilizers are projected to reduce federal budget deficits. * From 2024 to 2030, the economy operates below its potential in the agency's forecast, and automatic stabilizers are projected to increase deficits. * With the effects of automatic stabilizers removed, deficits are projected to average 4.7 percent of potential gross domestic product (GDP) over the next decade, nearly twice their 50-year average. (Potential GDP is an estimate of the maximum sustainable output of the economy.) Background When the economy is operating below its potential, automatic stabilizers typically boost federal outlays for transfer programs, such as unemployment insurance benefits, Medicaid, and the Supplemental Nutrition Assistance Program, above what they would be if the economy was operating at its potential; such programs support household income and thus private spending. Meanwhile, automatic stabilizers reduce federal reve- nues because wages and salaries, corporate profits, and Notes: Unless this report indicates otherwise, years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Numbers may not add up to totals because of rounding.

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