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1 An Update to the Budget and Economic Outlook: 2021 to 2031 1 (July 1, 2021)

handle is hein.congrec/cboubeco0001 and id is 1 raw text is: he Congressional Budget Office regularly pub- lishes reports presenting projections of what federal budget deficits, debt, revenues, and spending-and the economic path underlying them-would be for the current year and for the follow- ing 10 years if current laws governing taxes and spending generally remained unchanged. This report presents the agency's most recent budget and economic projections, which are based on the laws in effect as of May 18, 2021. This presentation of CBO's projections is much shorter than usual. The information is less detailed so that CBO can provide it to lawmakers as quickly as possible. CBO will publish more detailed information about its projec- tions later this month.1 The Budget In CBO's budget projections (called the baseline), the federal budget deficit for fiscal year 2021 is $3.0 trillion, nearly $130 billion less than the deficit recorded in 2020 but triple the shortfall recorded in 2019. Relative to the size of the economy, this year's deficit is projected to total 13.4 percent of gross domestic product (GDP), making it the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. The economic disruption caused by the 2020-2021 coronavirus pan- demic and the legislation enacted in response continue to weigh on the deficit (which was already large by histori- cal standards before the pandemic). Baseline deficits under current law are significantly smaller after 2021 and average $1.2 trillion from 2022 to 2031. They average 4.2 percent of GDP through 2031, well above their 50-year average of 3.3 percent. In CBO's projections, the deficit declines to about 3 percent of GDP in 2023 and 2024 before increasing again, reaching 1. CBO plans to publish additional information about its latest budget and economic projections on July 21, 2021. 5.5 percent in 2031 (see Table 1). By the end of the period, both primary deficits (which exclude net outlays for interest) and interest outlays are increasing in nomi- nal terms and as a share of GDP. With such deficits, federal debt held by the public- which stood at $21.0 trillion, or 100 percent of GDP, at the end of 2020-would total $23.0 trillion, or 103 percent of GDP, at the end of 2021. As recently as 2007, at the start of the previous recession, federal debt equaled 35 percent of GDP. Projected federal debt dips just below 100 percent of GDP between 2023 and 2025 before rising again, reaching 106 percent in 2031, about the same as the amount recorded in 1946, which stands as the highest in the nation's history. Revenues in CBO's baseline increase to 17 percent of GDP in 2021 and are relatively stable thereafter, aver- aging 18 percent from 2022 through 2031. Outlays are projected to decline from 31 percent of GDP this year to about 21 percent from 2023 through 2025 as pandem- ic-related spending wanes and low interest rates persist. Outlays then increase relative to GDP, owing to rising interest costs and greater spending for major entitlement programs. Compared with its estimates from February 2021, CBO's estimate of the deficit for 2021 is now $745 billion (or 33 percent) larger, and its projection of the cumulative deficit between 2022 and 2031, $12.1 trillion, is now $173 billion (or 1 percent) smaller. In 2021, recently enacted legislation-primarily the American Rescue Plan Act of 2021 (Public Law 117-2)-increases the projected deficit by $1.1 trillion, mostly as a result of higher spending. The largest budgetary effects stem from additional funding for recovery rebates for individuals, for state and local governments, for educational institutions, and for an extension of expanded unemployment Notes: Unless this report indicates otherwise, all years referred to when describing the budget outlook are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Years referred to in describing the economic outlook are calendar years. Numbers in the text and tables may not add up to totals because of rounding.

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