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1 CBO's Current View of the Economy in 2023 and 2024 and the Budgetary Implications 1 (November 30, 2022)

handle is hein.congrec/cosctv0001 and id is 1 raw text is: T his report describes the Congressional Budget Office's current view of the economy over the next two years, compares that view with pro- jections of other forecasters and with those that CBO made previously, and explains the implications for the federal budget. CBO's current view of the economy incor- porates information available through November 16, 2022; the agency's most recent projections, published in May 2022, used information available through March 2, 2022. According to CBO's current assessment, economic growth will probably be slower in 2023 than the agency projected in May 2022, reflecting recent developments (including higher interest rates), and faster in 2024, as the economy recovers. Rates of unemployment, infla- tion, and interest will probably be higher over the next two years than CBO projected in May 2022. Slower economic growth and higher rates of unemployment, inflation, and interest increase federal deficits and debt. CBO will publish its budget and economic projec- tions early next year in the agency's annual Budget and Economic Outlook.1 As part of the process of preparing that report, CBO is in the midst of revising its economic forecast. The agency is providing information in this report now in response to interest expressed by Members of Congress. The report is more comprehensive than would have been possible if CBO's standard process for developing its forecast had not already been underway. Because CBO has not completed its forecast, this analysis focuses on the middle two-thirds of ranges for economic projections that indicate uncertainty about the possible outcomes for output, unemployment, inflation, 1. For earlier volumes in the series, see Congressional Budget Office, Budget and Economic Outlook and Updates (accessed November 30, 2022), www.cbo.gov/about/products/major- recurring-reports#1. CBO's most recent projections from May 2022 underlie the baseline that will be used in cost estimates for legislation at least through the end of 2022. and interest rates. (For a description of the analytic methods used in this report, see Box 1 on page 5.) The forecast published early next year will include point estimates. Output From the fourth quarter of 2022 to the fourth quarter of 2023, CBO estimates, there is a two-thirds chance that growth in economic output-specifically, gross domestic product adjusted to remove the effects of inflation, or real GDP-will be between -2.0 percent and 1.8 per- cent (see Table 1). For 2024, that estimate ranges from 0.7 percent to 4.2 percent. For 2023, CBO expects that real GDP growth is more likely to be below than above the estimates of other forecasters-namely, the ranges spanned by the middle two-thirds of projections in the Survey of Professional Forecasters and the central tendency (roughly the middle two-thirds) of estimates by Federal Reserve officials. For 2024, CBO expects that such growth is more likely to be above the Federal Reserve's central tendency than below it. The forecasts from the Survey of Professional Forecasters were published in November 2022, and those by the Federal Reserve were published in September 2022. Part of the difference between CBO's projections and those of other forecasters is attributable to differences in the eco- nomic data available when the forecasts were completed and to differences in the economic and statistical models used to prepare them.2 2. A key difference between CBO's economic projections and those made by Federal Reserve officials is that CBO develops its projections so that they fall in the middle of the range of likely outcomes under current law, whereas the Federal Reserve reports a different concept: Federal Reserve officials provide modal forecasts-forecasts of the most likely outcomes-reflecting their individual assessments of appropriate monetary policy, and the Federal Reserve reports ranges of those modal values. In addition, Federal Reserve officials and other forecasters, unlike CBO, may assume in their forecasts that additional legislation will be enacted.

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