About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 Dan Ready, How Changes in Economic Conditions Might Affect the Federal Budget: 2025 to 2035 1 (March 13, 2025)

handle is hein.congrec/hwcsieccd0001 and id is 1 raw text is: t least once a year, the Congressional Budget Office publishes a report providing the agency's projections of what the federal budget and the economy would look like in the current fiscal year and over the next 10 years if current laws governing taxes and spending generally remained unchanged. The agency uses its economic forecast-which includes projections of income, inflation, interest rates, and other variables-as a basis for projecting revenues from each major revenue source (individual, corporate, payroll' and other taxes), spending for federal budget accounts, the resulting deficits or surpluses, and federal debt. If economic conditions differed noticeably from those in CBO's fore- cast, budgetary outcomes could diverge from those in the agency's baseline budget projections. To show how variations in economic conditions might affect its budget projections, CBO analyzed how reve- nues, outlays, and deficits might change if the values of key economic variables differed from those in the agency's forecast.1 To do so, CBO generated four economic scenar- ios that would result in larger budget deficits. In isolation, each of those scenarios would cause the cumulative deficit for the 2026-2035 period to be larger than it is in CBO's baseline projections-by an amount between $184 bil- lion and $388 billion. (The total deficit projected for that period is $21.8 trillion.) The four scenarios that CBO analyzed are as follows: • Slower productivity growth. If productivity grew at a rate that was 0.1 percentage point slower each year 1. This analysis is based on the agency's most recent baseline budget and economic projections. See Congressional Budget Office, The Budget and Economic Outlook: 2025 to 2035 (January 2025), www.cbo.gov/publication/60870. than it is in the agency's economic forecast, economic growth would slow, which would reduce income and, in turn, federal revenues. Although some of that decrease in revenues would be offset by reductions in outlays, annual deficits would be larger than projected by amounts that would reach $77 billion in 2035, CBO estimates. The cumulative deficit for the 2026- 2035 period would be $388 billion (or 1.8 percent) larger than it is in CBO's baseline budget projections. • Slower growth of the labor force. If the labor force grew at a rate that was 0.1 percentage point slower each year than the rate in CBO's economic forecast and the unemployment rate was the same as forecast, economic growth would slow, and annual deficits would be larger than those in the agency's baseline budget projections by amounts that would reach $37 billion in 2035.2 The cumulative deficit for the 2026-2035 period would be $184 billion (or 0.8 percent) larger than it is in the agency's baseline projections. • Higher interest rates. If all interest rates-including those on 3-month Treasury bills and 10-year Treasury notes-were 0.1 percentage point higher each year than they are in CBO's economic forecast, the government's net interest costs would grow progressively over the projection period. If other variables were the same as forecast, higher-than- forecast interest rates would cause deficits to exceed the agency's baseline projections by $54 billion in 2035 and by $351 billion (or 1.6 percent) over the 2026-2035 period. 2. The labor force is the number of people age 16 or older in the civilian noninstitutionalized population who have jobs or are unemployed (available for work and either seeking work or expecting to be recalled from a temporary layoff). The unemployment rate is the percentage of people in the labor force who are unemployed. Notes: All years referred to in describing the budgetary effects of changes in the economy 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 estimated changes to the economy are calendar years. Numbers in the text and tables may not add up to totals because of rounding.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most