The Effects on the Budget of Alternative Economic Scenarios

Posted by Keith Hall on
June 28, 2018

I am often asked about how different the deficit might be if productivity grows faster than CBO projects, if interest rates end up being higher than they are in our economic forecast, and so on. Today we have posted an interactive workbook that allows users to enter an alternative scenario for productivity growth, labor force growth, inflation, or interest rates and see estimates of revenues, several types of spending, and deficits under those scenarios. The estimates shown in the workbook are simplified approximations of the results that we might produce using our broad set of economic and budget models.

The workbook is accompanied by a report explaining the usefulness and limits of the analysis. Earlier versions of that material—showing fewer alternatives than those that can be created in the workbook, but containing similar information—have been published for many years as an appendix to our Budget and Economic Outlook.

The information released today enhances the transparency of our work by showing the sensitivity of our budget projections to key inputs. For example, if productivity growth was 0.1 percentage point higher than it is in our economic forecast each year for the next decade, then we project that the federal deficit for the 2019–2028 period would be lower by about $230 billion. If instead productivity growth was 0.1 percentage point lower, the deficit would be higher by roughly the same amount. This release is part of our ongoing efforts to provide more information to the Congress about our analyses, and we welcome feedback on its usefulness.

Keith Hall is CBO’s Director.