Automatic Stabilizers in the Federal Budget: 2020 to 2030
Report
In this report, CBO projects the budgetary effects of 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.
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 mechanisms help stabilize the economy automatically, without any legislated changes in tax or spending policies.
In this report, CBO 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. Like the agency’s current economic forecast and budget projections on which this analysis is based, the projections presented here reflect the assumption that current law will generally remain unchanged.
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.)