Federal revenues and outlays regularly respond to cyclical movements in the economy in ways that tend to offset those movements; the budget mechanisms that drive that process are known as automatic stabilizers. Those mechanisms, which help stabilize the economy automatically, also contribute to short-run fluctuations in the deficit, without any legislated changes in tax or spending policies.
In this report, the Congressional Budget Office projects the budgetary effects of those automatic stabilizers—as well as the size of deficits without them—from 2023 to 2033 and provides historical estimates of the stabilizers’ effects since 1973. This report is based on CBO’s forecast that was released in February 2023; those economic projections reflect economic developments through December 6, 2022. The projections in the February 2023 forecast and those presented in this report 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:
Automatic stabilizers are projected to increase federal deficits from 2023 to 2027. From 2028 to 2033, automatic stabilizers continue to add to deficits in CBO’s projections, but by a smaller amount than they do over the next five years.
With the effect of automatic stabilizers removed, deficits are projected to average 5.5 percent of potential gross domestic product (GDP) over the next decade, roughly double their 50-year average. (Potential GDP is an estimate of the maximum sustainable output of the economy.)