The Congressional Budget Office has analyzed the economic and budgetary effects of imposing caps on discretionary budget authority. Specifically, the agency has estimated what the effects would be if the funding caps enacted in June 2023 had been those required under H.R. 2811, the Limit, Save, Grow Act of 2023 (LSGA), which was passed by the House of Representatives on April 26, 2023. CBO has previously published estimates indicating that, relative to the agency’s February 2023 baseline budget projections, caps under the LSGA would reduce the primary deficit—that is, the total deficit minus net interest outlays—by $3.2 trillion from 2024 to 2033. In comparison, the caps that became law under the Fiscal Responsibility Act of 2023 (FRA, Public Law 118-5) would reduce CBO’s projections of discretionary spending, and therefore the projected primary deficit, by $1.3 trillion over that period.
Those estimates were prepared according to long-standing practice, reflecting the assumption that the total output of the economy, measured in current-year dollars (that is, in terms of nominal gross domestic product, or GDP), would not change. As a result, total income would be unchanged. The dynamic analysis described in this report considers a broader set of effects. It takes into account the ways that reductions in discretionary spending would affect the total output of the economy and how the resulting macroeconomic changes would in turn affect federal revenues and spending.