CBO was asked what the effects on federal deficits would be if the economy was stagnant over two years. The agency created two scenarios with no growth of gross domestic product adjusted to remove the effects of inflation.
The Congressional Budget Office was asked what the effects on federal deficits would be if the economy was stagnant over two years. To answer that question, the agency created two scenarios with no growth of gross domestic product adjusted to remove the effects of inflation (real GDP): one scenario with increases in interest rates and inflation typical of a supply shock, such as when oil prices rise, and the other with decreases in interest rates and inflation typical of a demand shock, such as when household spending declines because consumer confidence has fallen. Compared with CBO’s baseline projection of the deficit in its February 2023 Budget and Economic Outlook, those scenarios increased deficits by a total of about $336 billion and about $192 billion, respectively, during fiscal years 2024 and 2025.
