How Changes in Economic Conditions Might Affect the Federal Budget, 2026 to 2036: An Interactive Tool

Every year, CBO publishes projections of what the federal budget and the economy would look like in the current fiscal year and over the next 10 years if current laws governing taxes and spending generally remained unchanged. The agency uses its economic forecast as a basis for projecting revenues from each major revenue source (individual income taxes, corporate income taxes, payroll taxes, customs duties, and other taxes), outlays for federal budget accounts, the resulting deficits or surpluses, and federal debt. Those budget projections form CBO's budget baseline, which provides a benchmark that is used to evaluate the anticipated effects of proposed legislation and to determine whether the legislation is subject to various budget enforcement procedures. If economic conditions differed noticeably from those in CBO's forecast, budgetary outcomes could differ from those in the agency's baseline budget projections.

This interactive tool allows users to define alternative economic scenarios and see how revenues, outlays, and deficits and debt under those scenarios might differ from those in the agency's February 2026 baseline budget projections. Users may adjust four economic variables—productivity growth, labor force growth, interest rates, and inflation—by specifying differences in the values of those variables relative to the values underlying the agency's baseline budget projections. In addition to providing estimates of budgetary outcomes, the tool shows how values of certain other economic measures—including gross domestic product (GDP), real GDP (that is, GDP adjusted to remove the effects of changes in prices), and interest rates—might change under the user-specified scenario.

This interactive tool is based on the agency's "rules of thumb" about the budgetary effects of changes in key economic variables that are described in How Changes in Economic Conditions Might Affect the Federal Budget: 2026 to 2036. This tool, therefore, provides results that only approximate those that CBO would produce using its broad set of economic and budget models.

The formulas underlying the tool do not capture all the complex interactions among variables that would result from wider changes in the economy, although they do capture certain interactions. For example, when productivity growth is adjusted, the estimated percentage-point changes in real GDP growth reflect not only the direct effect of changes in productivity growth specified by the user but also the effects of those changes on the labor supply. Furthermore, the resulting changes in income approximate those that would be estimated by CBO's models. Similarly, when labor force growth is set to differ from the growth underlying the agency's baseline budget projections, the estimated effects on real GDP growth reflect how the labor supply and investment activity would respond to the user-specified changes—again, with the income effects approximating those generated by CBO's models. (Unlike the scenarios for productivity growth and labor force growth, in which other economic variables are allowed to change, the scenarios for interest rates and inflation hold those other variables constant.)

Like the rules of thumb, this tool calculates alternative estimates on the basis of changes in only a few specific variables. The simplified formulas underlying the tool do not capture all changes that could stem from broader changes in the economy or from changes in fiscal policy; rather, the user-specified scenarios share the same general economic conditions and are assumed to be subject to the same tax and spending policies underlying CBO's baseline projections. If, for example, a change in productivity was brought about by a change in immigration or by a change in the tax code, the effects on the economy and the budget would be more complicated than those estimated using this tool.

The estimates produced by this interactive tool will reasonably approximate the estimates that CBO's broader set of models would produce for only moderate changes in economic variables. Larger changes would require CBO to perform additional analysis to determine the budgetary and economic effects. Relative to CBO's baseline estimates, annual deviations of up to 0.5 percentage points for the productivity growth scenario, 0.75 percentage points for the labor force growth scenario, and 1 percentage point for the interest rates and inflation scenarios are expected to produce reasonable results. Users are not able to input values outside those ranges because the tool cannot approximate CBO's full suite of models for such scenarios.