Effects of Automatic Stabilizers on the Federal Budget: 2026 to 2036
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CBO provides estimates of the budgetary effects of automatic stabilizers—as well as the size of federal budget deficits without them—over the past 50 years and in CBO's current economic forecast from 2026 to 2036.
Automatic stabilizers are the components of federal revenues and outlays that automatically increase or decrease with cyclical changes in the economy to help strengthen a weakening economy or cool an overheating one. Automatic stabilizers are at work when, during a downturn, income tax payments decline as incomes fall, and unemployment insurance spending increases as more people claim unemployment benefits—or when tax payments increase and unemployment insurance spending falls during an expansion. Those changes, which occur without any legislated changes in tax or spending policies, help stabilize the economy by boosting or restraining private spending.
Estimating the effects of automatic stabilizers on the federal budget sheds light on the extent to which actual and projected changes in budget deficits occur automatically in response to economic fluctuations and the extent to which they are driven by other factors. Those other factors include changes in policy—such as legislated changes in tax and spending policies and executive actions—and demographic trends.
In this report, the Congressional Budget Office provides estimates of the budgetary effects of automatic stabilizers—as well as the size of federal budget deficits without them—over the past 50 years and in CBO's current economic forecast from 2026 to 2036. Effects are measured in nominal dollars (that is, not adjusted for inflation) and in relation to CBO's estimate of potential gross domestic product (GDP), which is the economic output that can be produced if labor and capital are employed at their maximum sustainable rates. Key takeaways include the following:
In CBO's projections, automatic stabilizers decrease federal deficits by an average of 0.2 percent of potential GDP from 2026 to 2029 and increase federal deficits by an average of 0.1 percent of potential GDP from 2030 to 2036.
On average, over the 2026–2036 period, automatic stabilizers decrease federal deficits by less than 0.05 percent of potential GDP per year, in CBO's projections. From 1976 to 2025, automatic stabilizers increased federal deficits by an estimated average of 0.3 percent of potential GDP per year.
In CBO's projections, deficits with the effects of automatic stabilizers removed (that is, deficits without the automatic effects of cyclical changes in the economy) average 6.1 percent of potential GDP from 2026 to 2036, about the same percentage of potential GDP for deficits with those effects included and markedly higher than the 50-year average of 3.7 percent for those cyclically adjusted deficits.
Those and other estimates in this report are based on historical data and CBO's baseline projections from its February 2026 report on the budget and economic outlook, which reflect what the federal budget and the economy would look like in the current year and over the next 10 years if laws governing taxes and spending generally remained unchanged. Like that February report, this report reflects trade policy as of November 20, 2025, and economic developments and laws in place as of December 3, 2025. Unlike the February report, this report presents estimated deficits as a percentage of potential GDP.
