Outlook for the Budget and the Economy

Accuracy of CBO’s Baseline Projections

CBO periodically reports to the Congress on the accuracy of its baseline projections for spending, revenues, and the deficit by comparing those data with actual outcomes.

Automatic Stabilizers in the Federal Budget

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. CBO periodically projects the budgetary effects of those automatic stabilizers—as well as the size of deficits without them—and provides historical estimates of the stabilizers’ effects.

Budget and Economic Outlook and Updates

CBO regularly publishes projections of economic and budget outcomes which incorporate the assumption that current law regarding federal spending and revenues generally remains in place. Those baseline projections cover the 10-year period used in the Congressional budget process. Most of the reports on those projections also describe the differences between the current projections and previous ones; compare the economic forecast with those of other forecasters; and show the budgetary impact of some alternative policy assumptions. The budget projections and economic forecast are generally issued each January and updated in August; the budget projections are also generally updated each March.

Economic Forecasting Record

CBO periodically evaluates the quality of its economic forecasts by comparing them with the economy’s actual performance and with forecasts by the Administration and the Blue Chip consensus—an average of about 50 private-sector forecasts. Such comparisons help to show the extent to which various factors have caused CBO to miss patterns and turning points in the economy.

Federal Debt and the Statutory Limit

The debt limit—commonly referred to as the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government’s operations.

Federal Mandatory Spending for Means-Tested Programs

Federal Receipts and Expenditures in the National Income and Product Accounts

CBO each year produces projections of the federal receipts and expenditures in the national income and product accounts (NIPAs), which are produced by the Department of Commerce’s Bureau of Economic Analysis.

Long-Term Budget Outlook

CBO provides the Congress with budget projections beyond the standard 10-year budget window. Those projections, which starting in 2016 focus primarily on the coming 30 years (previously they focused on the next 25 years), show the effects of demographic trends, economic developments, and rising health care costs on federal spending, revenues, and deficits. The assumptions about federal spending and revenue policies used for the long-term budget projections match those underlying the agency’s 10-year baseline for the first decade and are extended in a similar way to later years. The report also shows the long-term budgetary and economic effects of some alternative policies.

Workbook for How Changes in Economic Conditions Might Affect the Federal Budget