Economy

Extending the 10-year budget projections it published on January 17, 2025, CBO projects that federal debt held by the public, boosted by sustained deficits, will grow far beyond any previously recorded level over the next 30 years.

To show how variations in economic conditions might affect its budget projections, CBO analyzed how revenues, outlays, and deficits might change if the values of key economic variables differed from those in the agency’s forecast.

CBO provides additional details about the economic forecast it published on January 17, 2025, in The Budget and Economic Outlook: 2025 to 2035.

In CBO’s projections, the federal budget deficit is $1.9 trillion this year, and federal debt rises to 118 percent of GDP in 2035. Economic growth slows and inflation declines over the next two years; both remain moderate after 2026.

CBO provides details about its latest projections of the economy through 2027. Those projections reflect economic developments and current law as of December 4, 2024.

CBO’s Director describes how expiring provisions of the 2017 tax act affect the agency’s baseline projections and reviews some information that has become available since CBO first estimated the effects of the tax act in April 2018.

CBO focused on households’ consumption of a bundle of typical goods and services from 2019 to compare purchasing power in 2019 with that in 2023. On average, purchasing power increased, but the effects of inflation varied by income group.

In CBO’s latest projections, economic growth slows and then picks up over the 2023–2025 period. That initial slowdown in economic growth drives up unemployment. Inflation continues to gradually decline.

CBO assesses its two-year and five-year economic forecasts and compares them with forecasts of the Administration and the Blue Chip consensus, an average of about 50 private-sector forecasts.

Over recent decades, corporate economic profits have grown faster than the amounts that corporations pay in federal taxes. CBO examined the factors that explain why corporate tax payments have not grown with corporate economic profits.

CBO summarizes in graphic form its projections of what the economy would look like this year and over the next decade if current laws governing federal taxes and spending generally remained in place.

CBO projects the budgetary effects of automatic stabilizers—as well as the size of deficits without them—from 2022 to 2032 and provides historical estimates of the stabilizers’ effects since 1972.

CBO examines how inflation has affected households at different income levels and compares inflation since 2019 with the growth in household income over the same period.

This paper presents a practical method for assessing the uncertainty of long-term economic projections.