In CBO’s updated projections, real gross domestic product (GDP) grows by 3.1 percent in 2018 and by 2.4 percent in 2019 before slowing in the following years.
Economic Effects of Fiscal Policy
Expanding on its earlier long-term baseline projections, CBO shows how the federal budget and the economy would evolve under three scenarios in which laws would be changed to continue certain policies now in place, leading to higher debt.
The President’s budget proposals would make U.S. output larger over the next decade than it would be under current law—mostly by changing immigration laws. The economic effects would affect the budget in ways that would reduce deficits.
The President’s policies would make U.S. output larger over the next decade than it would be under current law—mostly by changing immigration laws. Such economic effects would feed back into the budget in ways that would reduce deficits.
- ReportEstimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014
In calendar year 2014, ARRA—which was enacted in 2009—raised real GDP by between a small fraction of a percent and 0.2 percent and increased the number of full-time-equivalent jobs by between a slight amount and 0.2 million, CBO estimates.
The federal government influences innovation through two broad channels: spending and tax policies, and the legal and regulatory systems. Policymakers have a number of options for spurring additional innovation.
In certain reports and for some major pieces of legislation, CBO analyzes the short- and longer-term effects on the overall economy of changes in federal tax and spending policies. This report explains the methods that CBO uses.
- ReportBudgetary and Economic Outcomes Under Paths for Federal Revenues and Noninterest Spending Specified by Chairman Ryan, April 2014
Under budgetary paths, but not particular policies, specified by Chairman Ryan, total deficits and debt would be smaller than under CBO’s extended baseline. Economic output would be lower in the next few years but higher thereafter.