CBO estimates that the federal budget deficit in 2020 will be $1.0 trillion, or 4.6 percent of gross domestic product (GDP). If current laws governing federal taxes and spending generally did not change, the projected gap between outlays and revenues would increase to 5.4 percent of GDP in 2030. Federal debt held by the public would rise over the coming decade, from 81 percent of GDP in 2020 to 98 percent of GDP in 2030. Inflation-adjusted GDP is projected to grow by 2.2 percent this year, largely because of continued strength in consumer spending and a rebound in business fixed investment. Output is projected to be higher than the economy’s maximum sustainable output in 2020 to a greater degree than it has been in recent years, leading to higher inflation and interest rates after a period in which both were low, on average. CBO projects that continued strength in the demand for labor will keep the unemployment rate low and drive employment and wages higher. Over the coming decade, the economy is projected to expand at an average annual rate of 1.7 percent, roughly the same rate as its potential rate of growth.

1. Congressional Budget Office
A Joint Seminar by the Congressional Budget Office
and the Congressional Research Service
February 6, 2020
Christina Hawley Anthony, Chief, Projections Unit, Budget Analysis Division
Robert Arnold, Chief, Projections Unit, Macroeconomic Analysis Division
Joshua Shakin, Chief, Revenue Estimating Unit, Tax Analysis Division
An Overview of
The Budget and Economic Outlook:
2020 to 2030
For more details, see www.cbo.gov/publication/56020.

2. 1
CBO
The Congressional Budget Office

3. 2
CBO
To provide the Congress with objective, nonpartisan, and timely analyses of
legislative proposals and of budgetary and economic issues to support the
Congressional budget process
CBO’s Role

4. 3
CBO
CBO’s Process for Developing the
Budget Baseline

5. 4
CBO
 A detailed projection for the current year and the ensuing 10 years of federal spending,
revenues, and the resulting deficits and surpluses
 Based on CBO’s economic forecast
 Incorporates the assumption that current laws governing taxes and spending generally
remain in place
 Not a forecast of future budgetary outcomes; those depend on future Congressional
action and other factors
 Generally provided two or three times a year
 Reported in the annual Budget and Economic Outlook and subsequent reports
What Is CBO’s Baseline?

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CBO
 Principles and rules mainly come from law, budget resolutions, House and Senate rules,
and the 1967 Report of the President’s Commission on Budget Concepts.
 A key law is the Balanced Budget and Emergency Deficit Control Act, section 257.
– Defines the baseline
– Sets out rules for projecting spending and revenues
– Requires an assumption of full funding for entitlements
– Directs the treatment of expiring programs and certain excise taxes
How Is the Baseline Constructed?

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CBO
 A benchmark for measuring the budgetary effects of proposed changes in federal
revenues and mandatory spending
 Basis for:
– Cost estimates for proposed legislation
– CBO’s analyses of the President’s annual budget
– CBO’s budget options volume
– Other reports (including those describing CBO’s long-term budget projections)
– Assessments of multiyear budget trends
 Often a starting point for budget resolutions
How Do CBO and the Congress Use the Baseline?

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CBO
CBO’s Current
Budget and Economic Outlook

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CBO
 Deficits and debt
 The economy
 Revenues
 Spending
 Policy alternatives
Baseline Projections

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CBO
Deficits and Debt

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CBO
When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and
thus are shifted into the previous fiscal year. All projections presented here have been adjusted to exclude the effects of those timing shifts.
Total Deficits and Surpluses

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CBO
When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and
thus are shifted into the previous fiscal year. All projections presented here have been adjusted to exclude the effects of those timing shifts.
Total Deficit, Primary Deficit, and Net Interest

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CBO
When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and
thus are shifted into the previous fiscal year. All projections presented here have been adjusted to exclude the effects of those timing shifts.
Total Revenues and Outlays

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CBO
Federal Debt Held by the Public

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CBO
When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and
thus are shifted into the previous fiscal year. All projections presented here have been adjusted to exclude the effects of those timing shifts.
The Uncertainty of CBO’s Baseline Projections of the
Budget Deficit

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CBO
Changes in CBO’s Baseline Projection of the 10-Year Deficit
Since August 2019

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CBO
The Economy

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CBO
Real GDP and Real Potential GDP

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CBO
The Output Gap

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CBO
Composition of the Growth of Real Potential GDP

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CBO
The Unemployment Rate and the Natural Rate of Unemployment

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CBO
Inflation

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CBO
Interest Rates

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CBO
Revenues

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CBO
* = between zero and 0.05 percentage points.
Changes in Projected Revenues From 2020 to 2030

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CBO
Reasons for the Growth of Individual Income
Tax Receipts in CBO’s Baseline Projections

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CBO
Outlays, Revenues, and Tax Expenditures in 2020

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CBO
Spending

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CBO
Federal Outlays, by Category

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CBO
a. Consists of outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, the Children’s Health Insurance Program, premium tax credits, and related spending.
Changes in Projected Outlays From 2020 to 2030