The Budget and Economic Outlook:
Fiscal Years 2010 to 2020
The economic forecast was completed on December 8, 2009, and estimates of 2009 values shown in the text and tables are based on information that was available by that date.
Numbers in the text and tables may not add up to totals because of rounding.
Unless otherwise indicated, years referred to in describing the economic outlook are calendar years, and years referred to in describing the budget outlook are federal fiscal years (which run from October 1 to September 30).
Some of the figures have shaded bars that indicate the duration of recessions. The National Bureau of Economic Research establishes the dates on which recessions begin and end but has not yet done so for the end of the most recent recession, which is shown as having ended in the second quarter of calendar year 2009.
Supplemental data for this analysis are available.
This volume is one of a series of reports on the state of the budget and the economy that the Congressional Budget Office (CBO) issues each year. It satisfies the requirement of section 202(e) of the Congressional Budget Act of 1974 that CBO submit to the Committees on the Budget periodic reports about fiscal policy and its baseline projections of the federal budget. In accordance with CBO’s mandate to provide impartial analysis, the report makes no recommendations.
The baseline spending projections were prepared by the staff of CBO’s Budget Analysis Division under the supervision of Peter Fontaine, Theresa Gullo, Holly Harvey, Janet Airis, Tom Bradley, Kim Cawley, Jeffrey Holland, Sarah Jennings, Leo Lex, Kate Massey, and Sam Papenfuss. The revenue estimates were prepared by the staff of the Tax Analysis Division under the supervision of Frank Sammartino, David Weiner, and Mark Booth, with assistance from the Joint Committee on Taxation. (A detailed list of contributors to the spending and revenue projections appears in Appendix G.)
The economic outlook presented in Chapter 2 was prepared by CBO’s Macroeconomic Analysis Division under the direction of Robert Dennis, Kim Kowalewski, and John Peterson. Robert Arnold and Christopher Williams produced the economic forecast and projections. David Brauer, Juan Contreras, Naomi Griffin, Juann Hung, Mark Lasky, Joe Mattey, Benjamin Page, Frank Russek, David Torregrosa, Steven Weinberg, and Susan Yang contributed to the analysis. Holly Battelle and Priscila Hammett provided research assistance.
An early version of CBO’s economic forecast was discussed at a meeting of the agency’s Panel of Economic Advisers. At that time, members of the panel were Henry J. Aaron, Martin N. Baily, Richard Berner, Martin Feldstein, Kristin J. Forbes, Robert J. Gordon, Robert E. Hall, Jan Hatzius, Douglas Holtz-Eakin, Simon Johnson, Anil Kashyap, Lawrence Katz, Laurence H. Meyer, William D. Nordhaus, Rudolph G. Penner, Adam S. Posen, James Poterba, Alice Rivlin, Nouriel Roubini, Diane C. Swonk, and Stephen P. Zeldes. John Haltiwanger and Aysegul Sahin attended the panel’s meeting as guests. Although CBO’s outside advisers provided considerable assistance, they are not responsible for the contents of this report.
Jeffrey Holland wrote the summary. Barry Blom wrote Chapter 1, with assistance from Jared Brewster, Jeffrey Holland, and David Newman. Robert Arnold wrote Chapter 2, with assistance from Kim Kowalewski, John Peterson, and David Torregrosa. Christina Hawley Anthony wrote Chapter 3, with assistance from Santiago Vallinas and Jared Brewster. Mark Booth wrote Chapter 4, with assistance from Grant Driessen, Barbara Edwards, Zachary Epstein, Pamela Greene, and Joshua Shakin. Christina Hawley Anthony and Jeffrey Holland wrote Appendix A. Amber Marcellino wrote Appendix B, with assistance from Mark Booth. Santiago Vallinas wrote Appendix C. Jared Brewster wrote Appendix D. Holly Battelle compiled Appendix E, and Amber Marcellino compiled Appendix F. Santiago Vallinas and Chayim Rosito produced the glossary.
Christine Bogusz, Chris Howlett, Kate Kelly, Loretta Lettner, and John Skeen edited the report, with assistance from Leah Mazade and Sherry Snyder. Maureen Costantino designed the cover and prepared the report for publication, with assistance from Jeanine Rees. Lenny Skutnik printed the initial copies, Linda Schimmel handled the print distribution, and Simone Thomas and Annette Kalicki prepared the electronic version for CBO’s Web site.
CBO’s Baseline Projections for 2010
CBO’s Baseline Projections for 2011 to 2020
Changes in CBO’s Baseline Since August 2009
Uncertainty and Budget Projections
Federal Debt Held by the Public
Factors Affecting Economic Growth Through 2014
Factors Affecting Labor Markets Through 2014
Factors Affecting Inflation Through 2014
The Outlook for Income Through 2020
Comparison with CBO’s August 2009 Forecast
Comparison with Other Forecasts
Effects of Expiring Tax Provisions
The American Recovery and Reinvestment Act of 2009
Changes in CBO’s Baseline Since August 2009
How Changes in Economic Projections Can Affect Budget Projections
Trust Funds and Measures of Federal Debt
CBO’s Economic Projections for 2009 to 2020
Contributors to the Revenue and Spending Projections
S-1. CBO’s Baseline Budget Outlook
S-2. CBO’s Economic Projections for Calendar Years 2009 to 2020
1-1. Projected Deficits and Surpluses in CBO’s Baseline
1-2. Average Annual Rates of Growth in Revenues and Outlays Since 1999 and as Projected in CBO’s Baseline
1-3. CBO’s Baseline Budget Projections
1-4. Changes in CBO’s Baseline Projections of the Deficit Since August 2009
1-5. Budgetary Effects of Selected Policy Alternatives Not Included in CBO’s Baseline
1-6. Holders of Federal Debt Held by the Public, 2004 and 2009
1-7. CBO’s Baseline Projections of Federal Debt
2-1. CBO’s Economic Projections for Calendar Years 2009 to 2020
2-2. Key Assumptions in CBO’s Projection of Potential Output
2-3. CBO’s Current and Previous Economic Projections for Calendar Years 2009 to 2019
2-4. Comparison of CBO and Blue Chip Consensus Economic Forecasts for Calendar Years 2009 to 2011
2-5. Comparison of Federal Reserve and CBO Forecasts for Calendar Years 2009 to 2012
3-1. CBO’s Baseline Projections of Outlays
3-2. Average Annual Rates of Growth in Outlays Since 1999 and as Projected in CBO’s Baseline
3-3. CBO’s Baseline Projections of Mandatory Spending
3-4. Sources of Growth in Mandatory Outlays
3-5. CBO’s Baseline Projections of Offsetting Receipts
3-6. Costs for Mandatory Programs That CBO’s Baseline Assumes Will Continue Beyond Their Current Expiration Dates
3-7. Growth in Discretionary Budget Authority, 2009 to 2010
3-8. Defense and Nondefense Discretionary Outlays, 1985 to 2010
3-9. Nondefense Discretionary Funding, 2009 to 2010
3-10.CBO’s Projections of Discretionary Spending Under Selected Policy Alternatives
3-11. CBO’s Baseline Projections of Federal Interest Outlays
4-1. CBO’s Projections of Revenues
4-2. CBO’s Projections of Individual Income Tax Receipts and the NIPAs Tax Base
4-3. Actual and Projected Capital Gains Realizations and Tax Receipts
4-4. CBO’s Projections of Social Insurance Tax Receipts and the Social Insurance Tax Base
4-5. CBO’s Projections of Social Insurance Tax Receipts, by Source
4-6. CBO’s Projections of Corporate Income Tax Receipts and Tax Bases
4-7. CBO’s Projections of Excise Tax Receipts, by Category
4-8. CBO’s Projections of Other Sources of Revenue
A-1. Estimated Direct Effects of the American Recovery and Reinvestment Act of 2009
B-1. Changes in CBO’s Baseline Projections of the Deficit Since August 2009
C-1. How Selected Economic Changes Might Affect CBO’s Baseline Budget Projections
D-1. CBO’s Baseline Projections of Trust Fund Surpluses or Deficits
D-2. CBO’s Baseline Projections of Federal Debt
E-1. CBO’s Year-by-Year Forecast and Projections for Calendar Years 2009 to 2020
E-2. CBO’s Year-by-Year Forecast and Projections for Fiscal Years 2009 to 2020
F-1. Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public, 1970 to 2009, in Billions of Dollars
F-2. Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public, 1970 to 2009, as a Percentage of Gross Domestic Product
F-3. Revenues by Major Source, 1970 to 2009, in Billions of Dollars
F-4. Revenues by Major Source, 1970 to 2009, as a Percentage of Gross Domestic Product
F-5. Outlays for Major Categories of Spending, 1970 to 2009, in Billions of Dollars
F-6. Outlays for Major Categories of Spending, 1970 to 2009, as a Percentage of Gross Domestic Product
F-7. Discretionary Outlays, 1970 to 2009, in Billions of Dollars
F-8. Discretionary Outlays, 1970 to 2009, as a Percentage of Gross Domestic Product
F-9. Outlays for Mandatory Spending, 1970 to 2009, in Billions of Dollars
F-10. Outlays for Mandatory Spending, 1970 to 2009, as a Percentage of Gross Domestic Product
F-11. Deficits, Surpluses, Debt, and Related Series, 1970 to 2009
F-12. Cyclically Adjusted Deficit or Surplus and Related Series, 1970 to 2009, in Billions of Dollars
F-13. Cyclically Adjusted Deficit or Surplus and Related Series, 1970 to 2009, as a Percentage of Gross Domestic Product
S-1. Debt Held by the Public and Net Interest
S-2. Total Revenues and Outlays
1-1. The Total Deficit or Surplus, 1970 to 2020
1-2. Federal Debt Held by the Public, 1970 to 2020
2-1. Real Gross Domestic Product
2-3. Tightening of Standards for Home Mortgage Loans from Commercial Banks
2-4. Issuance of Mortgage-Backed Securities
2-6. Net Business Fixed Investment
2-8. Trade-Weighted Exchange Value of the U.S. Dollar
2-9. Labor Force Participation Rate
2-10. Average Weekly Hours Worked in the Nonfarm Business Sector
2-11. People Who Have Lost Jobs as a Percentage of All Unemployed Persons
2-13. Rental Vacancy Rate and Growth of Price Indexes for Rents
3-1. Outlays, by Category, 1970 to 2020
4-1. Total Revenues, 1970 to 2020
4-2. Annual Growth of Federal Revenues and Gross Domestic Product, 1970 to 2020
4-3. Revenues, by Source, 1970 to 2020
4-4. Effects of the Individual Alternative Minimum Tax in CBO’s Baseline
D-1. Total Surplus or Deficit of the Social Security Trust Funds
D-2. Debt Subject to Limit, November 2008 to September 2011
1-1. Funding for Operations in Iraq and Afghanistan and for Related Activities
1-2. Recent Activity in the Troubled Asset Relief Program
3-1. Categories of Federal Spending
4-1. Effect of Expiring Tax Provisions on CBO’s Revenue Baseline
