The Economic and Budget Outlook: Fiscal Years 1999-2008

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THE ECONOMIC AND BUDGET OUTLOOK: FISCAL YEARS 1999-2008
JANUARY 1998

NOTES

Unless otherwise indicated, all years referred to in Chapter 1 and Appendix H are calendar years and all years in Chapters 2 through 4 and all other appendixes are fiscal years.

Some figures in this report indicate periods of recession by using shaded vertical bars. The bars extend from the peak to the trough of the recession.

Unemployment rates throughout the report are calculated on the basis of the civilian labor force.

Numbers in the text and tables of this report may not add to totals because of rounding.

National income and product account (NIPA) data shown in the tables do not incorporate the revised data for the third quarter of 1997 that were released on December 23, 1997.

Preface

This volume is one of a series of reports on the state of the economy and the budget that the Congressional Budget Office (CBO) issues each year. It satisfies the requirement of section 202(e) of the Congressional Budget Act of 1974 for CBO to submit periodic reports to the Committees on the Budget with respect to fiscal policy and to provide five-year baseline projections of the federal budget. In accordance with CBO's mandate to provide objective and impartial analysis, the report contains no recommendations.

The analysis of the economic outlook presented in Chapter 1 was prepared by the Macroeconomic Analysis Division under the direction of Robert Dennis and John F. Peterson. Edward Gamber wrote the chapter, with substantial contributions from Robert Arnold, Juann Hung, and Frank Russek. John F. Peterson, Matthew Salomon, and Robert Arnold carried out the economic forecast and projections. Douglas Hamilton, Juann Hung, Kim Kowalewski, Joyce Manchester, Angelo Mascaro, Benjamin Page, Frank Russek, Kent Smetters, John Sturrock, Jan Walliser, and Christopher Williams provided comments and background analysis. Paul Diller, Timothy Lasocki, and Michael Simpson provided research assistance.

The baseline outlay projections were prepared by the staff of the Budget Analysis Division under the supervision of Paul N. Van de Water, Robert Sunshine, Priscilla Aycock, Paul Cullinan, Peter Fontaine, James Horney, Michael Miller, and Murray Ross. The revenue estimates were prepared by the staff of the Tax Analysis Division under the supervision of Rosemary D. Marcuss and Richard Kasten. Jeffrey Holland wrote Chapters 2 and 4, with contributions by Paul Cullinan on Chapter 4. Rosemary D. Marcuss and Richard Kasten wrote Chapter 3. Daniel Kowalski wrote Appendix A; Stephanie Weiner wrote Appendixes B, C, and E; Jennifer Winkler wrote Appendix D; Jeffrey Lemieux wrote Appendixes F and H; and Jeanne De Sa wrote Appendix G. Jennifer Smith coordinated the revision of the glossary. James Horney wrote the summary of the report.

An early version of the economic forecast underlying this report was discussed at a meeting of CBO's Panel of Economic Advisers. Members of the panel are Robert Barro, Michael Boskin, Barry P. Bosworth, Robert Dederick, Rudiger Dornbusch, Martin Feldstein, Robert J. Gordon, Lyle E. Gramley, Robert E. Hall, Marvin Kosters, Anne Krueger, N. Gregory Mankiw, Allan Meltzer, Rudolph Penner, James Poterba, Robert Reischauer, Sherwin Rosen, Joel Slemrod, John Taylor, and James Tobin. William Dudley, Mickey Levy, Zia Qureshi, and Robert J. Shiller attended as guests. Although these outside advisers provided considerable assistance, CBO is solely responsible for the accuracy of the analyses in this report.

Sherry Snyder supervised the editing of the report, and Kathryn Quattrone supervised production. Major portions were edited by Sherry Snyder, Melissa Burman, Leah Mazade, and Christian Spoor. The authors owe thanks to Marion Curry, Linda Lewis Harris, Kishana Highgate, Denise Jordan, Dorothy Kornegay, and Simone Thomas, who assisted in the preparation of the report. Kathryn Quattrone prepared the report for final publication, with assistance from Sharon Corbin-Jallow and Martina Wojak-Piotrow.

June E. O'Neill
Director
January 1998

Contents

SUMMARY

ONE - THE ECONOMIC OUTLOOK