Congressional Budget Office

The 2016 Budget Outlook

Presentation at theForecasters Club of New York

New York City, NY

June 29, 2016

Keith HallDirector

This presentation draws on Updated Budget Projections: 2016 to 2026 (March 2016), www.cbo.gov/publication/51384, Budgetary and Economic Outcomes Under Paths for Federal Revenues and Noninterest Spending Specified by Chairman Price, March 2016 (March 2016), www.cbo.gov/publication/51260, and The Budget and Economic Outlook: 2016 to 2026 (January 2016), www.cbo.gov/publication/51129.

1CO N GR ES S IO N A L B UDGE T O F F IC E

CBO’s Budget Projections Through 2026 as of March 2016

2CO N GR ES S IO N A L B UDGE T O F F IC E

Total Deficits or Surpluses

Percentage of GDP

Actual Projected

Deficits

Surpluses

AverageDeficit,

1966 to 2015(-2.8%)

1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026-10

-8

-6

-4

-2

0

2

4

-10

-8

-6

-4

-2

0

2

4

3CO N GR ES S IO N A L B UDGE T O F F IC E

Total Revenues and Outlays

Percentage of GDP

1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 20260

4

8

12

16

20

24

28

0

4

8

12

16

20

24

28

Outlays

Revenues

Average Outlays,1966 to 2015

(20.2%)

Average Revenues,1966 to 2015

(17.4%)

Actual Projected

4CO N GR ES S IO N A L B UDGE T O F F IC E

Components of the Total Increase in Outlays in CBO’s Baseline Between 2016 and 2026

5CO N GR ES S IO N A L B UDGE T O F F IC E

Projected Net Interest Outlays

6CO N GR ES S IO N A L B UDGE T O F F IC E

Projected Outlays in Major Budget Categories

Percentage of GDP

7CO N GR ES S IO N A L B UDGE T O F F IC E

Major Changes in Projected Revenues From 2016 to 2026

8CO N GR ES S IO N A L B UDGE T O F F IC E

Tax Expenditures and Other Budget Categories in 2016

9CO N GR ES S IO N A L B UDGE T O F F IC E

CBO’s Budget Projections Through 2040 as of January 2016

10CO N GR ES S IO N A L B UDGE T O F F IC E

Federal Debt, Spending, and Revenues

Percentage of GDP

11CO N GR ES S IO N A L B UDGE T O F F IC E

Uncertainty About Projections of Debt

■ Even if future tax and spending policies match the policies specified in current law, budgetary outcomes will undoubtedly differ from CBO’s projections.

■ Unexpected changes in the economy, demographics, and other key factors will occur.

12CO N GR ES S IO N A L B UDGE T O F F IC E

Components of Federal Spending

13CO N GR ES S IO N A L B UDGE T O F F IC E

Changes in the Population, by Age Group

14CO N GR ES S IO N A L B UDGE T O F F IC E

Projected Spending, Compared With Past Averages

15CO N GR ES S IO N A L B UDGE T O F F IC E

Total Revenues

16CO N GR ES S IO N A L B UDGE T O F F IC E

Projected Spending, Revenues, and Deficits, Compared With Past Averages

Percentage of GDP

17CO N GR ES S IO N A L B UDGE T O F F IC E

Federal Debt Held by the Public

Percentage of GDP

18CO N GR ES S IO N A L B UDGE T O F F IC E

A Likely Range for CBO’s Projection of Debt

■ The extended baseline represents CBO’s best projection of federal debt relative to GDP 25 years from now under current law, but the amount could be higher or lower.

■ Last year, CBO considered a wide range of possible values for key factors such as interest rates, health care costs, and productivity.

■ That analysis concluded that federal debt would probably be at least as high as it is today and would most likely be much higher.

■ This year, federal debt is projected to be even higher than it was in last year’s analysis.

19CO N GR ES S IO N A L B UDGE T O F F IC E

A Sustainable Path for the Long Term

■ Lawmakers would have to make major changes to tax policies, spending policies, or both.

■ The size of such changes would depend upon the amount of federal debt that lawmakers considered appropriate.

20CO N GR ES S IO N A L B UDGE T O F F IC E

Federal Debt Held by the Public Under Various Budget Scenarios