Congressional Budget Office

The 2016 Budget Outlook

Presentation at thePeter G. Peterson Foundation’s

2016 Fiscal SummitWashington, D.C.

May 11, 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 G R ES S I O N A L B U D G E T O F F I C E

CBO’s Budget Projections Through 2026 as of March 2016

2CO N G R ES S I O N A L B U D G E T O F F I C 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 G R ES S I O N A L B U D G E T O F F I C 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 G R ES S I O N A L B U D G E T O F F I C E

Projected Outlays in Major Budget Categories

Percentage of GDP

5CO N G R ES S I O N A L B U D G E T O F F I C E

Major Changes in Projected Revenues From 2016 to 2026

6CO N G R ES S I O N A L B U D G E T O F F I C E

Tax Expenditures and Other Budget Categories in 2016

7CO N G R ES S I O N A L B U D G E T O F F I C E

CBO’s Budget Projections Through 2040 as of January 2016

8CO N G R ES S I O N A L B U D G E T O F F I C E

Federal Debt, Spending, and Revenues

Percentage of GDP

9CO N G R ES S I O N A L B U D G E T O F F I C 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.

10CO N G R ES S I O N A L B U D G E T O F F I C E

Components of Federal Spending

11CO N G R ES S I O N A L B U D G E T O F F I C E

Changes in the Population, by Age Group

12CO N G R ES S I O N A L B U D G E T O F F I C E

Projected Spending, Compared With Past Averages

13CO N G R ES S I O N A L B U D G E T O F F I C E

Total Revenues

14CO N G R ES S I O N A L B U D G E T O F F I C E

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

Percentage of GDP

15CO N G R ES S I O N A L B U D G E T O F F I C E

Federal Debt Held by the Public

Percentage of GDP

16CO N G R ES S I O N A L B U D G E T O F F I C 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.

17CO N G R ES S I O N A L B U D G E T O F F I C 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.

18CO N G R ES S I O N A L B U D G E T O F F I C E

Federal Debt Held by the Public Under Various Budget Scenarios