In fiscal year 2016, for the first time since 2009, the federal budget deficit increased in relation to the nation’s economic output. The Congressional Budget Office projects that over the next decade, if current laws remained generally unchanged, the deficit would decline in 2018 and then resume its upward trajectory—the result of strong growth in spending for retirement and health care programs targeted to older people and rising interest payments on the government’s debt, accompanied by only modest growth in revenue collections. Those accumulating deficits would drive debt held by the public from its already high level up to its highest percentage of gross domestic product (GDP) since shortly after World War II. CBO’s estimate of the deficit for 2017 has increased since January 2017, when the agency issued its previous estimates, because revenues are expected to be lower and mandatory spending is expected to be higher than earlier anticipated. Additionally, the current projection for the cumulative deficit for the 2018–2027 period is about $700 billion more than reported in January. CBO’s economic forecast—which underlies its budget projections—indicates that under current law, economic growth over the next two years would remain close to the modest rate observed since the end of the recession in 2009. Nevertheless, economic growth would continue to outpace growth in potential (maximum sustainable) GDP and thus continue to reduce the amount of underused resources, or slack, in the economy. The result would be increases in hiring, employment, and wages, along with upward pressure on inflation and interest rates. In the later part of the 10-year projection period, output growth would be constrained by a relatively slow increase in the nation’s supply of labor. Presentation by Sam Papenfuss, Deputy Assistant Director for CBO’s Budget Analysis Division, at the National Association of State Auditors, Comptrollers and Treasurers annual conference.

1. Congressional Budget Office
2017 Annual Conference
National Association of State Auditors, Comptrollers and Treasurers
Nashville, Tennessee
August 15, 2017
Sam Papenfuss
Deputy Assistant Director for Budget Analysis
CBO’s Budget and Economic Outlook:
2017 to 2027
Formoredetails, see CongressionalBudget Office,AnUpdate tothe Budgetand EconomicOutlook:2017 to2027
(June 2017), www.cbo.gov/publication/52801,and The2017 Long-TermBudget Outlook(March2017),
www.cbo.gov/publication/52480.

2. 1CONGRESSIONAL BUDGET OFFICE
An Overview of the Budget Outlook

3. 2CONGRESSIONAL BUDGET OFFICE
The federal government’s annual
budget deficit is on a path to grow
during the next decade.

4. 3CONGRESSIONAL BUDGET OFFICE
Total Deficits or Surpluses Deficits or Surpluses
P Percentage of Gross Domestic Product

5. 4CONGRESSIONAL BUDGET OFFICE
Billions of Dollars
Percentage of
Gross Domestic Product
Actual,
2009
Actual,
2015 2017 2027
Actual,
2009
Actual,
2015 2017 2027
Total Revenues 2,105 3,250 3,315 5,158 14.6 18.2 17.3 18.4
Total Outlays 3,518 3,688 4,008 6,621 24.4 20.6 21.0 23.6
_____________________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ____________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________
Total Deficit -1,413 -438 -693 -1,463 -9.8 -2.4 -3.6 -5.2
 In 2009, the deficit equaled the largest percentage of GDP since 1945. It
was over $1 trillion for four years (2009 to 2012).
 In 2015, the deficit was $438 billion, the smallest amount since the recent
recession.
 By 2027, the projected deficit is larger than it was in 2009 in nominal
terms, but significantly smaller as a percentage of GDP.
Budget Totals

6. 5CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public
Percentage of Gross Domestic Product
Percentage of Gross Domestic Product

7. 6CONGRESSIONAL BUDGET OFFICE
The growing shortfalls would occur
mainly because, under current law,
growth in revenues would be
outpaced by growth in spending for
large federal benefit programs
(primarily retirement and health care
programs targeted to older people)
and for interest payments on the
federal debt.

8. 7CONGRESSIONAL BUDGET OFFICE
Total Revenues and Outlays
Percentage of Gross Domestic Product

9. 8CONGRESSIONAL BUDGET OFFICE
Projected Outlays in Major Budget Categories
Percentage of Gross Domestic Product

10. 9CONGRESSIONAL BUDGET OFFICE
Components of the Total Increase in Outlays in
CBO’s Baseline Between 2017 and 2027

11. 10CONGRESSIONAL BUDGET OFFICE
Projected Debt Held by the Public and Net Interest
Billions of Dollars

12. 11CONGRESSIONAL BUDGET OFFICE
Federal revenues would also increase
if current laws remained generally
unchanged, but they would increase
much more slowly than federal
spending.

13. 12CONGRESSIONAL BUDGET OFFICE
Revenues, by Major Source
Percentage of Gross Domestic Product

14. 13CONGRESSIONAL BUDGET OFFICE
Major Changes in Projected Revenues From 2017 to 2027
Major Changes in Projected Revenues From 2017 to
2027
Major Changes in Projected Revenues From 2017 to 2027

15. 14CONGRESSIONAL BUDGET OFFICE
Spending and Revenues Projected in CBO’s Baseline,
Compared With Actual Values in 1967 and 1992
Percentage of Gross Domestic Product

16. 15CONGRESSIONAL BUDGET OFFICE
An Overview of the Economic
Outlook

17. 16CONGRESSIONAL BUDGET OFFICE
CBO projects that the economy will
expand through 2018 at a pace that
leads to further tightening of the
labor market. As the amount of
unused productive resources in the
economy shrinks, inflation and
interest rates are projected to rise.

18. 17CONGRESSIONAL BUDGET OFFICE
Key Economic Indicators

19. 18CONGRESSIONAL BUDGET OFFICE
The Employment Shortfall
Millions of People

20. 19CONGRESSIONAL BUDGET OFFICE
From 2021 on, real GDP is projected
to grow at an average annual rate of
1.9 percent, the same rate that CBO
estimates for potential output.

21. 20CONGRESSIONAL BUDGET OFFICE
Growth of Real GDP and Real Potential GDP

22. 21CONGRESSIONAL BUDGET OFFICE
CBO’s estimates represent the
midpoint in the range of outcomes
that the agency deems most
probable—generally so that the
chances of being too high or too low
are about the same.

23. 22CONGRESSIONAL BUDGET OFFICE
Comparison of CBO’s Economic Projections With Those
From the Blue Chip Survey
Percent