The Treasury also pays interest on debt issued to trust funds and other government accounts, but such payments are intragovernmental transactions that have no effect on the budget deficit.In CBO’s projections, net outlays for interest in 2020 edge up to $382 billion, from $376 billion in 2019. Two such factors are investors’ heightened concerns about relatively weak global economic growth and the increased demand for long-term bonds as a hedge against unexpectedly low inflation.In CBO’s projections, as foreign economic growth improves and the rate of inflation reaches the Federal Reserve’s long-run objective of 2 percent, investors’ demand for long-term bonds weakens slightly, putting upward pressure on long-term interest rates.
All projections presented here have been adjusted to exclude the effects of those timing shifts.
Most of the reduction in outlays projected for that period stems from the downward revision in the agency’s forecast of interest rates, which reduced its projections of net interest costs by $441 billion before changes in debt-service costs are taken into account.Those revisions continue the agency’s long-term trend of revising its forecast of interest rates downward.
In the agency’s projection, those factors and diminishing fiscal stimulus slow the economy and dampen the labor market’s current momentum, narrowing the output gap and the gap between employment and potential employment in 2021 and 2022.CBO’s projections of the economy over the next five years reflect anticipated fluctuations in the components of final demand (such as consumption and investment), projected changes in supply-side factors (such as growth in productivity and the labor supply), and the interactions between them.CBO expects output to grow 2.2 percent in 2020. Taking into account the errors in its past projections, CBO estimates that there is approximately a two-thirds chance that, under current law, federal debt would be between 80 percent and 98 percent of GDP in that year.Federal outlays in CBO’s baseline are projected to rise from $4.6 trillion in 2020 to $7.5 trillion in 2030. Specifically, appropriations designated for overseas contingency operations and activities designated as emergency requirements are assumed to grow with inflation after 2020, and the caps are adjusted accordingly. For example, again using the data from 2015 to 2016, the calculation produced a result of 0.02940. Historical amounts have been adjusted as far back as the available data will allow.The average deficit projected over the next 10 years is 1.8 percentage points more than the 3.0 percent of GDP that annual deficits have averaged over the past 50 years. That reflects the likelihood of a business cycle occurring during the projection period. As of January 7, 2020, retaliatory tariffs had been imposed on 9.3 percent of all goods exported by the United States—primarily industrial supplies and materials as well as agricultural products (see Source: Congressional Budget Office, using information from the Census Bureau and the Office of the U.S. Trade Representative.The values and shares of affected goods are measured relative to their amounts in 2017—the year before the tariffs were imposed.n.a.
(For a discussion of changes made to CBO’s long-term projections since they were last updated in June 2019, see The two pieces of legislation enacted since August that had the most significant effects on CBO’s projections were the Consolidated Appropriations Act, 2020 (P.L. For example, Country A had a total output worth $1,000,000 in 2008. For example, between 1969 and 2018, the average deficit totaled 1.5 percent of GDP in years when the unemployment rate was below 6 percent. If an economy shows two consecutive quarters of negative growth rates, the nation is officially in a Those shifts would have generally increased income tax revenues because affected workers would have received less of their income in nontaxable health benefits and more in taxable wages.
Wages and salaries are expected to grow more quickly than the rest of national income over the next five years as wage growth picks up, but their growth rates are projected to fall slightly in the latter half of the projection period.
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As new information becomes available, CBO continues to revisit its estimates of the corporate tax base since the changes made by the 2017 tax act took effect.The tables in this appendix show the Congressional Budget Office’s economic projections for each year from 2020 to 2030. Some or all of the discretionary funding related to seven types of activities is not constrained by the caps; for most of those activities, the caps are adjusted to accommodate such funding, up to certain limits. Similarly, investment trends in nonfarm business (which accounts for about three-quarters of economic activity and nearly all of the growth in productivity) are expected to yield slightly slower growth in that sector’s capital services than has occurred during the current business cycle.Real values are nominal values that have been adjusted to remove the effects of changes in prices. CBO also lowered its estimates of potential output growth and its projections of the unemployment rate in the latter part of the projection period.CBO’s economic projections in this forecast are similar to those of other forecasters.
Real GDP then recovers until the relationship between the levels of GDP and potential GDP reaches its long-run average in the final years of the projection period.In CBO’s estimation, the trade barriers put in place by the United States and its trading partners between January 2018 and January 2020 would reduce real GDP over the projection period. The contribution from capital services drops from an average of 0.8 percentage points per year to about 0.6 percentage points. Although economic and job growth slow, employment, which tends to lag behind movements in output, is expected to remain above its maximum sustainable level over the entire 2020–2024 period, supporting relatively robust wage growth during those years.In CBO’s projections, solid economic growth is expected to keep the unemployment rate at about 3.5 percent in 2020.