US – Automatic Stabilizers in the Federal Budget, 2020 to 2030

Federal revenues and outlays regularly respond to cyclical movements in the economy in ways that tend to dampen those movements; the budget mechanisms that drive that process are known as automatic stabilizers. Those mecha- nisms help stabilize the economy automatically, without any legislated changes in tax or spending policies.

In this report, the Congressional budget Office projects the budgetary effects of those automatic stabilizers—as well as the size of deficits without them—from 2020 to 2030 and provides historical estimates of the stabilizers’

The key takeaways from CbO’s analysis of the effects of automatic stabilizers are as follows:
• From 2020 to 2023, the economy operates above its potential in CbO’s forecast, and automatic stabilizers are projected to reduce federal budget deficits.
• From 2024 to 2030, the economy operates below its potential in the agency’s forecast, and automatic stabilizers are projected to increase deficits.
• With the effects of automatic stabilizers removed, deficits are projected to average 4.7 percent of potential gross domestic product (GDP) over the next decade, nearly twice their 50-year average. (Potential GDP is an estimate of the maximum sustainable output of the economy.)

Chosen excerpts by Job Market Monitor. Read the whole story @  Automatic Stabilizers in the Federal Budget: 2020 to 2030


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