This report is usually published in January. This year, it was published in April to give the Congressional Budget Office time to analyze and incorporate some of the effects of recent major legislation, particularly Public Law 115-97 (originally called the Tax Cuts and Jobs Act and called the 2017 tax act in this report), which was enacted on December 22, 2017; the Bipartisan Budget Act of 2018 (P.L. 115-123), which was enacted on February 9, 2018; and the Consolidated Appropriations Act, 2018 (P.L. 115-141), which was enacted on March 23, 2018. Unless the report notes otherwise, the projections in it do not reflect economic developments, administrative actions, or regulatory changes that occurred after mid-February 2018.
Members of Congress, media watchers and reporters, activists of federal operations and financial matters, economists, economic forecasters, business financial officers, business marketers.
Summary 1
Economic Growth Is Projected to Be Relatively Strong This Year and Next and
Then to Moderate 1
GDP Is Projected to Be Greater Than CBO Previously Estimated 3
Deficits Are Projected to Be Large by Historical Standards 3
Deficits Are Projected to Be Larger Than CBO Previously Estimated 5
Debt Held by the Public Is Projected to Approach 100 Percent of GDP 5
Deficits and Debt Would Be Larger If Some Current Policies Were Continued 6
The Economic Outlook 7
Overview 7
Recent Economic Developments 11
The Economic Effects of Recent Changes in Fiscal Policy 11
Potential Output 14
Actual Output 17
The Labor Market 26
Inflation 28
Monetary Policy and Interest Rates 29
Income 29
Uncertainty Surrounding the Economic Outlook 32
Comparisons With CBO’s June 2017 Projections 33
Comparisons With Other Economic Projections 39
The Spending Outlook 43
Overview 43
Mandatory Spending 45
BOX 2-1. CATEGORIES OF FEDERAL SPENDING 46
Discretionary Spending 54
Net Interest 61
Uncertainty Surrounding the Spending Outlook 62
The Revenue Outlook 63
Overview 63
The Evolving Composition of Revenues 64
Individual Income Taxes 65
Payroll Taxes 68
Corporate Income Taxes 69
Smaller Sources of Revenues 71
Tax Expenditures 74
Uncertainty Surrounding the Revenue Outlook 78
3
II The Budget and Economic Outlook: 2018 to 2028 April 2018
A Changes in CBO’s Baseline Projections Since June 2017 93
B The Effects of the 2017 Tax Act on CBO’s Economic and Budget Projections 105
C Trust Funds 131
D CBO’s Economic Projections for 2018 to 2028 139
E Historical Budget Data 143
The Outlook for Deficits and Debt 79
Overview 79
Deficits 79
Debt 85
Alternative Assumptions About Fiscal Policy 88
Changes in CBO’s Baseline Projections Since June 2017 93
Overview 93
Legislative Changes 93
Economic Changes 99
Technical Changes 101
The Effects of the 2017 Tax Act on CBO’s Economic and Budget Projections 105
Overview 105
The Major Provisions of the Act 106
BOX B-1. REPATRIATION OF UNDISTRIBUTED FOREIGN EARNINGS 109
How the Act Affects the Economic Outlook 114
BOX B-2. COMPARISON WITH OTHER ORGANIZATIONS’ ESTIMATES 117
BOX B-3. THE EFFECTS OF PROFIT SHIFTING ON ECONOMIC STATISTICS 124
How the Act Affects the Budget Outlook 128
Uncertainty Surrounding CBO’s Estimates 129
Trust Funds 131
Overview 131
Social Security’s Trust Funds 134
Trust Funds for Federal Employees’ Retirement Programs 134
Medicare’s Trust Funds 136
Highway Trust Fund 137
CBO’s Economic Projections for 2018 to 2028 139
Historical Budget Data 143
List of Tables and Figures 155
About This Document
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