CBO Outlook Targets First Higher Budget Deficit Since Recession

Economy

Published: January 19, 2016 12:10 pm

Last Updated: January 13, 2020 2:52 pm

A better economy and offering more and more benefits to more and more people was supposed to engender a better government spending picture, wasn’t it? The Congressional Budget Office (CBO) has released a portion of its 2016 to 2026 outlook, and the end result is that the federal budget deficit will increase in relation to the size of the economy in 2016.

What stands out about this prediction is that, if the CBO is accurate, this would be the first increase in the budget deficit since 2009.

In the new CBO outlook, the group warns that if current laws generally remained unchanged then the budget deficit would grow over the next 10 years. It also noted that by 2026 it would be considerably larger than its average over the past 50 years.

Another warning from the CBO is that the debt held by the public also would grow significantly from its already high level. The U.S. National Debt clock showed that debt at $18.903 trillion as of 11:00 a.m. Eastern time on Monday, January 19, 2016.

Another risk is here in that the CBO said that it anticipates that the U.S. economy will expand solidly this year and next year. But what if the slower and slower GDP picture makes these expectations wrong? The CBO’s summary said:

Increases in demand for goods and services are expected to reduce the quantity of underused labor and capital, or “slack,” in the economy—thereby encouraging greater participation in the labor force by reducing the unemployment rate and pushing up compensation. That reduction in slack will also push up inflation and interest rates. Over the following years, CBO projects, output will grow at a more modest pace, constrained by relatively slow growth in the nation’s supply of labor. Nevertheless, in those later years, output is anticipated to grow more quickly than it has during the past decade.