Relative to its estimates from September 2020, CBO’s estimate of the deficit for 2021 is now $448 billion (or 25 percent) larger, and its projection of the cumulative deficit between 20 (at $12.6 trillion) is now $345 billion (or 3 percent) smaller. Changes Since CBO’s Previous Projections.Outlays then increase relative to GDP, owing to rising interest costs and greater spending for major entitlement programs. Projected outlays decline relative to GDP for the next few years, as pandemic-related spending wanes and low interest rates persist. Federal revenues are projected to generally increase relative to GDP as a result of the expiration of temporary pandemic-related provisions, scheduled increases in taxes, and other factors. By 2031, debt would equal 107 percent of GDP, the highest in the nation’s history. Federal debt held by the public-which stood at 100 percent of GDP at the end of fiscal year 2020-is projected to reach 102 percent of GDP at the end of 2021, dip slightly for a few years, and then rise further. By the end of the period, both primary deficits (which exclude net outlays for interest) and interest outlays are rising. They decline to 4.0 percent of GDP or less from 2023 to 2027 before increasing again, reaching 5.7 percent of GDP in 2031. In CBO’s projections, annual deficits average $1.2 trillion a year from 2022 to 2031 and exceed their 50-year average of 3.3 percent of GDP in each of those years. Those deficits, which were already projected to be large by historical standards before the onset of the 2020–2021 coronavirus pandemic, have widened significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response. At 10.3 percent of gross domestic product (GDP), the deficit in 2021 would be the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. CBO projects a federal budget deficit of $2.3 trillion in 2021, nearly $900 billion less than the shortfall recorded in 2020. CBO’s economic assessment is identical to the forecast the agency published on February 1, 2021. For this report, the latest in the series, the projections are based on the laws in effect as of January 12, 2021. The Congressional Budget Office regularly publishes reports presenting projections of what federal budget deficits, debt, revenues, and spending-and the economic path underlying them-would be for the current year and for the following 10 years if current laws governing taxes and spending generally remained unchanged. Outlays, Revenues, and Tax Expenditures in 2021 The Relationship Between GDP and Potential GDP CBO’s Current and Previous Economic Projections for Calendar Years 2020 to 2030 Key Inputs in CBO’s Projections of Real Potential GDP The Projected Growth of Real GDP and Its Components CBO’s Economic Projections for Calendar Years 2021 to 2031 Changes in CBO’s Baseline Projections of the Deficit Since September 2020 CBO’s Baseline Projections of Discretionary Spending Mandatory Outlays Projected in CBO’s Baseline CBO’s Baseline Projections of Federal Debt CBO’s Baseline Budget Projections, by Category
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