The Budget and Economic Outlook: Fiscal Years 2013 to 2023

Chairman Murray, Senator Sessions, and Members of the Committee, thank you for inviting me to testify on the Congressional Budget Office s CBO s most recent analysis of the outlook for the budget and the economy. My statement summarizes CBO s new economic forecast and baseline budget projections, which cover fiscal years 2013 to 2023. Those estimates were released last week in the report titled The Budget and Economic Outlook Fiscal Years 2013 to 2023. Economic growth will remain slow this year, CBO anticipates, as gradual improvement in many of the forces that drive the economy is offset by the effects of budgetary changes that are scheduled to occur under current law. After this year, economic growth will speed up, CBO projects, causing the unemployment rate to decline and inflation and interest rates to eventually rise from their current low levels. Nevertheless, the unemployment rate is expected to remain above 7 percent through next year if that happens, 2014 will be the sixth consecutive year with unemployment exceeding 7 percent of the labor force the longest such period in the past 70 years. If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to 845 billion, or 5.3 percent of gross domestic product GDP, its smallest size since 2008. In CBO s baseline projections, deficits continue to shrink over the next few years, falling to 2.4 percent of GDP by 2015. Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. As a result, federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade. By 2023, if current laws remain in place, debt will equal 77 percent of GDP and be on an upward path, CBO projects see Figure 1.