Director’s Statement on The Budget and Economic Outlook: 2022 to 2032

Source: US Congressional Budget Office

This afternoon I briefed the press about the Congressional Budget Office’s new report, The Budget and Economic Outlook: 2022 to 2032. I delivered the following remarks.

Thank you for joining me to talk about the federal budget and the economy. In CBO’s latest projections, released today, the federal budget deficit in 2022 is $1.0 trillion. That shortfall would represent a substantial reduction from deficits in the past two years as federal spending in response to the coronavirus pandemic wanes and the current economic expansion continues.

In our projections, which reflect the assumption that current laws governing federal taxes and spending generally remain unchanged, federal deficits nonetheless remain large by historical standards and generally increase over the next decade. From 2023 to 2032, the annual shortfall averages $1.6 trillion. The projected deficit of more than $2 trillion in 2032 would equal 6.1 percent of gross domestic product (GDP), well above the average for the past 50 years.

Outlays average 23 percent of GDP over the next 10 years. Rising interest rates and accumulating debt cause net interest costs to double as a percentage of GDP by 2032. At that time, the aging population and the rising cost of health care contribute to increased mandatory spending.

In 2022, revenues in CBO’s projections reach their highest level as a share of GDP in more than two decades. They then decline over the next few years but remain above their long-term average through 2032. But outlays grow faster than revenues over that period, so deficits increase.

Federal debt held by the public initially dips to 96 percent of GDP in 2023 and rises thereafter. In our projections, it reaches 110 percent of GDP in 2032 (higher than it has ever been) and 185 percent of GDP in 2052. We aim for our projections to fall in the middle of the range of likely outcomes; still, they are subject to considerable uncertainty, in part because of the ongoing pandemic and other world events.

CBO’s estimate of the deficit for 2022 is now $118 billion less than it was last July. In that current estimate for 2022, revenues are 10 percent higher than previously projected, and outlays are up by 6 percent.

The projection of the cumulative deficit over the 2022–2031 period is $2.4 trillion more than it was last summer. Newly enacted legislation accounts for most of that increase. Other changes that boost projected revenues—and reduce deficits—are mostly offset by economic changes that increase outlays, particularly those for interest and Social Security.

I will turn now to the economy. The pace of inflation since the middle of last year has been the fastest in four decades. In CBO’s projections, elevated inflation persists in 2022 because of the combination of strong demand and restrained supply in the markets for goods, services, and labor. In response, the Federal Reserve tightens monetary policy, and interest rates rise rapidly. Real GDP (that is, GDP adjusted to remove the effects of inflation) grows by 3.1 percent this year, and the unemployment rate averages 3.8 percent. After 2022, economic growth slows, and inflationary pressures ease.

CBO has published a great deal of information today about its new projections, which were produced through the efforts of more than 150 people. I am happy to answer questions.

Phillip L. Swagel is CBO’s Director.

The Budget and Economic Outlook: 2022 to 2032

Source: US Congressional Budget Office

The Congressional Budget Office regularly publishes reports presenting its baseline projections of what the federal budget and the economy would look like in the current year and over the next 10 years if current laws governing taxes and spending generally remained unchanged. This report is the latest in that series.

The Budget.

CBO projects that the federal budget deficit will shrink to $1.0 trillion in 2022 (it was $2.8 trillion last year) and that the annual shortfall would average $1.6 trillion from 2023 to 2032. The deficit continues to decrease as a percentage of gross domestic product (GDP) next year as spending related to the coronavirus pandemic wanes, but then deficits increase, reaching 6.1 percent of GDP in 2032. The deficit has been greater than that only six times since 1946.

Outlays are projected to average 23 percent of GDP over that period, a level high by historical standards, boosted by rising interest costs and greater spending for programs that provide benefits to elderly people. Revenues are projected to reach their highest level as a share of GDP in more than two decades in 2022 and then to decline over the following few years but remain above their long-term average through 2032.

Relative to the size of the economy, federal debt held by the public is projected to dip over the next two years, to 96 percent of GDP in 2023, and to rise thereafter. In CBO’s projections, it reaches 110 percent of GDP in 2032 (higher than it has ever been) and 185 percent of GDP in 2052. Moreover, if lawmakers amended current laws to maintain certain policies now in place, even larger increases in debt would ensue.

Changes in CBO’s Budget Projections.

CBO’s projection of the deficit for 2022 is now $118 billion less than it was in July 2021, but its projection of the cumulative deficit over the 2022–2031 period is $2.4 trillion more.

The Economy.

In CBO’s projections, elevated inflation initially persists in 2022 because of the combination of strong demand and restrained supply in the markets for goods, services, and labor. Inflation then subsides as supply disruptions dissipate, energy prices decline, and less accommodative monetary policy takes hold. Since mid-2021, inflation has reached its fastest pace in four decades. In CBO’s projections, the price index for personal consumption expenditures increases by 4.0 percent in 2022. In response, the Federal Reserve tightens monetary policy and interest rates rise rapidly. Real GDP grows by 3.1 percent in 2022, and the unemployment rate averages 3.8 percent. After 2022, economic growth slows, and inflationary pressures ease.

Changes in CBO’s Economic Projections.

The agency’s projection of real GDP growth is similar to what it was last summer for 2022, higher for 2023 and 2024, and similar over the remainder of the projection period. CBO currently projects higher inflation in 2022 and 2023 than it did last July; prices are increasing more rapidly across many sectors of the economy than CBO anticipated. CBO now expects both short- and long-term interest rates over the coming decade to be higher, on average, than in its previous forecast, partly reflecting higher inflation.

H.R. 7417, Legislation to Name United States Post Offices

Source: US Congressional Budget Office

On May 11, 2022, the House Committee on Oversight and Reform ordered reported the following five bills that would name different post offices:

  • H.R. 228, a bill to designate the facility of the United States Postal Service located at 2141 Ferry Street in Anderson, California, as the “Norma Comnick Post Office Building,”
  • H.R. 5976, a bill to designate the facility of the United States Postal Service located at 101 West Walnut Street in Watseka, Illinois, as the “Sgt. Jeremy C. Sherman Post Office Building,”
  • H.R. 6404, a bill to designate the facility of the United States Postal Service located at 114 North Magnolia Street in Elmwood, Illinois, as the “Corporal Benjamin Desilets Post Office,”
  • H.R. 7417, a bill to designate the facility of the United States Postal Service located at 120 East Oak Avenue in Seminole, Oklahoma, as the “Sergeant Bret D. Isenhower Memorial Post Office Building,” and
  • H.R. 7514, a bill to designate the facility of the United States Postal Service located at 345 South Main Street in Butler, Pennsylvania, as the “Andrew Gomer Williams Post Office Building.”

Cash flows for the Postal Service are recorded in the federal budget in the Postal Service Fund and are classified as off-budget direct spending. CBO estimates that naming those facilities would have no significant cost.

H.R. 7514, Legislation to Name United States Post Offices

Source: US Congressional Budget Office

On May 11, 2022, the House Committee on Oversight and Reform ordered reported the following five bills that would name different post offices:

  • H.R. 228, a bill to designate the facility of the United States Postal Service located at 2141 Ferry Street in Anderson, California, as the “Norma Comnick Post Office Building,”
  • H.R. 5976, a bill to designate the facility of the United States Postal Service located at 101 West Walnut Street in Watseka, Illinois, as the “Sgt. Jeremy C. Sherman Post Office Building,”
  • H.R. 6404, a bill to designate the facility of the United States Postal Service located at 114 North Magnolia Street in Elmwood, Illinois, as the “Corporal Benjamin Desilets Post Office,”
  • H.R. 7417, a bill to designate the facility of the United States Postal Service located at 120 East Oak Avenue in Seminole, Oklahoma, as the “Sergeant Bret D. Isenhower Memorial Post Office Building,” and
  • H.R. 7514, a bill to designate the facility of the United States Postal Service located at 345 South Main Street in Butler, Pennsylvania, as the “Andrew Gomer Williams Post Office Building.”

Cash flows for the Postal Service are recorded in the federal budget in the Postal Service Fund and are classified as off-budget direct spending. CBO estimates that naming those facilities would have no significant cost.

H.R. 6404, Legislation to Name United States Post Offices

Source: US Congressional Budget Office

On May 11, 2022, the House Committee on Oversight and Reform ordered reported the following five bills that would name different post offices:

  • H.R. 228, a bill to designate the facility of the United States Postal Service located at 2141 Ferry Street in Anderson, California, as the “Norma Comnick Post Office Building,”
  • H.R. 5976, a bill to designate the facility of the United States Postal Service located at 101 West Walnut Street in Watseka, Illinois, as the “Sgt. Jeremy C. Sherman Post Office Building,”
  • H.R. 6404, a bill to designate the facility of the United States Postal Service located at 114 North Magnolia Street in Elmwood, Illinois, as the “Corporal Benjamin Desilets Post Office,”
  • H.R. 7417, a bill to designate the facility of the United States Postal Service located at 120 East Oak Avenue in Seminole, Oklahoma, as the “Sergeant Bret D. Isenhower Memorial Post Office Building,” and
  • H.R. 7514, a bill to designate the facility of the United States Postal Service located at 345 South Main Street in Butler, Pennsylvania, as the “Andrew Gomer Williams Post Office Building.”

Cash flows for the Postal Service are recorded in the federal budget in the Postal Service Fund and are classified as off-budget direct spending. CBO estimates that naming those facilities would have no significant cost.

H.R. 5976, Legislation to Name United States Post Offices

Source: US Congressional Budget Office

On May 11, 2022, the House Committee on Oversight and Reform ordered reported the following five bills that would name different post offices:

  • H.R. 228, a bill to designate the facility of the United States Postal Service located at 2141 Ferry Street in Anderson, California, as the “Norma Comnick Post Office Building,”
  • H.R. 5976, a bill to designate the facility of the United States Postal Service located at 101 West Walnut Street in Watseka, Illinois, as the “Sgt. Jeremy C. Sherman Post Office Building,”
  • H.R. 6404, a bill to designate the facility of the United States Postal Service located at 114 North Magnolia Street in Elmwood, Illinois, as the “Corporal Benjamin Desilets Post Office,”
  • H.R. 7417, a bill to designate the facility of the United States Postal Service located at 120 East Oak Avenue in Seminole, Oklahoma, as the “Sergeant Bret D. Isenhower Memorial Post Office Building,” and
  • H.R. 7514, a bill to designate the facility of the United States Postal Service located at 345 South Main Street in Butler, Pennsylvania, as the “Andrew Gomer Williams Post Office Building.”

Cash flows for the Postal Service are recorded in the federal budget in the Postal Service Fund and are classified as off-budget direct spending. CBO estimates that naming those facilities would have no significant cost.

H.R. 228, Legislation to Name United States Post Offices

Source: US Congressional Budget Office

On May 11, 2022, the House Committee on Oversight and Reform ordered reported the following five bills that would name different post offices:

  • H.R. 228, a bill to designate the facility of the United States Postal Service located at 2141 Ferry Street in Anderson, California, as the “Norma Comnick Post Office Building,”
  • H.R. 5976, a bill to designate the facility of the United States Postal Service located at 101 West Walnut Street in Watseka, Illinois, as the “Sgt. Jeremy C. Sherman Post Office Building,”
  • H.R. 6404, a bill to designate the facility of the United States Postal Service located at 114 North Magnolia Street in Elmwood, Illinois, as the “Corporal Benjamin Desilets Post Office,”
  • H.R. 7417, a bill to designate the facility of the United States Postal Service located at 120 East Oak Avenue in Seminole, Oklahoma, as the “Sergeant Bret D. Isenhower Memorial Post Office Building,” and
  • H.R. 7514, a bill to designate the facility of the United States Postal Service located at 345 South Main Street in Butler, Pennsylvania, as the “Andrew Gomer Williams Post Office Building.”

Cash flows for the Postal Service are recorded in the federal budget in the Postal Service Fund and are classified as off-budget direct spending. CBO estimates that naming those facilities would have no significant cost.

S. 977, No Oil Producing and Exporting Cartels Act of 2021

Source: US Congressional Budget Office

S. 977 would seek to prohibit foreign states from working collectively to limit the production, set the price, or otherwise restrain the trading of petroleum and natural gas when such actions affect U.S. markets. The bill would authorize the Department of Justice (DOJ) to enforce the legislation by filing antitrust actions in federal courts. Under the bill, foreign states that restrain trade in petroleum and natural gas would not be immune from the judgment of U.S. courts under the doctrine of sovereign immunity.

CBO has no basis to predict whether DOJ would initiate antitrust actions against foreign states under the bill. The cost of investigating alleged antitrust violations like those that might be brought under S. 977 could cost millions of dollars per year, subject to the availability of appropriated funds.

Those prosecuted and convicted under S. 977 could be subject to criminal fines, thus the federal government might collect additional fines under the bill. Criminal fines are recorded as revenues, deposited in the Crime Victims Fund, and later spent without further appropriation action. Because enacting S. 977 could affect direct spending and revenues, pay-as-you-go procedures apply. CBO cannot estimate the magnitude of additional revenues and direct spending that might result from the bill over the 2022-2032 period because of significant uncertainty about enforcement decisions made by DOJ, the outcome of prosecutions, and the magnitude of fines that would be imposed and collected. A successful prosecution of a foreign entity under S. 977 could result in the collection of hundreds of millions of dollars, if the magnitude of future fines is similar to those in recent antitrust cases. Because the spending of revenues occurs over a period of several years after the fines are collected, CBO expects that the legislation could reduce the deficit during the 2022-2032 period, as large fines are collected during that period but some of the funds are spent after 2032.

S. 1944, Vet Center Improvement Act of 2021

Source: US Congressional Budget Office

S. 1944 would authorize the Department of Veterans Affairs (VA) to carry out a program to provide grants to entities that address food insecurity among veterans and their family members. The department would be required to begin the program within 18 months of enactment and provide grants for three years after it begins the program. The bill would authorize appropriations of $15 million for each fiscal year that the program operates. CBO expects that each year of the program would span more than one fiscal year; thus, we estimate the bill would authorize appropriations of $60 million for the grant program over four fiscal years. Eligible grant recipients include nonprofit organizations, community-based organizations, public agencies, or institutions of higher education. The grants would be used to support partnerships among entities that address food insecurity among veterans and their families and to increase participation in nutrition counseling programs and federal food assistance programs. CBO estimates that implementing the program would cost $58 million over the 2022-2027 period; such spending would be subject to appropriation of the specified amounts.

The bill also would require several actions regarding Vet Centers, which are VA facilities that provide social and psychological services to veterans, military service members, and their families. It would require VA to:

  • Collect feedback from Vet Center employees on their productivity expectations;
  • Develop, implement, and regularly update a staffing model for those facilities; and
  • Standardize roles and expectations for staff positions at those centers.

S. 3126, A bill to amend the Grand Ronde Reservation Act to address the hunting, fishing, trapping, and animal gathering rights of the Confederated Tribes of the Grand Ronde Community, and for other purposes

Source: US Congressional Budget Office

In 1988, the Grand Ronde Reservation Act established a reservation for the Confederated Tribes of the Grand Ronde Community of Oregon and codified limits on the tribe’s hunting, fishing, and trapping rights that the tribe and the state had previously agreed to in a consent decree. Those limitations cannot be modified under current federal law.

S. 3126 would amend the Act to permit the tribe and the state to alter or replace the existing agreement defining the tribe’s rights to use the land.

Using information provided by the Bureau of Indian Affairs, CBO expects that under the bill the agency would provide technical assistance to the tribe and the state to facilitate any revisions to the agreement. CBO estimates that the cost of those efforts would not be significant; any spending would be subject to the availability of appropriated funds.