A Preliminary Analysis of the
President’s Budget and an Update of
CBO’s Budget and Economic Outlook
March 2009
Unless otherwise indicated, years referred to in describing the economic outlook are calendar years, and years referred to in describing the budget outlook are federal fiscal years (which run from October 1 to September 30).
Numbers in the text and tables may not add up to totals because of rounding.
The figures use dashed vertical lines to separate actual from projected data and use shaded vertical bars to indicate periods of recession. (A recession extends from the peak of a business cycle to its trough.)
Preface
In response to a request by the Senate Committee on Appropriations, the Congressional Budget Office (CBO) offers this analysis. It includes a new economic forecast, updated budget projections, and the agency’s work to date in analyzing the President’s budgetary proposals for fiscal year 2010, as described in brief in the Office of Management and Budget’s A New Era of Responsibility: Renewing America's Promise, released in February 2009. Once the Administration has released the details of those proposals, CBO will complete its analysis.
The baseline spending projections and the estimates of the President’s spending proposals were prepared by the staff of CBO’s Budget Analysis Division under the supervision of Peter Fontaine, Theresa Gullo, Janet Airis, Tom Bradley, Kim Cawley, Jeffrey Holland, Sarah Jennings, Kate Massey, and Sam Papenfuss. The baseline revenue estimates were prepared by the staff of CBO’s Tax Analysis Division under the supervision of Frank Sammartino, Mark Booth, and David Weiner. Pamela Greene coordinated the analysis of the President’s revenue proposals, and the Joint Committee on Taxation prepared most of the estimates of them. (A detailed list of contributors to the spending and revenue projections appears in Appendix B.)
The economic outlook was prepared by the Macroeconomic Analysis Division under the direction of Robert Dennis, Kim Kowalewski, and John F. Peterson. Robert Arnold and Christopher Williams developed the economic forecast and projections. David Brauer, Juan Contreras, Naomi Griffin, Juann Hung, Wendy Kiska, Mark Lasky, Damien Moore, Benjamin Page, William Randolph, Frank Russek, Marika Santoro, Sven Sinclair, David Torregrosa, Steven Weinberg, and Susan Yang contributed to the analysis. Holly Battelle and Eric Miller provided research assistance.
Barry Blom of CBO’s Projections Unit was the lead author for Chapter 1. David Brauer wrote Chapter 2. Eric Miller compiled Appendix A.
John Skeen and Sherry Snyder edited the report, with help from Kate Kelly. Denise Jordan-Williams and Linda Lewis Harris assisted in its preparation. Maureen Costantino designed the cover and prepared the report for publication. Lenny Skutnik printed the initial copies, Linda Schimmel handled the distribution, and Simone Thomas prepared the electronic version for CBO’s Web site.
Contents
CBO’s Baseline and Estimate of the President’s Budget
CBO’s Baseline Budget Projections
Changes in CBO’s Baseline Since January 2009
CBO’s Estimate of the President’s Budget
Comparison with CBO’s January Forecast
Comparison with Other Forecasts
CBO’s Economic Projections for 2009 to 2019
Contributors to the Revenue and Spending Projections
1-1. Comparison of Projected Revenues, Outlays, and Deficits in CBO’s March 2009 Baseline and CBO’s Estimate of the President’s Budget
1-2. CBO’s Baseline Budget Projections
1-3. Changes in CBO’s Baseline Projections of the Deficit Since January 2009
1-4. CBO’s Estimate of the President’s Budget
1-5. CBO’s Estimate of the Effect of the President’s Budget on Baseline Deficits
2-1. CBO’s Economic Projections for Calendar Years 2009 to 2019
2-2. Consensus Forecasts of Foreign Economies’ Inflation-Adjusted Growth of GDP, 2009
2-3. Estimated Macroeconomic Impacts of the American Recovery and Reinvestment Act of 2009, Fourth Quarters of Calendar Years 2009 to 2019
2-4. Key Assumptions in CBO’s Projection of Potential Output
2-5. CBO’s Current and Previous Economic Projections for Calendar Years 2009 to 2019
2-6. Comparison of CBO, Administration, and Blue Chip Economic Projections for Calendar Years 2009 to 2019
2-7. Comparison of Economic Forecasts by the Federal Reserve and CBO for Calendar Years 2009, 2010, and 2011
A-1. CBO’s Year-by-Year Forecast and Projections for Calendar Years 2009 to 2019
A-2. CBO’s Year-by-Year Forecast and Projections for Fiscal Years 2009 to 2019
1-1. Total Deficits or Surpluses, 1969 to 2019
1-2. Total Revenues and Outlays as a Percentage of Gross Domestic Product in CBO’s Baseline and the President’s Budget
2-1. The GDP Gap, 1965 to 2015
2-3. Uncertainty in Projections of Real GDP
2-4. Vacant Homes, 1965 to 2008
2-5. Spread Between the Three-Month Libor and the Expected Federal Funds Rate, January 2007 to March 2009
2-6. Real Personal Consumption Expenditures, January 1965 to January 2009
2-7. Initial Claims for Unemployment Insurance, January 1965 to February 2009
2-8. The Trade Balance, 1965 to 2008
2-9. Core Consumer Price Index, 1985 to 2011
