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Congressional Budget Office
Presentation to the National Economists Club
Outlook for the Economy
and the Budget
February 24, 2011
Douglas W. Elmendorf
Director
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Actual and Potential Output
Trillions of 2005 Dollars, Log Scale
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Possible Paths to Full Employment
Millions of People
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Unemployment Rate
Percent
2
Actual Projected
202020152010200520001995199019851980
12
10
8
6
4
2
0
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Inflation (PCE Price Index)
Percentage Change from Previous Year
5
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CBOs Baseline Budget Projections
Actual,2009
Actual,2010 2011 2012 2013 2014 2021
Total,20122021
In Billions of Dollars
Total Deficit -1,413 -1,294 -1,480 -1,100 -704 -533 -763
-6,971
Debt Held by thePublic
7,545 9,018 10,430 11,598 12,386 12,996 18,253
As a Percentage of GDP
Total Deficit -10.0 -8.9 -9.8 -7.0 -4.3 -3.1 -3.2 -3.6
Debt Held by thePublic
53.5 62.1 69.4 73.9 75.5 75.3 76.7
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Total Deficits and SurplusesHistorically, in CBOsBaseline, and
with a Continuation of Certain Policies
Percentage of gross domestic product
1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021
- 12
- 10
- 8
- 6
- 4
- 2
0
2
4
- 12
- 10
- 8
- 6
- 4
- 2
0
2
4Actual Projected
Baseline
Continuation of
Certain Policies
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Federal Debt Held by the PublicHistorically, in CBOsBaseline,
and with a Continuation of Certain Policies
Percentage of gross domestic product
1940 1949 1958 1967 1976 1985 1994 2003 2012 2021
0
20
40
60
80
100
120
0
20
40
60
80
100
120Actual Projected
Baseline
Continuation
of Certain
Policies
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Projected Federal Revenue and Spending in 2021with the
Continuation of Certain Policies
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Components of the Federal Budget
1970 2007
2021
JanuaryBaseline
Percentage of GDP
Revenues 19.0 18.5 20.8
Outlays 19.3 19.6 24.0
Social Security, Medicare, Medicaid,health insurance subsidies,
andother health programs
3.8 8.2 12.0
Defense 8.1 3.9 3.6
Other mandatory spendingand nondefense discretionaryspending
6.0 5.8 5.0
Net interest 1.4 1.7 3.3
Deficit 0.3 1.2 3.2Note: Figures are shown net of offsetting
receipts where relevant.
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Debt Burden Across Countries in 2009
Source: For the United States, debt held by the public net of
financial assets. For other countries, general government debt
net of financial liabilities as reported by the Organisation for
Economic Co-operation and Development.
Percentage of gross domestic product
Switzerland
Slovak Republic
Poland
Canada
Ireland
Netherlands
Spain
Austria
Iceland
United Kingdom
UNITED STATES
Germany
France
Portugal
Hungary
Belgium
Greece
Italy
Japan
0 20 40 60 80 100 120
2021 CBO
Baseline
With
Continuation of
Certain Policies
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Timing of Deficit Reduction
The longer the necessary adjustments are delayed: The greater
the negative consequences of mounting debt;
The more uncertainty about future government policies; and
The more drastic the ultimate policy changes.
However, changes of the magnitude that will ultimately
berequired could be disruptive. Congress may wish to implementthem
gradually so as to:
Avoid a sudden negative impact on the economy;
Give families, businesses, and governments time to plan
andadjust.
Gradual implementation would mean that remedying the
fiscalimbalance would take longer, so major policy changes
would
need to be enacted soon to limit the further increase in
debt.
