January 17, 2025 (press release) –
The Budget and Economic Outlook: 2025 to 2035
Report
In CBO’s projections, the federal budget deficit is $1.9 trillion this year, and federal debt rises to 118 percent of GDP in 2035. Economic growth slows and inflation declines over the next two years; both remain moderate after 2026.
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The Budget and Economic Outlook: 2025 to 2035 JANUARY | 2025 By the Numbers The Budget Outlook, by Fiscal Year Percentage of GDP Billions of dollars Average, Actual, Actual, 1975–2024 2024 2025 2026 2035 2024 2025 2026 2035 Revenues 17.3 17.1 17.1 17.8 18.3 4,918 5,163 5,580 8,031 Individual income taxes 8.0 8.4 8.7 9.5 10.0 2,426 2,621 2,968 4,413 Payroll taxes 6.0 5.9 5.8 5.9 5.9 1,709 1,759 1,840 2,605 Corporate income taxes 1.8 1.8 1.7 1.6 1.2 530 524 495 517 Other 1.5 0.9 0.9 0.9 1.1 253 259 277 496 Outlays 21.1 23.7 23.3 23.3 24.4 6,826 7,028 7,294 10,730 Mandatory 11.1 14.3 14.0 14.0 15.1 4,130 4,228 4,386 6,626 Social Security 4.4 5.0 5.2 5.3 6.0 1,454 1,572 1,664 2,624 Major health care programs 3.5 5.8 5.8 5.8 6.7 1,669 1,754 1,832 2,949 Medicare 2.1 3.2 3.1 3.2 4.0 910 942 1,000 1,753 Medicaid, CHIP, and marketplace subsidies 1.3 2.6 2.7 2.7 2.7 759 812 831 1,196 Other mandatory 3.2 3.5 3.0 2.8 2.4 1,006 902 891 1,053 Discretionary 7.9 6.3 6.1 6.1 5.3 1,815 1,848 1,897 2,322 Defense 4.2 3.0 2.9 2.8 2.4 855 859 866 1,053 Nondefense 3.7 3.3 3.3 3.3 2.9 960 989 1,031 1,268 Net interest 2.1 3.1 3.2 3.2 4.1 881 952 1,010 1,783 Total deficit (-) -3.8 -6.6 -6.2 -5.5 -6.1 -1,907 -1,865 -1,713 -2,699 Primary deficit (-) -1.7 -3.6 -3.0 -2.2 -2.1 -1,026 -913 -703 -916 Debt held by the public at the end of each period 49.7 97.8 99.9 101.7 118.5 28,199 30,103 31,883 52,056 See Appendix B. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that ordinarily would have been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Outlays and deficits have been adjusted to remove the effects of those shifts. CHIP = Children’s Health Insurance Program; GDP = gross domestic product. The Economic Outlook, by Calendar Year Annual average Estimated, 2028– 2030– 2024 2025 2026 2027 2029 2035 Change from fourth quarter to fourth quarter (percent) Real (inflation-adjusted) GDP 2.3 1.9 1.8 1.8 1.8 1.8 Inflation PCE price index 2.5 2.2 2.1 2.0 2.0 2.0 Consumer price index 2.7 2.3 2.4 2.3 2.2 2.2 Payroll employment (net monthly change, in thousands) 187 90 58 46 52 57 Annual average (percent) Unemployment rate 4.0 4.3 4.4 4.4 4.4 4.4 Interest rates Effective federal funds rate 5.1 4.0 3.5 3.3 3.3 3.2 3-month Treasury bills 5.0 3.8 3.3 3.2 3.2 3.1 10-year Treasury notes 4.2 4.1 3.9 3.9 3.9 3.8 Tax bases (percentage of GDP) Wages and salaries 42.6 42.8 43.1 43.2 43.5 43.6 Domestic corporate profits 11.4 11.1 10.7 10.3 9.6 9.5 See Appendix C. GDP = gross domestic product; PCE = personal consumption expenditures. www.cbo.gov/publication/60870 Contents The Budget and Economic Outlook: 2025 to 2035 1 The Budget Outlook 1 The Economic Outlook 5 Appendix A: Changes in CBO’s Baseline Projections Since June 2024 9 Appendix B: The Budget Outlook in Tables 19 Appendix C: The Economic Outlook in Tables 27 Appendix D: Tax Expenditures 33 Appendix E: Table and Figure Notes 35 About This Document 37 Notes About This Report The budget projections in this report include the effects of legislation enacted through January 6, 2025, and are based on the Congressional Budget Office’s economic projections. Those economic projections reflect economic developments and information as of December 4, 2024, and are avail- able on CBO’s website (www.cbo.gov/data/budget-economic-data#4). Unless this report indicates otherwise, all years referred to in describing the budget outlook are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Years referred to in describing the economic outlook are calendar years. When October 1 falls on a weekend, certain monthly payments that the government would ordinarily have made on that day are instead made at the end of September and thus are shifted into the pre- vious fiscal year. Consequently, the number of payments in the fiscal year that begins on a weekend decreases, and the number in the previous year increases. Those shifts in the timing of payments affect outlays and deficits (or surpluses) and thus are reflected in the agency’s baseline budget pro- jections (see Table A-1 and Table B-1). But timing shifts can complicate comparisons of annual outlays and deficits and distort certain budgetary trends, so CBO also presents adjusted baseline projec- tions that treat the payments as if they were not subject to the shifts. (For examples, see Table B-2 and Table B-4.) Unless this report indicates otherwise, historical economic data shown in the text, tables, and figures reflect data available from the Bureau of Economic Analysis and other sources in mid-January 2025. Those data contain updated values for the last two months of 2024, which were not available when CBO developed its current projections. Numbers in the text, tables, and figures may not add up to totals because of rounding. Some of the figures in this report use shaded vertical bars to indicate periods of recession. (A reces- sion begins just after a peak in economic activity and runs through the subsequent trough.) Supplemental data for this analysis are available on CBO’s website (www.cbo.gov/publication/60870#data), as are a glossary of budgetary and economic terms (www.cbo.gov/publication/42904), a guide that explains the differences between common budgetary terms (www.cbo.gov/publication/57420), a description of how CBO develops its baseline budget projections (www.cbo.gov/publication/58916), a description of how CBO prepares its economic forecast (www.cbo.gov/publication/53537), and previous editions of this report (https://tinyurl.com/4dt4hshv). The Budget and Economic Outlook: 2025 to 2035 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 laws governing taxes and spending generally remained unchanged. This report is the latest in that series, presented in an abbreviated version to facilitate work on other Congressional priorities. The budget projections are based on CBO’s economic forecast, which reflects developments in the economy as of December 4, 2024. They also incorporate legislation enacted through January 6, 2025. The Budget Outlook Deficits In CBO’s projections, the federal budget deficit in fiscal year 2025 is $1.9 trillion. Adjusted to exclude the effects of shifts in the timing of certain payments, the deficit grows to $2.7 trillion by 2035. It amounts to 6.2 percent of gross domestic product (GDP) in 2025 and drops to 5.2 percent by 2027 as revenues increase faster than outlays. In later years, Projections outlays increase faster than revenues, on average. In 2035, the adjusted deficit equals 6.1 percent of GDP—significantly more than the 3.8 percent that deficits have averaged for 2025 over the past 50 years. Debt Budget deficit: From 2025 to 2035, debt swells as increases in mandatory spending and interest costs $1.9 trillion outpace growth in revenues. Federal debt held by the public rises from 100 percent of GDP this year to 118 percent in 2035, surpassing its previous high of 106 percent of GDP in 1946. Outlays and Revenues Debt held by Federal outlays in 2025 total $7.0 trillion, or 23.3 percent of GDP. They remain close to the public: that level through 2028 and then rise, reaching 24.4 percent of GDP in 2035 (if adjusted 100% of GDP to exclude the effects of shifts in the timing of certain payments). The main reasons for that increase are growth in spending for Social Security and Medicare and rising net interest costs. Revenues total $5.2 trillion, or 17.1 percent of GDP, in 2025. They rise to 18.2 percent Outlays: of GDP by 2027, in part because of the scheduled expiration of provisions of the 2017 tax $7.0 trillion act. Revenues decline as a share of GDP over the next two years, falling to 17.9 percent in 2029, but then generally increase, reaching 18.3 percent in 2035. Changes in CBO’s Budget Projections Revenues: The deficit for 2025 is $0.1 trillion (or 4 percent) less in CBO’s current projections $5.2 trillion than it was in the agency’s June 2024 projections, and the cumulative deficit over the 2025–2034 period is smaller by $1.0 trillion (or 4 percent). The largest contributor to the cumulative decrease was growth in projected collections of individual income taxes, driven by greater projections of taxable income in CBO’s economic forecast. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that ordinarily would have been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Because those shifts can distort budgetary trends, CBO often presents adjusted projections of deficits and outlays that treat the payments as if they were not subject to the shifts. 2 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 The Budget Outlook, by Fiscal Year Percentage of GDP Billions of dollars Average, Actual, Actual, 1975–2024 2024 2025 2026 2035 2024 2025 2026 2035 Revenues 17.3 17.1 17.1 17.8 18.3 4,918 5,163 5,580 8,031 Individual income taxes 8.0 8.4 8.7 9.5 10.0 2,426 2,621 2,968 4,413 Payroll taxes 6.0 5.9 5.8 5.9 5.9 1,709 1,759 1,840 2,605 Corporate income taxes 1.8 1.8 1.7 1.6 1.2 530 524 495 517 Other 1.5 0.9 0.9 0.9 1.1 253 259 277 496 Outlays 21.1 23.7 23.3 23.3 24.4 6,826 7,028 7,294 10,730 Mandatory 11.1 14.3 14.0 14.0 15.1 4,130 4,228 4,386 6,626 Social Security 4.4 5.0 5.2 5.3 6.0 1,454 1,572 1,664 2,624 Major health care programs 3.5 5.8 5.8 5.8 6.7 1,669 1,754 1,832 2,949 Medicare 2.1 3.2 3.1 3.2 4.0 910 942 1,000 1,753 Medicaid, CHIP, and marketplace subsidies 1.3 2.6 2.7 2.7 2.7 759 812 831 1,196 Other mandatory 3.2 3.5 3.0 2.8 2.4 1,006 902 891 1,053 Discretionary 7.9 6.3 6.1 6.1 5.3 1,815 1,848 1,897 2,322 Defense 4.2 3.0 2.9 2.8 2.4 855 859 866 1,053 Nondefense 3.7 3.3 3.3 3.3 2.9 960 989 1,031 1,268 Net interest 2.1 3.1 3.2 3.2 4.1 881 952 1,010 1,783 Total deficit (-) -3.8 -6.6 -6.2 -5.5 -6.1 -1,907 -1,865 -1,713 -2,699 Primary deficit (-) -1.7 -3.6 -3.0 -2.2 -2.1 -1,026 -913 -703 -916 Debt held by the public at the end of each period 49.7 97.8 99.9 101.7 118.5 28,199 30,103 31,883 52,056 Outlook for See Appendix B. Outlays and Revenues The Budget Outlook in Six Figures Increases in spending for Social Security Total Outlays and Percentage of GDP Revenues and Medicare and 40 Measured as a percentage of Projected rising net interest GDP, federal outlays in CBO’s costs push outlays to projections exceed their $10.7 trillion, or 24.4% 50-year average every year 30 Average outlays, from 2025 to 2035. Revenues 1975 to 2024 of GDP, in 2035. (21.1) Outlays 24.4 remain below their 50-year average in 2025 but rise 20 18.3 Revenues in 2035 above it thereafter. total $8.0 trillion, or Average revenues, Revenues 10 1975 to 2024 18.3% of GDP. (17.3) 0 1975 1985 1995 2005 2015 2025 2035 JANUAry 2025 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 3 Outlays, by Category In CBO’s projections, rising spending for Social Security and Medicare boosts mandatory outlays, and discretionary spending shrinks as a share of GDP. Net outlays for interest increase as debt mounts. Interest costs exceed outlays for defense from 2025 to 2035 and exceed outlays for nondefense discretionary programs from 2027 to 2035. From 2027 on, interest costs are greater in relation to GDP than at any point since at least 1940 (the first year for which the Office of Management and Budget reports such data). Percentage of GDP 25 Projected 20 Mandatory 15 15.1 10 Discretionary 5 5.3 4.1 Net interest Outlook for 0 1975 1985 1995 2005 2015 2025 2035 Outlays and Revenues Revenues, by Category Receipts from individual income taxes rise over the next three years, primarily because The Budget Outlook in Six Figures of scheduled increases in most tax rates, and then roughly stabilize as a share of GDP. Increases in spending After 2025, corporate income tax receipts decrease in relation to GDP, largely for Social Security because of other scheduled changes in tax rules, increased claims of tax credits, and and Medicare and slower growth of corporate profits relative to overall growth in the economy. rising net interest Percentage of GDP costs push outlays to 12 Projected $10.7 trillion, or 24.4% of GDP, in 2035. Individual income taxes 10.0 9 Revenues in 2035 total $8.0 trillion, or 6 Payroll taxes 5.9 18.3% of GDP. 3 Corporate income taxes 1.2 Other 11..11 0 1975 1985 1995 2005 2015 2025 2035 4 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Total Deficit, Net Interest Percentage of GDP Outlays, and Primary Deficit 15 Projected In CBO’s projections, the total deficit—the amount by which outlays exceed revenues— 10 equals 6.1 percent of GDP in 2035. By that year, net interest Total deficit payments grow to 4.1 percent of GDP and account for about 5 Net interest one-sixth of all federal spending. outlays The primary deficit (which Primary deficit excludes those payments) equals 0 2.1 percent of GDP in 2035. Primary surplus −5 1975 1985 1995 2005 2015 2025 2035 Changes in CBO’s Projections of the 10-Year Deficit Trillions of dollars Since June 2024 Deficits from 2025 to 2034 are 2025–2034 deficit in CBO’s June 2024 baseline 22.1 projected to total $21.1 trillion, $1.0 tril- lion less than CBO projected in June. 2025–2034 deficit in CBO’s January 2025 baseline 21.1 Most of that decrease is due to economic changes to CBO’s projec- tions, particularly increases in pro- jected revenues from individual income taxes. Legislative changes and Economic changes −2.5 technical (that is, neither economic nor legislative) changes boosted projected Legislative changes 0.3 deficits. Those increases offset more than half of the decrease from eco- nomic changes. (For more details Technical changes 1.3 about changes to CBO’s budget projections, see Appendix A.) Federal Debt Held Percentage of GDP by the Public 120 Projected Debt held by the public rises each year. From 2025 to 2035, 100 it swells from 100 percent of GDP to 118 percent—an amount greater than at any point in the 80 nation’s history. (For more details about CBO’s budget 60 projections, see Appendix B.) 40 Debt 20 0 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2015 2025 2035 JANUAry 2025 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 5 The Economic Outlook Economic Growth Outlook for In CBO’s projections, economic growth cools from an estimated 2.3 percent in calendar year 2024 to 1.9 percent in 2025 and 1.8 percent in 2026 amid higher unemployment 2025– and lower inflation. The Federal Reserve continues reducing interest rates through the 2035 end of 2026, which supports economic growth. Real GDP then grows by 1.8 percent per year, on average, through 2035. Roughly four-fifths of the growth over that period is due to increases in the productivity of the labor force. The rest is due to increases in the size Over the next two of the labor force. years, economic Inflation growth slows, and The overall growth of prices slows slightly in 2025. Inflation as measured by the price inflation continues index for personal consumption expenditures (PCE) falls from an estimated 2.5 percent in 2024 to a rate roughly in line with the Federal Reserve’s long-run goal of 2 percent in to decline. 2027 and stabilizes thereafter. Interest Rates After 2026, The Federal Reserve began reducing the federal funds rate (the rate financial institutions economic growth charge each other for overnight loans) in September 2024. In CBO’s projections, those and inflation remain reductions continue through the end of 2026. Longer-term interest rates, such as the rate on 10-year Treasury notes, decline through the end of 2026 and then remain roughly flat. moderate. Changes in CBO’s Economic Projections Since June 2024, when CBO published its previous full economic forecast, the agency’s projections of the average growth rate of real GDP over the 2024–2026 period have changed little. CBO raised its forecast of the average unemployment rate for 2024 to 2026 and lowered its forecast of employment growth over that period. Inflation is expected to be slightly higher, on average, in 2025 and 2026 than the agency projected in June. The forecast of long-term interest rates for 2026 is also higher. After 2026, CBO’s current and previous forecasts are generally similar. The Economic Outlook, by Calendar Year Annual average Estimated, 2028– 2030– 2024 2025 2026 2027 2029 2035 Change from fourth quarter to fourth quarter (percent) Real (inflation-adjusted) GDP 2.3 1.9 1.8 1.8 1.8 1.8 Inflation PCE price index 2.5 2.2 2.1 2.0 2.0 2.0 Consumer price index 2.7 2.3 2.4 2.3 2.2 2.2 Payroll employment (net monthly change, in thousands) 187 90 58 46 52 57 Annual average (percent) Unemployment rate 4.0 4.3 4.4 4.4 4.4 4.4 Interest rates Effective federal funds rate 5.1 4.0 3.5 3.3 3.3 3.2 3-month Treasury bills 5.0 3.8 3.3 3.2 3.2 3.1 10-year Treasury notes 4.2 4.1 3.9 3.9 3.9 3.8 Tax bases (percentage of GDP) Wages and salaries 42.6 42.8 43.1 43.2 43.5 43.6 Domestic corporate profits 11.4 11.1 10.7 10.3 9.6 9.5 See Appendix C. 6 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 The Economic Outlook in Six Figures Growth of Real GDP The growth of economic output, as measured by the nation’s GDP, is expected to moderate in 2025, reflecting slower growth in consumer and government spending. CBO expects that more moderate economic growth to continue in 2026 as consumer spending slows further and investment in private nonresidential structures declines. Percent 6 Recession Projected 4 Real GDP growth 2 0 −2 Outlook for Economic Growth −4 2000 2005 2010 2015 2020 2025 2030 2035 Real GDP grows Residential Investment by 1.9% in 2025 Real residential investment, which includes home construction, renovations, and and 1.8% in 2026. brokers’ commissions, grew by an estimated 2.5 percent in 2024, contributing 0.1 percentage point to real GDP growth. In CBO’s projections, that contribution rises to 0.3 percentage points in 2025 and 2026 before declining. Such investment grows by an average of 6.4 percent in those years as falling interest rates, pent-up demand, recent increases in the population, and a limited supply of existing homes for sale boost demand for new homes. Percent 20 Recession Projected 15 10 5 0 −5 Growth of real −10 residential investment −15 −20 −25 −30 2000 2005 2010 2015 2020 2025 2030 2035 JANUAry 2025 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 7 Unemployment In CBO’s projections, the slowdown in economic growth raises the unemployment rate to 4.3 percent at the end of 2025 and 4.4 percent at the end of 2026. In later years, the unemployment rate declines gradually, reaching 4.3 percent at the end of 2035. Percent 10 Recession Projected 8 6 Unemployment rate 4 2 0 Outlook for 2000 2005 2010 2015 2020 2025 2030 2035 Unemployment and Wages Wages The unemployment Weaker demand for labor and falling inflation slow the growth of nominal wages rate rises through the over the next year. Wage growth declines gradually after 2025 but remains end of 2026 and then above the rate it averaged from 2015 to 2019—before the coronavirus pandemic—through 2035. declines gradually after 2032. Percent 6 Recession Projected Wage growth continues 5 to slow, falling to 2.9% at the end of 2035. 4 Growth of wages 3 2 1 0 2000 2005 2010 2015 2020 2025 2030 2035 8 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Overall Inflation and Core Inflation CBO expects the growth of overall prices to slow further in 2025, to a rate close to the Federal Reserve’s long-run goal of 2 percent. In CBO’s projections, inflation as measured by the PCE price index (the Federal Reserve’s preferred measure) falls from 2.5 percent in 2024 to 2.2 percent in 2025, reflecting moderating demand for labor and slower growth in housing costs. Inflation then declines more gradually, reaching 2.1 percent in 2026. From 2027 to 2035, it averages 2.0 percent per year. Percent 7 Recession Projected 6 5 4 Core inflation 3 Federal Reserve’s (excludes food and Outlook for long-run goal energy prices) Inflation 2 Overall inflation and Interest 1 Rates 0 2000 2005 2010 2015 2020 2025 2030 2035 Inflation slows in 2025 and settles at 2% or less after 2026. Interest Rates The Federal Reserve continues to lower the federal funds rate, which falls to 3.7 percent in the fourth quarter of 2025 and 3.4 percent in the fourth quarter of After 2025, short-term 2026. The 10-year rate declines less in those years. From 2027 to 2035, both interest rates remain short- and long-term interest rates decline slightly. (For details about the entire forecast and changes to it, see Appendix C.) below 10-year rates, Percent reflecting their typical 7 relationship. Recession Projected 6 5 10-year Treasury 4 notes 3 Federal funds rate 2 1 0 2000 2005 2010 2015 2020 2025 2030 2035 Appendix A: Changes in CBO’s Baseline Projections Since June 2024 At least once a year, the Congressional Budget Office $21.1 trillion. That amount is $1.0 trillion (or 4 per- publishes reports providing the agency’s projections of cent) less than the $22.1 trillion the agency projected in what the federal budget and the economy would look June 2024. That change is the net result of a $1.9 tril- like in the current fiscal year and over the next 10 years lion (or 3 percent) increase in projected revenues and a if current laws governing taxes and spending generally $0.9 trillion (or 1 percent) increase in projected outlays remained unchanged. In this appendix, CBO describes over the 2025–2034 period. The main factor contrib- key ways in which its current budget projections dif- uting to a smaller projected cumulative deficit over that fer from the projections that the agency published in period is an increase in projected individual income tax June 2024.1 (For the current budget projections in tabu- receipts, driven by greater projections of taxable income lar form, see Appendix B.) in CBO’s economic forecast. Overview In CBO’s current projections, debt held by the public CBO estimates that if no new legislation affecting spend- reaches $49.6 trillion at the end of 2034—$1.1 trillion ing and revenues was enacted after January 6, 2025, the less than the $50.7 trillion projected in June 2024. Also, budget deficit for fiscal year 2025 would total $1.87 tril- the economy is now projected to be 2.3 percent larger in lion. That amount is $0.1 trillion (or 4 percent) less 2034, mainly because of upward revisions to data about than the $1.94 trillion deficit the agency estimated in the size of the economy in 2024. Together, that reduction June 2024, when it last published its baseline budget in projected debt and the larger projected economy cause projections.2 Since then, CBO has increased its projec- federal debt at the end of 2034 to equal 117 percent of tion of revenues in 2025 by $125 billion (or 2 percent) gross domestic product (GDP); last June, CBO projected and its estimate of outlays in that year by $53 billion that debt in 2034 would equal 122 percent of GDP. (or 1 percent). When CBO updates its baseline budget projections, it CBO now projects that if current laws governing reve- groups the changes into three categories—legislative, nues and spending generally remained unchanged, the economic, and technical. Those categories are defined cumulative deficit for the 2025–2034 period would be as follows: • Legislative changes result from laws enacted since the 1. For those June 2024 projections, see Congressional Budget agency published its previous baseline projections. Office, An Update to the Budget and Economic Outlook: 2024 to 2034 (June 2024), www.cbo.gov/publication/60039. CBO’s • Economic changes arise from revisions that the current baseline projections incorporate the effects of legislation agency has made to its economic forecast, including enacted through January 6, 2025, and include the effects of the American Relief Act, 2025 (Public Law 118-158), which provides those made to incorporate the projected effects of enacted legislation on the economy.3 federal agencies with funds to operate through March 14, 2025. The effects of legislation discussed here generally reflect the estimates provided for budget enforcement purposes around the • Technical changes are revisions to projections that are time the legislation was enacted. neither legislative nor economic. 2. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that ordinarily would have been made on that day are instead made at the end of September 3. CBO’s current economic forecast reflects the laws enacted and and thus are shifted into the previous fiscal year. Because those the policy measures taken through December 4, 2024. The shifts can distort budgetary trends, CBO often presents adjusted economic changes discussed in this report reflect differences projections of deficits and outlays that treat the payments as if between the current forecast and CBO’s June 2024 forecast. For they were not subject to the shifts. The projections discussed in more details about that earlier forecast, see Congressional Budget this appendix, however, have not been adjusted to remove the Office, An Update to the Budget and Economic Outlook: 2024 to effects of those timing shifts. 2034 (June 2024), www.cbo.gov/publication/60039. 10 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 The $1.0 trillion reduction in the projected cumulative Legislative Changes deficit over the 2025–2034 period is the net result of the Revisions that CBO made to its projections of outlays following changes: and revenues to account for legislation enacted since the • A $0.3 trillion net increase attributable to agency published its June 2024 baseline increased the legislative changes (see Table A-1). CBO increased estimated deficit for 2025 by $35 billion and projected deficits over the 2025–2034 period by $0.3 trillion.4 its projections of outlays for the Social Security program because of the Social Security Fairness Act of 2023 (Public Law 118-273), which increased Changes in Outlays benefits for certain workers who receive pensions Incorporating the effects of recently enacted legislation for employment not covered by Social Security. into CBO’s baseline projections increased estimated Most of the people who will see increased benefits outlays in 2025 by $29 billion (or less than 1 percent) have employment experience at state and local and projected outlays over the 2025–2034 period by governments or were first hired by the federal $0.2 trillion (or less than 1 percent). The largest change government before 1984. was a $1.0 trillion decrease in outlays for defense dis- cretionary programs that was almost entirely offset • A $2.5 trillion net decrease resulting from economic by an increase in outlays for nondefense discretionary changes. Most of that decrease is due to a $2.2 trillion programs.5 increase in projected revenues, largely stemming from higher projections of taxable income that Discretionary Outlays. To account for legislation boosted projected individual income tax receipts. enacted since CBO completed its June 2024 baseline The reduction in deficits arising from that increase in projections, the agency decreased its projections of projected revenues reduced net outlays for interest by discretionary outlays over the 2025–2034 period by $0.4 trillion. $17 billion. That downward revision is the net result • A $1.3 trillion net increase attributable to technical of a $958 billion decrease in defense outlays that was changes. The largest adjustments increasing the deficit almost entirely offset by a $941 billion increase in are upward revisions to projections of outlays for nondefense outlays. Medicaid and a downward revision to projections of corporate income tax revenues. Defense. Decreases in defense funding, and thus outlays, stemmed from two factors. First, the interaction of the As a result of those changes, primary deficits—that is, continuing resolution that was in place on January 6, deficits excluding net outlays for interest—are now pro- 2025 (when CBO’s current baseline projections jected to total $8.1 trillion over the 2025–2034 period, were finalized), and the caps established by the Fiscal which is $1.1 trillion (or 12 percent) less than CBO Responsibility Act of 2023 (FRA, P.L. 118-5) reduced projected in June 2024. That reduction is partially offset projected funding in 2025 and later years. Second, fund- by an increase of $0.1 trillion (or 1 percent) in projected ing designated as an emergency requirement provided net outlays for interest over the 2025–2034 period. for defense purposes in 2025 was much less than the amount of such funding projected in June 2024. After reviewing administrative actions and judicial decisions that changed its baseline projections since Two separate sections of the FRA, sections 101 and June 2024, CBO identified one administrative action, 102, established caps on defense and nondefense fund- regarding immigration, that changed those projections ing. The limit on defense funding under section 102 is by $5 billion or more in at least one year of the projec- about $45 billion less than the limit established under tion period. In June 2024, the Administration issued an section 101. Which section applies in 2025 depended on executive order that is projected to reduce immigration by suspending entry of most noncitizens at the southern border of the United States. The effects of that order are included in the economic and technical changes to 4. The June 2024 baseline projections incorporated the effects of revenues and to outlays for various programs discussed in legislation enacted through May 13, 2024. this appendix; isolating those effects from other changes and reporting them separately was not practicable. 5. Funding that is provided in appropriation acts and the outlays that result from it are generally categorized as discretionary. APPENDIX A: CHANGES IN CBO’S BASELINE PrOJECTIONS SINCE JUNE 2024 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 11 whether a continuing resolution funded any part of the baseline projections. Because CBO’s current projections government on January 1 of that year. 6 of such funding begin with that smaller amount and grow with inflation over the next 10 years, projected On December 21, 2024, a continuing resolu- outlays stemming from funding designated as an emer- tion was enacted to fund the government through gency requirement are $0.5 trillion less than they were in March 14, 2025.7 As a result, the caps established under CBO’s previous baseline projections. section 102 of the FRA are currently in place. The current continuing resolution provides $888 billion in Nondefense. The increases in projected nonde- base defense funding for 2025. (Base funding refers to fense funding, and thus outlays, stemmed from base funding constrained by the caps established by the FRA.) funding that is greater than previously projected That amount exceeds the $850 billion cap on such fund- and from increases in funding designated as an ing established under section 102 of the FRA. As a result, emergency requirement. CBO’s current baseline projections for 2025 include a reduction in funding to comply with that cap. In CBO’s Base nondefense funding is $36 billion more in 2025 previous baseline projections, which incorporated the than CBO previously projected. That is mainly because effects of the caps established under section 101 of the funding for mandatory programs was reduced by FRA, base defense funding totaled $895 billion. $39 billion in the continuing resolution. For purposes of determining compliance with the caps established by In accordance with provisions of the Balanced the FRA, that reduction is credited against discretionary Budget and Emergency Deficit Control Act of funding. In CBO’s current baseline projections, how- 1985 (P.L. 99-177), CBO’s projections of funding for ever, that reduction is reflected as a change in mandatory discretionary programs generally reflect the assumption spending, thereby boosting discretionary funding by that funding in future years is equal to the amount pro- $39 billion in relation to the agency’s June 2024 pro- vided for the current year with increases for inflation.8 jections. Projecting that the increase would continue As a result, the downward adjustment to base defense in each year of the 2025–2034 period raised CBO’s funding affects the agency’s baseline projections of such projections of nondefense outlays over that period by funding after 2025. To account for the caps currently $0.5 trillion. in place, CBO reduced its projections of defense out- lays from funding constrained by the caps over the Similarly, nondefense funding designated as an emer- 2025–2034 period by $0.5 trillion. gency requirement for 2025 is $59 billion greater than CBO projected in June, almost entirely because of the In addition, as of January 6, 2025, $12 billion in defense supplemental appropriations for disaster relief pro- funding designated as an emergency requirement, which vided in the American Relief Act, 2025 (P.L. 118-158). is not constrained by the caps established by the FRA Because of that increase in funding, the agency raised and is included in nonbase funding, has been provided its projections of nondefense outlays over the 2025– for fiscal year 2025. That amount is $57 billion less 2034 period by an additional $0.5 trillion. than the amount of such funding in CBO’s June 2024 Mandatory Outlays. CBO increased its estimate of mandatory outlays in 2025 by $25 billion (or 1 per- 6. For a more detailed explanation of the caps established by cent) and its projections of such outlays over the 2025– the FRA, see Congressional Budget Office, The Budget and 2034 period by $0.2 trillion (or less than 1 percent), on Economic Outlook: 2024 to 2034 (February 2024), Box 1-2, www.cbo.gov/publication/59710. net, to account for legislation enacted since the agency prepared its previous baseline projections. The repeal of 7. For CBO’s estimate of discretionary appropriations provided the windfall elimination provision and the government by the current continuing resolution, see Congressional Budget Office, cost estimate for H.R. 10545, the American Relief Act, pension offset for Social Security benefits accounted for 2025 (December 20, 2024), www.cbo.gov/publication/61148. nearly all of that change. Those two provisions reduced benefits for retired or disabled workers and their spouses 8. To develop its projections of discretionary funding related to federal personnel, CBO is required to use the employment cost who have fewer than 30 years of significant earnings index for wages and salaries to adjust for inflation; to develop its from employment covered by Social Security if they projections of other types of discretionary funding, the agency is also receive pensions based on employment not covered required to use the GDP price index. 12 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table A-1 . Changes in CBO’s Baseline Projections of the Deficit Since June 2024 Billions of dollars Total 2025– 2025– 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2029 2034 Deficit in CBO’s June 2024 baselinea 1,938 1,851 1,756 1,942 1,949 2,193 2,283 2,487 2,822 2,862 9,436 22,083 Legislative changes Changes in revenues -6 -6 -8 -11 -12 -10 -9 -4 -3 -3 -43 -70 Changes in outlays Discretionary Defense Base -27 -38 -43 -46 -47 -49 -50 -52 -53 -54 -201 -459 Nonbase -8 -29 -42 -51 -57 -59 -61 -63 -64 -65 -187 -499 Subtotal, defense -35 -68 -84 -97 -104 -108 -111 -114 -117 -119 -388 -958 Nondefense Base 24 34 52 47 48 50 51 52 54 55 205 466 Nonbase 15 29 36 44 50 55 58 61 63 64 174 474 Subtotal, nondefense 39 63 88 90 99 104 109 113 116 119 378 941 Subtotal, discretionary 4 -5 3 -7 -5 -4 -2 -1 * * -9 -17 Mandatory 25 14 13 16 12 17 19 19 19 20 80 173 Debt service b * 2 2 3 4 5 6 7 8 9 11 44 Total change in outlays 29 11 18 12 11 18 22 24 26 29 82 201 Increase or decrease (-) in the deficit from legislative changes 35 17 27 23 23 27 31 28 29 31 125 271 Economic changes Changes in revenues Individual income taxes 114 140 136 134 137 142 152 166 179 193 661 1,492 Corporate income taxes 40 35 31 28 24 22 23 26 28 33 158 291 Payroll taxes 10 16 20 24 27 28 29 31 33 37 96 254 Federal Reserve remittances 2 1 * * * 77 7 6 3 -1 4 95 Other 2 2 2 2 1 1 2 2 3 4 8 20 Total change in revenues 168 193 190 188 189 270 213 231 246 265 928 2,153 Changes in outlays Mandatory Medicare * -2 -5 -8 -9 -13 -17 -21 -28 -29 -24 -131 Medicaid -2 -3 -4 -5 -5 -7 -8 -10 -12 -14 -20 -69 SNAP * -1 -2 -2 -3 -3 -4 -5 -5 -6 -8 -30 Earned income tax credits and child tax credits 1 * -1 -1 -2 -3 -3 -4 -4 -4 -3 -21 Other -4 -7 -4 -1 * 1 1 4 4 5 -15 * Subtotal, mandatory -5 -12 -15 -17 -19 -25 -31 -35 -44 -48 -69 -252 Discretionary 0 2 3 5 7 9 10 10 10 10 17 65 Net interest Effect of interest rates and inflation -64 -48 * 41 60 65 59 47 31 14 -12 205 Debt service b -2 -14 -22 -29 -35 -42 -50 -58 -68 -79 -101 -398 Subtotal, net interest -67 -62 -21 12 25 23 9 -11 -37 -65 -113 -193 Total change in outlays -72 -73 -33 * 13 6 -12 -37 -72 -103 -165 -381 Increase or decrease (-) in the deficit from economic changes -239 -266 -223 -187 -177 -264 -225 -267 -317 -368 -1,092 -2,534 Continued APPENDIX A: CHANGES IN CBO’S BASELINE PrOJECTIONS SINCE JUNE 2024 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 13 Table A-1. Continued Changes in CBO’s Baseline Projections of the Deficit Since June 2024 Billions of dollars Total 2025– 2025– 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2029 2034 Technical changes Changes in revenues Individual income taxes -38 -9 -1 3 -2 -8 -9 -4 1 9 -48 -59 Corporate income taxes -6 -7 -18 -22 -27 -31 -30 -28 -29 -35 -79 -233 Payroll taxes 12 10 9 6 7 9 13 16 17 18 44 118 Other -5 6 6 1 1 -36 -5 -4 -3 -5 9 -44 Total change in revenues -36 -1 -3 -12 -20 -65 -31 -20 -14 -13 -73 -217 Changes in outlays Mandatory Medicaid 57 84 100 91 91 87 83 82 73 67 424 817 Medicare 6 5 -4 -9 -9 -18 -26 -31 -47 -60 -10 -194 Social Security 5 7 8 9 9 9 9 8 8 4 38 76 SNAP and child nutrition 7 6 7 8 8 9 9 9 9 8 35 80 Earned income tax credits and child tax credits -2 -3 -4 -5 -4 -5 -5 -5 -6 -6 -18 -45 Veterans’ benefits 7 -4 1 4 5 4 4 5 6 4 13 35 Other 1 5 6 -3 -4 3 2 -5 2 2 5 8 Subtotal, mandatory 81 99 114 95 97 89 77 63 44 18 487 777 Discretionary Defense -11 -8 -5 1 5 6 4 3 2 1 -17 -1 Nondefense 22 10 5 10 1 2 3 2 3 1 48 58 Subtotal, discretionary 12 2 * 11 6 8 7 5 5 2 30 57 Net interest Debt service b 1 5 9 13 17 22 27 31 34 37 45 195 Other 2 5 2 1 2 * 2 4 5 3 11 26 Subtotal, net interest 3 10 10 14 19 22 29 35 39 39 56 222 Total change in outlays 96 111 124 120 122 118 113 103 89 59 573 1,055 Increase or decrease (-) in the deficit from technical changes 132 112 127 133 143 184 144 123 103 72 646 1,272 All changes Total increase or decrease (-) in the deficit -73 -138 -69 -32 -11 -53 -50 -117 -185 -264 -322 -991 Deficit in CBO’s January 2025 baseline a 1,865 1,713 1,687 1,911 1,938 2,140 2,233 2,371 2,637 2,597 9,114 21,092 Addendum: Change in revenues 125 187 179 165 156 195 173 207 228 250 812 1,865 Change in outlays 53 49 110 133 146 142 123 90 44 -15 490 874 Increase or decrease (-) in the primary deficit c -9 -87 -60 -61 -59 -103 -94 -147 -195 -248 -276 -1,064 Increase or decrease (-) in the deficit from the change in net interest outlays -63 -50 -9 29 48 50 44 30 10 -17 -45 73 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. SNAP = Supplemental Nutrition Assistance Program; * = between -$500 million and $500 million. a. When outlays exceed revenues, the result is a deficit. Values in this row were calculated by subtracting revenues from outlays; thus, positive values indicate deficits. When outlays are subtracted from revenues, as recorded in the federal budget and in the tables in Appendix B, negative values indicate deficits. b. Debt-service costs are the changes in interest payments resulting from an increase or decrease in projected deficits. c. Primary deficits exclude net outlays for interest. 14 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 by Social Security. Eliminating those two provisions the full fiscal year, that rescission would reduce individ- increased benefits for those beneficiaries, which, in turn, ual and corporate income tax receipts over the 2025– increased projected outlays for Social Security over the 2034 period by $66 billion—resulting in a net increase 2025–2034 period by about $0.2 trillion. in the projected cumulative deficit of $46 billion. That increase was partly offset by a provision of the In addition, CBO lowered projections of individual American Relief Act, 2025, that temporarily rescinded income tax receipts over the 2025–2034 period by $20 billion of mandatory funding for the Internal $5 billion to account for the enactment of the Federal Revenue Service (IRS).9 In CBO’s baseline, the provi- Disaster Tax Relief Act of 2023 (P.L. 118-148).10 That sions of temporary funding bills are annualized—that law included a provision that relaxed limitations on is, estimated as if appropriations were provided for the deducting certain losses from federally declared disasters entire fiscal year. As a result, CBO’s baseline reflects the over the past several years. full $20 billion reduction in spending. (That rescission reduced CBO’s projections of receipts from individual Economic Changes and corporate income taxes, as discussed below.) The economic forecast that underlies CBO’s baseline budget projections includes the agency’s projections Net Outlays for Interest. Before accounting for the of GDP, interest rates, the labor force, wages and sal- changes in interest payments that would result from aries, inflation, and other factors that affect federal changes in projected deficits (known as debt service), spending and revenues. Taken together, the revisions CBO increased its estimate of the deficit in 2025 by made to account for changes in that forecast reduced $34 billion and its projection of the cumulative deficit CBO’s estimate of the deficit in 2025 by $0.2 trillion for the 2025–2034 period by $227 billion to account and its projection of the cumulative deficit over the for legislation enacted since the June 2024 baseline was 2025–2034 period by $2.5 trillion. Upward revisions to prepared. The increases in federal borrowing stemming revenues were the main reason for those reductions. from larger annual deficits would increase debt-service costs; that debt service increased CBO’s projections of Changes in Revenues net outlays for interest over the 2025–2034 period by To account for changes in its economic forecast, CBO $44 billion. increased its estimate of revenues in 2025 by $168 bil- lion (or 3 percent) and its projections of revenues over Changes in Revenues the 2025–2034 period by $2.2 trillion (or 3 percent). To account for legislation enacted since it prepared its Those changes are largely the result of higher projec- previous baseline projections, CBO revised downward tions of GDP and the associated components of taxable its estimate of revenues in 2025 by $6 billion and its income, including wages, salaries, and corporate profits. projections of revenues over the 2025–2034 period by CBO revised upward its projections of GDP over the $70 billion. 2025–2034 period by $7.2 trillion (or 2 percent). That upward revision boosted projected receipts from income Those reductions mainly stemmed from the provision and payroll taxes. of the American Relief Act, 2025, that temporarily rescinded $20 billion in funding provided to the IRS. Other factors further boosted receipts. Higher asset CBO anticipates that the IRS would prioritize continu- values increased anticipated capital gains realizations, ing enforcement activities that are expected to have the boosting projected revenues from individual and cor- largest return in terms of collections, so as additional porate income taxes. Those higher asset values also funds are rescinded, the amount of revenues reduced by increased projected account balances and distributions each dollar of rescinded funds increases. If enacted for from taxable retirement accounts. Downward revisions to CBO’s forecast of short-term interest rates reduced 9. In keeping with the American Relief Act, 2025, which projections of the Federal Reserve’s interest expenses, temporarily continues discretionary appropriations and thus boosting projected remittances from the Federal authorities contained in 2024 appropriation legislation through Reserve to the Treasury. March 14, 2025, that funding has been temporarily precluded from obligation; whether it remains unavailable to the IRS for the duration of fiscal year 2025 depends on future legislation. If future legislation permanently rescinded that funding, CBO 10. For more information, see Congressional Budget Office, cost would incorporate the changes in spending or revenues into its estimate for H.R. 5863, the Federal Disaster Tax Relief Act of assessment of the budgetary effects of that legislation. 2023 (January 9, 2024), www.cbo.gov/publication/59866. APPENDIX A: CHANGES IN CBO’S BASELINE PrOJECTIONS SINCE JUNE 2024 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 15 Individual Income Taxes. Economic changes increased Other Revenues. To account for changes in its economic CBO’s estimate of revenues from individual income taxes forecast, CBO increased its estimates of revenues from in 2025 by $114 billion (or 4 percent) and its projec- estate and gift taxes, customs duties, and excise taxes in tions of such revenues over the 2025–2034 period by 2025 by $2 billion (or 1 percent) and its projections over $1.5 trillion (or 4 percent), on net. the 2025–2034 period by $20 billion (or 1 percent), on net. Most of that increase resulted from growth in The increases in 2025 and later years were partly driven projected imports, which increased the expected tax base by higher projections of components of taxable income, for customs duties. including wages, salaries, and business income taxed at the individual level. Projected receipts were also boosted Changes in Outlays by higher asset values, especially for equities, in the near Revisions to CBO’s economic forecast included revisions term, which increased expected capital gains realizations to projected interest rates and reductions in projected and distributions from taxable retirement accounts. rates of inflation. To account for those and other changes to its economic forecast, CBO decreased its estimate Corporate Income Taxes. To account for changes in its of outlays in 2025 by $72 billion (or 1 percent) and its economic forecast, CBO raised its estimate of revenues projections of outlays over the 2025–2034 period by from corporate income taxes in 2025 by $40 billion (or $0.4 trillion (or less than 1 percent). 8 percent) and its projections of such revenues over the 2025–2034 period by $291 billion (or 6 percent). Those Mandatory Outlays. Economic changes decreased changes resulted from revisions to the agency’s projec- CBO’s estimate of mandatory outlays in 2025 by $5 bil- tions of domestic corporate profits, which increased lion (or less than 1 percent), on net. Projected manda- by $2.8 trillion (or 9 percent) over that period. Those tory outlays over the 2025–2034 period fell by $0.3 tril- higher projected profits resulted from updated estimates lion (or less than 1 percent). Downward revisions to by the Bureau of Economic Analysis of the total profits projected outlays for Medicare and Medicaid account for earned from 2021 to 2024. However, because corporate most of that decrease. tax revenues are already known for those years, the larger estimates of historical profits imply a lower average tax Medicare. CBO reduced its projections of outlays for rate on those profits. Incorporating that lower aver- Medicare over the 2025–2034 period by $131 billion age rate resulted in a downward revision to projected (or 1 percent). The agency’s latest economic forecast revenues that is categorized as a technical change, as includes downward revisions to the producer price index discussed below. for prescription drugs, which reduced the expected growth in payments to providers such as hospitals and Payroll Taxes. Revisions to CBO’s economic fore- skilled nursing facilities. cast increased the agency’s estimate of revenues from payroll taxes in 2025 by $10 billion (or less than Medicaid. CBO decreased its projections of outlays for 1 percent) and its projections of such revenues over Medicaid over the 2025–2034 period by $69 billion the 2025–2034 period by $254 billion (or 1 percent). (or 1 percent). The agency’s latest economic forecast Those upward revisions largely stemmed from higher includes downward revisions to projected increases in projections of wages and salaries. the prices of many medical goods and services, which reduced projected payment rates for Medicaid. Federal Reserve Remittances. Because CBO now expects short-term interest rates to decline more quickly Supplemental Nutrition Assistance Program. Economic than previously anticipated, the interest that the Federal changes to CBO’s projections for the 2025–2034 period Reserve pays to banks for deposits is less than previ- decreased projected outlays for the Supplemental ously projected. That change boosted CBO’s projec- Nutrition Assistance Program (SNAP) by $30 billion tions of remittances from the Federal Reserve over the (or 3 percent). That reduction stemmed mainly from 2025–2034 period by $95 billion (or 16 percent). In downward revisions to CBO’s projections of increases in CBO’s projections, most changes in the Federal Reserve’s food prices. income or costs affect the Federal Reserve banks’ deferred assets until 2030 and then begin to affect remittances. 16 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Earned Income and Child Tax Credits. To account Technical Changes for changes in its economic forecast, CBO decreased Technical changes—those changes that are neither leg- its estimate of total outlays for the earned income tax islative nor economic—result from a variety of factors, credit (EITC) and the child tax credit (CTC) over such as revisions to average tax rates, new information the 2025–2034 period by $21 billion (or 2 percent). or data from federal agencies (including actual out- That decrease was a result of reductions in the agency’s lays and revenues for the most recent fiscal year), and projections of the U.S. population, including reduc- changes in the way programs are administered that tions in the projected number of children. To account affect federal spending and revenues. Technical changes for that decrease in the projected population, CBO increased CBO’s estimate of the deficit in 2025 by revised downward its projections of the number of $0.1 trillion and boosted projected deficits over the people who would claim those credits; as a result, pro- 2025–2034 period by $1.3 trillion. jected outlays are smaller than they were in the agency’s June 2024 baseline projections. Changes in Outlays Taken together, technical changes increased CBO’s esti- Other Mandatory Programs. Changes in CBO’s eco- mate of outlays in 2025 by $0.1 trillion (or 1 percent) nomic forecast also affected projected outlays for other and its projections of outlays over the 2025–2034 period mandatory programs. Although those changes included by $1.1 trillion (or 1 percent). Greater projected spend- upward and downward revisions, their net effect was to ing on Medicaid was the largest technical revision, boost- increase projected outlays for those programs over the ing outlays over the 2025–2034 period by $0.8 trillion. 2025–2034 period by less than $1 billion. Mandatory Outlays. CBO increased its projections of Discretionary Outlays. Economic changes—stemming outlays for several mandatory programs and decreased mainly from upward revisions to the agency’s forecasts them for others to account for revisions to its demo- of certain measures of inflation—increased projected graphic projections, updated projections of enrollment discretionary outlays over the 2025–2034 period by in benefit programs, and changes in other technical $65 billion (or less than 1 percent). CBO’s baseline factors that underlie those spending projections. On projections generally reflect the assumption that discre- net, technical changes to CBO’s projections increased its tionary funding keeps pace with inflation. estimate of mandatory outlays in 2025 by $81 billion (or 2 percent) and its projections of such outlays over the Net Outlays for Interest. Economic changes reduced 2025–2034 period by $0.8 trillion (or 2 percent). CBO’s estimate of net outlays for interest in 2025 by $64 billion (or 6 percent) but increased its projections of Medicaid. Technical changes increased CBO’s estimate of such outlays over the 2025–2034 period by $205 billion outlays for Medicaid in 2025 by $57 billion (or 10 per- (or 2 percent). Those changes were attributable to revi- cent) and its projections over the 2025–2034 period by sions to the agency’s forecasts of interest rates on Treasury $817 billion (or 12 percent). Several factors contrib- securities. CBO decreased its projections of short-term uted to those increases. The biggest factors were that in interest rates in 2025 and 2026 and increased them over 2024, enrollment in Medicaid and actual outlays for the the 2027–2034 period. The agency increased its projec- program were significantly greater than expected, causing tions of long-term rates over the 2026–2029 period and CBO to increase its projections of spending on the pro- lowered them over the 2031–2034 period. gram in future years. All told, changes stemming from revisions to CBO’s eco- In June 2024, CBO expected Medicaid enrollment to be nomic forecast decreased the projected cumulative deficit 79 million people in 2025. The revised projections reflect for the 2025–2034 period by $2.1 trillion. To account an expected enrollment of 84 million people in that for the reduction in debt-service costs stemming from year. Costs per enrollee in 2024 were also significantly the decrease in projected deficits, the agency lowered its higher than expected because of a reported decrease in projections of net outlays for interest over that period by the average health status of Medicaid enrollees after the $398 billion. continuous eligibility policy put in place during the coronavirus pandemic ended on April 1, 2023. CBO expects that the higher costs per enrollee will lead to higher-than-previously-projected payment rates for APPENDIX A: CHANGES IN CBO’S BASELINE PrOJECTIONS SINCE JUNE 2024 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 17 health plans that manage care for Medicaid enrollees Social Security. CBO increased its projections of out- beginning in 2026, when payment rates start to reflect lays for Social Security over the 2025–2034 period by that decrease in average health status. $76 billion (or less than 1 percent) for technical reasons. Most of that increase stems from an upward revision Four other factors caused CBO to increase its projections to the agency’s projections of growth in the number of of outlays for Medicaid. First, the agency expects greater people age 65 or older in the population, which slightly spending on the program over the 2025–2034 period increased the projected number of beneficiaries of Old- because of an increase in the number of disabled people Age and Survivors Insurance and Disability Insurance. receiving Supplemental Security Income. (Such peo- ple automatically qualify for Medicaid.) Second, CBO Supplemental Nutrition Assistance Program and Child increased projected spending to account for greater Nutrition. For technical reasons, CBO increased its pro- anticipated use of prescription drugs over that period, jections of outlays for SNAP over the 2025–2034 period particularly the use of anti-obesity medications known by $52 billion (or 5 percent) and of outlays for child as glucagon-like peptide-1 agonists, or GLP-1s. Third, nutrition programs over that same period by $28 billion CBO increased projected spending to account for a mod- (or 7 percent). Enrollment in SNAP in 2024 was higher est increase in expected coverage expansions under the than anticipated, which led CBO to increase projected optional eligibility category established by the Affordable enrollment in the program by 2 to 3 million people in Care Act. And finally, the agency increased its projec- each year of the projection period. The upward revision tions of outlays associated with state-directed payments to outlays for child nutrition programs reflects the fact in Medicaid managed care. Those increased projections that more free lunches and breakfasts were provided in reflect higher-than-expected spending through directed 2024 than CBO projected. payment arrangements in 2024. They also incorporate the effects of a final rule that permits states to pay hos- Earned Income and Child Tax Credits. CBO decreased pitals, skilled nursing facilities, and physicians affiliated its projections of outlays for the EITC and CTC over with academic medical centers at the average commercial the 2025–2034 period by $45 billion (5 percent). That payment rate when using a directed payment.11 decrease stemmed from a change to CBO’s tax model to better align the number of children claimed on tax Medicare. CBO’s estimate of outlays for Medicare over returns in future years with CBO’s projections of the the 2025–2034 period is $194 billion (or 1 percent) less population. That change reduced the projected number than it was in June 2024 because of technical revisions. of children claimed on tax returns and, in turn, reduced Two factors explain most of that decrease. First, CBO projected outlays for the EITC and CTC. reduced its projections of Medicare enrollment over that period by 1 percent compared with its June 2024 projec- Veterans’ Benefits and Services. For technical reasons, tion. The reduction stemmed from modeling improve- CBO increased its projections of outlays for veterans’ ments that included removing foreign-born people who benefits and services over the 2025–2034 period by are not eligible for benefits from the agency’s enrollment $35 billion (or 1 percent). That increase reflects the projections. Second, CBO reduced its projections of incorporation of actual outcomes in 2024 into CBO’s growth in the amounts that Medicare pays to clinical lab- projections. The number of beneficiaries of disability oratories to better reflect the amounts that Medicare has compensation in 2024 was greater than CBO expected, paid in recent years. which led the agency to increase the number of benefi- ciaries in each year of the projection period by 45,000. In addition, a sustained recovery in enrollments and a 11. When an agency publishes a proposed regulation in the Federal more intensive use of benefits resulted in greater pro- Register, CBO generally does not incorporate an estimate of the jected outlays for readjustment benefits. (Those bene- total effects of the rule as proposed into its baseline projections. fits are intended to assist veterans with the transition Rather, CBO typically incorporates a portion of the effects based on the assigned probability (often 50 percent) that the rule will from military life to civilian life; they include employ- be implemented to reflect the uncertainty about whether and ment programs, education assistance, and vocational how the rule will ultimately be carried out. After the final version rehabilitation benefits.) of a rule is published, CBO incorporates the total estimated effects of the final rule into its subsequent cost estimates and Other Mandatory Programs. Technical changes increased baseline projections. For more information, see Congressional CBO’s projections of outlays for other mandatory pro- Budget Office, CBO Explains How It Develops the Budget Baseline (April 2023), www.cbo.gov/publication/58916. grams over the 2025–2034 period by $8 billion, on net. 18 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Discretionary Outlays. Technical changes increased $233 billion (or 5 percent). That decrease in projected CBO’s projections of discretionary outlays over the revenues results from newly available data from corporate 2025–2034 period by $57 billion (or less than 1 per- tax returns and from updated estimates of past profits cent). In general, that increase stemmed from adjust- reported by the Bureau of Economic Analysis. ments to better reflect the recent rates at which discre- tionary funding has translated into outlays. Long-standing business credits reported on tax returns, including those for research and investment, have been Net Outlays for Interest. Increases in debt-service larger than expected over the past several years, causing costs and other technical changes added $222 billion CBO to revise upward its projections of those credits (or 2 percent) to CBO’s projections of net outlays for going forward. In addition, the Bureau of Economic interest over the 2025–2034 period. Those increases in Analysis revised upward the estimated amount of profits debt-service costs stemmed from greater borrowing to earned during the 2021–2024 period. That upward finance more noninterest outlays and from less revenues. revision caused CBO to increase its projections of profits in future years, which resulted in higher projections of Changes in Revenues corporate tax receipts for economic reasons. But because For technical reasons, CBO decreased its estimate of rev- corporate tax revenues are already known for those years, enues in 2025 by $36 billion (or less than 1 percent) and the higher estimates of historical profits imply a lower its projections of revenues over the 2025–2034 period by average tax rate on those profits, resulting in a downward $0.2 trillion (or less than 1 percent). adjustment to projected revenues. The largest downward revisions were to projections of Payroll Taxes. For technical reasons, CBO increased receipts from individual and corporate income taxes and its estimate of revenues from payroll taxes in 2025 by remittances from the Federal Reserve, which partially $12 billion (or less than 1 percent) and its projections of offset the upward revisions to those sources that were such revenues over the 2025–2034 period by $118 bil- prompted by economic changes. The largest upward lion (or less than 1 percent). On the basis of recent tax revisions were to projected receipts from payroll taxes information, CBO now projects that a larger share of and estate and gift taxes. earnings will fall below the taxable maximum for Social Security taxes, boosting projected payroll taxes. Individual Income Taxes. Technical revisions reduced CBO’s estimate of individual income tax receipts in Other Revenues. Technical revisions decreased CBO’s 2025 by $38 billion (or 1 percent) and its projections of estimate of revenues from other sources in 2025 by such receipts over the 2025–2034 period by $59 billion $5 billion (or 2 percent) and its projections of such (or less than 1 percent). CBO decreased its estimate of revenues over the 2025–2034 period by $44 billion individual income tax receipts in 2025 because recent (or 1 percent), on net. CBO reduced its projections of tax collections have been weaker than expected, given remittances from the Federal Reserve over the 2025– current economic data. The small net downward revi- 2034 period by $68 billion (or 11 percent) to better sions over the 2025–2034 period reflect many offsetting reflect the rising interest costs that the Federal Reserve factors, including the incorporation of information from has been paying on deposits at Federal Reserve banks. recent tax collections, detailed historical tax data for CBO also reduced its projections of receipts from excise prior tax years, and updated information on the distribu- taxes over that period by $31 billion (or 3 percent), tion of earnings. mostly because recent collections of aviation and high- way taxes were smaller than anticipated. Those decreases Corporate Income Taxes. For technical reasons, CBO were partly offset by increased projections of receipts decreased its estimate of revenues from corporate income from estate and gift taxes over the 2025–2034 period. taxes in 2025 by $6 billion (or 1 percent) and its pro- Those projections were revised upward by $42 billion jections of such revenues for the 2025–2034 period by (or 8 percent) to account for recent collections. Appendix B: The Budget Outlook in Tables By law, the Congressional Budget Office is required to payments that generally are covered by statutory criteria. produce an annual report providing the agency’s pro- Discretionary spending, which covers a broad array of jections of what the federal budget and the economy government programs and activities, is controlled by would look like in the current fiscal year and over the appropriation acts that specify the amount of funding (or next 10 years if current laws governing taxes and spend- budget authority), as well as the purpose and period of ing generally remained unchanged. This report is the availability of that funding. latest in that series, presented in an abbreviated version to facilitate work on other Congressional priorities. The agency’s budget projections—often referred to The agency uses its economic forecast—which includes as CBO’s budget baseline—are constructed in accor- projections of income, inflation, interest rates, and other dance with provisions set forth in the Balanced Budget variables—as a basis for projecting revenues from each and Emergency Deficit Control Act of 1985 (Public major revenue source (individual, corporate, payroll, and Law 99-177) and the Congressional Budget and other taxes), spending for every federal budget account, Impoundment Control Act of 1974 (P.L. 93-344). For the resulting deficits or surpluses, and federal debt. projections of discretionary spending, CBO’s baseline incorporates limits on discretionary funding for 2025, as The budget projections in this report reflect develop- specified in the Fiscal Responsibility Act of 2023 (FRA; ments in the economy as of December 4, 2024. They also P.L. 118-5). CBO’s projections of discretionary spending incorporate legislation enacted through January 6, 2025. generally reflect the assumption (as required by law) that funding will grow with inflation after 2025. The first two tables in this appendix show CBO’s pro- jections for the budget by category (see Table B-1) and CBO’s baseline is not intended to provide a forecast of projections for those same categories of outlays (and thus future budgetary outcomes. Rather, it helps policymakers of deficits) adjusted to exclude the effects of shifts in assess the potential effects of future policy decisions by the timing of certain payments that can distort budget- providing a benchmark that can be used to evaluate the ary trends (see Table B-2). The rest of the tables show anticipated effects of proposed legislation and to deter- the agency’s projections of federal debt (see Table B-3), mine whether that legislation is subject to various budget details about mandatory (see Table B-4) and discretion- enforcement procedures. ary spending (see Table B-5), and a set of key projections (see Table B-6). CBO last released its baseline budget projections in June 2024; changes since then are discussed in Mandatory spending, also called direct spending, Appendix A. Additional information about the agency’s includes outlays for certain benefit programs and other projections is available on CBO’s website. 20 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table B-1 . CBO’s Baseline Budget Projections, by Category Total Actual, 2026– 2026– 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2030 2035 In billions of dollars Revenues Individual income taxes 2,426 2,621 2,968 3,253 3,355 3,455 3,584 3,721 3,870 4,037 4,220 4,413 16,615 36,876 Payroll taxes 1,709 1,759 1,840 1,915 1,990 2,072 2,155 2,242 2,329 2,419 2,510 2,605 9,973 22,078 Corporate income taxes 530 524 495 469 462 453 450 456 468 493 503 517 2,329 4,767 Othera 253 259 277 298 301 310 360 416 439 456 474 496 1,545 3,827 Total 4,918 5,163 5,580 5,935 6,108 6,290 6,549 6,834 7,106 7,405 7,708 8,031 30,463 67,548 On-budget 3,658 3,859 4,217 4,516 4,637 4,760 4,959 5,180 5,389 5,623 5,860 6,114 23,088 51,254 Off-budgetb 1,260 1,304 1,364 1,418 1,472 1,530 1,591 1,654 1,718 1,782 1,848 1,917 7,375 16,293 Outlays Mandatory 4,060 4,228 4,386 4,596 4,852 4,948 5,276 5,520 5,788 6,208 6,341 6,465 24,058 54,380 Discretionary 1,810 1,848 1,897 1,951 2,002 2,033 2,086 2,130 2,175 2,229 2,271 2,315 9,969 21,090 Net interest 881 952 1,010 1,075 1,164 1,247 1,328 1,417 1,514 1,605 1,694 1,783 5,825 13,836 Total 6,750 7,028 7,294 7,622 8,019 8,228 8,689 9,067 9,477 10,042 10,306 10,563 39,852 89,306 On-budget 5,430 5,603 5,784 6,029 6,325 6,434 6,791 7,060 7,357 7,809 7,972 8,126 31,363 69,687 Off-budgetb 1,320 1,425 1,509 1,593 1,694 1,795 1,898 2,007 2,120 2,233 2,334 2,436 8,489 19,619 Total deficit (-) c -1,832 -1,865 -1,713 -1,687 -1,911 -1,938 -2,140 -2,233 -2,371 -2,637 -2,597 -2,531 -9,389 -21,758 On-budget -1,772 -1,744 -1,568 -1,513 -1,688 -1,674 -1,832 -1,880 -1,968 -2,186 -2,112 -2,012 -8,274 -18,432 Off-budgetb -60 -121 -146 -174 -223 -265 -308 -353 -403 -451 -485 -519 -1,115 -3,326 Primary deficit (-)c,d -951 -913 -703 -612 -746 -691 -812 -816 -857 -1,033 -904 -749 -3,564 -7,922 Debt held by the public 28,199 30,103 31,883 33,636 35,601 37,581 39,748 41,992 44,372 46,985 49,556 52,056 n.a. n.a. Addendum: GDP 28,828 30,136 31,341 32,538 33,765 35,047 36,394 37,792 39,252 40,768 42,330 43,936 169,085 373,164 As a percentage of GDP Revenues Individual income taxes 8.4 8.7 9.5 10.0 9.9 9.9 9.8 9.8 9.9 9.9 10.0 10.0 9.8 9.9 Payroll taxes 5.9 5.8 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 Corporate income taxes 1.8 1.7 1.6 1.4 1.4 1.3 1.2 1.2 1.2 1.2 1.2 1.2 1.4 1.3 Other a 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.1 1.1 1.1 1.1 1.1 0.9 1.0 Total 17.1 17.1 17.8 18.2 18.1 17.9 18.0 18.1 18.1 18.2 18.2 18.3 18.0 18.1 On-budget 12.7 12.8 13.5 13.9 13.7 13.6 13.6 13.7 13.7 13.8 13.8 13.9 13.7 13.7 Off-budgetb 4.4 4.3 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 Outlays Mandatory 14.1 14.0 14.0 14.1 14.4 14.1 14.5 14.6 14.7 15.2 15.0 14.7 14.2 14.6 Discretionary 6.3 6.1 6.1 6.0 5.9 5.8 5.7 5.6 5.5 5.5 5.4 5.3 5.9 5.7 Net interest 3.1 3.2 3.2 3.3 3.4 3.6 3.6 3.7 3.9 3.9 4.0 4.1 3.4 3.7 Total 23.4 23.3 23.3 23.4 23.8 23.5 23.9 24.0 24.1 24.6 24.3 24.0 23.6 23.9 On-budget 18.8 18.6 18.5 18.5 18.7 18.4 18.7 18.7 18.7 19.2 18.8 18.5 18.5 18.7 Off-budgetb 4.6 4.7 4.8 4.9 5.0 5.1 5.2 5.3 5.4 5.5 5.5 5.5 5.0 5.3 Total deficit (-) c -6.4 -6.2 -5.5 -5.2 -5.7 -5.5 -5.9 -5.9 -6.0 -6.5 -6.1 -5.8 -5.6 -5.8 On-budget -6.1 -5.8 -5.0 -4.6 -5.0 -4.8 -5.0 -5.0 -5.0 -5.4 -5.0 -4.6 -4.9 -4.9 Off-budgetb -0.2 -0.4 -0.5 -0.5 -0.7 -0.8 -0.8 -0.9 -1.0 -1.1 -1.1 -1.2 -0.7 -0.9 Primary deficit (-)c,d -3.3 -3.0 -2.2 -1.9 -2.2 -2.0 -2.2 -2.2 -2.2 -2.5 -2.1 -1.7 -2.1 -2.1 Debt held by the public 97.8 99.9 101.7 103.4 105.4 107.2 109.2 111.1 113.0 115.3 117.1 118.5 n.a. n.a. Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. GDP = gross domestic product; n.a. = not applicable. a. Consists of excise taxes, remittances from the Federal reserve System, customs duties, estate and gift taxes, and miscellaneous fees and fines. b. The revenues and outlays of the Social Security trust funds and the net cash flow of the Postal Service are classified as off-budget. c. When outlays exceed revenues, the result is a deficit. Values in this row were calculated by subtracting outlays from revenues; thus, negative values indicate deficits. d. Primary deficits exclude net outlays for interest. APPENDIX B: THE BUDGET OUTLOOK IN TABLES THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 21 Table B-2 . CBO’s Baseline Projections of Outlays and Deficits, Adjusted to Exclude Effects of Timing Shifts Actual, 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 In billions of dollars Adjustments to exclude effects of timing shifts a 75 0 0 0 -116 116 0 0 0 -156 -11 167 Outlays, adjusted for timing shifts Mandatory 4,130 4,228 4,386 4,596 4,742 5,058 5,276 5,520 5,788 6,058 6,330 6,626 Discretionary 1,815 1,848 1,897 1,951 1,997 2,038 2,086 2,130 2,175 2,223 2,271 2,322 Net interest 881 952 1,010 1,075 1,164 1,247 1,328 1,417 1,514 1,605 1,694 1,783 Total 6,826 7,028 7,294 7,622 7,903 8,344 8,689 9,067 9,477 9,886 10,294 10,730 Total deficit (-), adjusted for timing shifts b -1,907 -1,865 -1,713 -1,687 -1,795 -2,054 -2,140 -2,233 -2,371 -2,481 -2,586 -2,699 Primary deficit (-), adjusted for timing shiftsb,c -1,026 -913 -703 -612 -630 -807 -812 -816 -857 -877 -893 -916 As a percentage of GDP Outlays, adjusted for timing shifts Mandatory 14.3 14.0 14.0 14.1 14.0 14.4 14.5 14.6 14.7 14.9 15.0 15.1 Discretionary 6.3 6.1 6.1 6.0 5.9 5.8 5.7 5.6 5.5 5.5 5.4 5.3 Net interest 3.1 3.2 3.2 3.3 3.4 3.6 3.6 3.7 3.9 3.9 4.0 4.1 Total 23.7 23.3 23.3 23.4 23.4 23.8 23.9 24.0 24.1 24.2 24.3 24.4 Total deficit (-), adjusted for timing shifts b -6.6 -6.2 -5.5 -5.2 -5.3 -5.9 -5.9 -5.9 -6.0 -6.1 -6.1 -6.1 Primary deficit (-), adjusted for timing shiftsb,c -3.6 -3.0 -2.2 -1.9 -1.9 -2.3 -2.2 -2.2 -2.2 -2.2 -2.1 -2.1 Addendum: Baseline deficit (-), unadjusted In billions of dollars b -1,832 -1,865 -1,713 -1,687 -1,911 -1,938 -2,140 -2,233 -2,371 -2,637 -2,597 -2,531 As a percentage of GDP b -6.4 -6.2 -5.5 -5.2 -5.7 -5.5 -5.9 -5.9 -6.0 -6.5 -6.1 -5.8 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. GDP = gross domestic product. a. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Those shifts primarily affect mandatory outlays; discretionary outlays are also affected but to a much lesser degree. Net interest outlays are not affected. b. When outlays exceed revenues, the result is a deficit. Values in this row were calculated by subtracting outlays from revenues; thus, negative values indicate deficits. c. Primary deficits exclude net outlays for interest. 22 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table B-3 . CBO’s Baseline Projections of Federal Debt Billions of dollars Actual, 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Debt held by the public at the beginning of the year 26,236 28,199 30,103 31,883 33,636 35,601 37,581 39,748 41,992 44,372 46,985 49,556 Changes in debt held by the public Resulting from the deficit 1,832 1,865 1,713 1,687 1,911 1,938 2,140 2,233 2,371 2,637 2,597 2,531 Resulting from other means of financinga 131 38 67 67 54 42 27 12 9 -24 -27 -31 Total 1,964 1,903 1,780 1,753 1,965 1,980 2,167 2,245 2,379 2,613 2,570 2,500 Debt held by the public at the end of the year In billions of dollars 28,199 30,103 31,883 33,636 35,601 37,581 39,748 41,992 44,372 46,985 49,556 52,056 As a percentage of GDP 97.8 99.9 101.7 103.4 105.4 107.2 109.2 111.1 113.0 115.3 117.1 118.5 Addendum: Federal financial assetsb 2,198 2,237 2,303 2,370 2,424 2,465 2,493 2,505 2,513 2,489 2,463 2,432 Debt minus financial assets In billions of dollars 26,001 27,866 29,579 31,266 33,177 35,115 37,255 39,488 41,858 44,496 47,093 49,624 As a percentage of GDP 90.2 92.5 94.4 96.1 98.3 100.2 102.4 104.5 106.6 109.1 111.3 112.9 Federal Reserve’s holdings of debt held by the public 4,384 4,467 5,017 5,602 6,202 6,803 7,343 7,859 8,377 8,896 9,418 9,941 Debt minus financial assets and the Federal Reserve’s holdings In billions of dollars 21,617 23,399 24,563 25,664 26,975 28,312 29,912 31,629 33,482 35,599 37,675 39,683 As a percentage of GDP 75.0 77.6 78.4 78.9 79.9 80.8 82.2 83.7 85.3 87.3 89.0 90.3 Gross federal debtc 35,230 37,209 39,130 40,872 42,748 44,781 46,828 48,910 51,083 53,590 56,396 59,207 Debt subject to limitd 35,355 37,333 39,253 40,994 42,869 44,902 46,950 49,033 51,207 53,715 56,522 59,334 Average interest rate on debt held by the public (percent) 3.3 3.4 3.3 3.4 3.4 3.5 3.5 3.5 3.6 3.6 3.6 3.6 Data sources: Congressional Budget Office; Department of the Treasury. See www.cbo.gov/publication/60870#data. GDP = gross domestic product. a. Factors not included in budget totals that affect the government’s need to borrow from the public. Those factors include changes in the government’s cash balances and cash flows associated with federal credit programs, such as those related to student loans. Only the subsidy costs of those programs are reflected in the budget deficit. b. The value of outstanding student loans and other credit transactions, cash balances, and various financial instruments. c. Federal debt held by the public plus Treasury securities held by federal trust funds and other government accounts. d. The amount of federal debt that is subject to the overall limit set in law. That measure of debt excludes debt issued by the Federal Financing Bank and reflects certain other adjustments that are excluded from gross federal debt. The statutory debt limit was reinstated on January 2, 2025, and set at $36.1 trillion, matching the amount of total debt outstanding on the prior day. In the coming weeks, the Department of the Treasury is expected to announce a “debt issuance suspension period” and to take “extraordinary measures” to borrow additional funds without breaching the debt limit. The Deficit Control Act requires CBO to project spending, revenues, and deficits independently of the debt limit. For more details, see Congressional Budget Office, Federal Debt and the Statutory Limit, February 2023 (February 2023), www.cbo.gov/publication/58906. APPENDIX B: THE BUDGET OUTLOOK IN TABLES THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 23 Table B-4 . CBO’s Baseline Projections of Mandatory Outlays, Adjusted to Exclude Effects of Timing Shifts Billions of dollars Total Actual, 2026– 2026– 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2030 2035 Social Security Old-Age and Survivors Insurance 1,300 1,411 1,493 1,580 1,677 1,771 1,868 1,968 2,070 2,172 2,274 2,377 8,389 19,251 Disability Insurance 154 161 171 181 189 196 203 211 219 227 237 247 941 2,081 Subtotal 1,454 1,572 1,664 1,761 1,865 1,968 2,072 2,179 2,289 2,399 2,511 2,624 9,329 21,331 Major health care programs Medicarea,b 1,089 1,145 1,216 1,291 1,372 1,460 1,555 1,659 1,770 1,905 2,037 2,166 6,893 16,429 Medicaid 618 656 695 738 767 803 837 871 910 948 986 1,025 3,839 8,579 Premium tax credits and related spending c 122 136 115 119 122 125 128 133 139 148 139 155 610 1,324 Children’s Health Insurance Program 19 21 21 22 22 23 23 23 16 15 15 15 110 195 Subtotal 1,848 1,957 2,047 2,169 2,283 2,411 2,542 2,686 2,835 3,015 3,176 3,362 11,452 26,527 Income security programs Supplemental Nutrition Assistance Program 107 110 107 110 111 111 111 112 115 115 116 116 550 1,124 Earned income, child, and other tax credits d 91 121 94 78 78 78 78 78 78 78 77 77 406 795 Supplemental Security Income a 62 65 67 69 71 73 75 77 80 82 84 87 354 764 Unemployment compensation 35 43 47 49 50 51 53 53 54 56 58 59 249 530 Child nutrition 34 35 37 39 40 42 43 45 46 48 49 51 201 440 Family support and foster care e 46 37 36 36 37 37 38 38 39 39 39 40 184 379 Subtotal 375 410 387 381 387 392 398 402 412 418 424 431 1,945 4,032 Federal civilian and military retirement Civilian f 128 131 136 140 144 148 152 156 162 168 172 177 719 1,556 Military a 78 80 83 86 89 91 93 96 98 101 104 106 442 947 Subtotal 206 211 219 226 232 239 245 252 260 269 276 283 1,161 2,502 Veterans’ programs Income securitya,g 175 188 202 215 228 239 248 259 270 282 294 306 1,132 2,543 Toxic exposures fund h 19 24 28 32 37 41 46 50 55 59 63 67 183 477 Othera,i 12 19 17 18 19 20 20 21 22 23 24 25 94 208 Subtotal 206 231 247 265 283 300 314 330 347 364 381 398 1,409 3,228 Other programs Higher education 125 25 27 27 27 27 27 28 28 29 29 29 134 276 Agriculture 20 22 23 25 26 24 22 21 22 22 23 23 119 230 Deposit insurance 36 -26 -23 -17 -95 -11 -12 -12 -12 -21 -14 -14 -158 -232 MERHCF 12 13 13 14 15 15 16 17 17 18 19 19 74 164 Fannie Mae and Freddie Macj 0 0 4 6 7 7 7 8 8 10 12 13 31 82 Pension Benefit Guaranty Corporation 12 -6 -1 -4 -4 -4 -5 -5 -5 -5 -6 -6 -18 -44 Education Stabilization Fund 49 16 1 0 0 0 0 0 0 0 0 0 1 1 Other 140 184 172 160 155 150 141 133 123 109 99 93 778 1,334 Subtotal 395 229 216 210 129 208 197 189 181 161 162 157 961 1,811 Mandatory outlays, excluding offsetting receipts 4,484 4,610 4,781 5,012 5,179 5,518 5,768 6,040 6,324 6,626 6,929 7,255 26,257 59,431 Continued 24 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table B-4. Continued CBO’s Baseline Projections of Mandatory Outlays, Adjusted to Exclude Effects of Timing Shifts Billions of dollars Total Actual, 2026– 2026– 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2030 2035 Offsetting receipts Medicare -179 -203 -215 -233 -250 -267 -289 -311 -335 -363 -389 -413 -1,254 -3,065 Federal share of federal employees’ retirement Civil service retirement and other -61 -64 -66 -68 -70 -72 -74 -77 -79 -81 -84 -86 -350 -758 Military retirement -25 -23 -22 -22 -23 -24 -24 -25 -25 -26 -27 -27 -115 -245 Social Security -23 -23 -24 -25 -26 -27 -27 -28 -29 -30 -31 -32 -129 -278 Subtotal -109 -109 -111 -115 -119 -122 -126 -130 -133 -137 -141 -145 -593 -1,280 Receipts related to natural resources -19 -19 -19 -20 -19 -20 -20 -21 -21 -21 -22 -22 -99 -205 MERHCF -11 -11 -13 -14 -14 -15 -16 -17 -17 -18 -19 -20 -72 -164 Fannie Mae and Freddie Mac j -6 -7 0 0 0 0 0 0 0 0 0 0 0 0 Other -30 -33 -36 -35 -35 -35 -41 -42 -29 -29 -29 -29 -181 -338 Total -354 -382 -395 -416 -437 -459 -492 -520 -536 -568 -599 -630 -2,199 -5,051 Mandatory outlays, including offsetting receipts 4,130 4,228 4,386 4,596 4,742 5,058 5,276 5,520 5,788 6,058 6,330 6,626 24,058 54,380 Effects that timing shifts have on mandatory outlays in CBO’s baseline projections Medicare -45 0 0 0 77 -77 0 0 0 111 8 -119 n.a n.a Supplemental Security Income -5 0 0 0 6 -6 0 0 0 7 * -7 n.a n.a Military retirement -6 0 0 0 7 -7 0 0 0 7 1 -8 n.a n.a Veterans’ income security -13 0 0 0 20 -20 0 0 0 23 2 -25 n.a n.a Veterans’ other -1 0 0 0 1 -1 0 0 0 1 * -1 n.a n.a Total -70 0 0 0 110 -110 0 0 0 150 11 -161 n.a n.a Mandatory outlays in CBO’s baseline projections 4,060 4,228 4,386 4,596 4,852 4,948 5,276 5,520 5,788 6,208 6,341 6,465 24,058 54,380 Addendum: Outlays, net of offsetting receipts Medicare 910 942 1,000 1,058 1,122 1,193 1,266 1,348 1,435 1,542 1,648 1,753 5,639 13,365 Major health care programs 1,669 1,754 1,832 1,936 2,033 2,144 2,254 2,375 2,500 2,652 2,787 2,949 10,198 23,463 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Spending for benefit programs shown in this table generally excludes administrative costs, which are discretionary. MErHCF = Department of Defense Medicare-Eligible retiree Health Care Fund; n.a. = not applicable; * = between zero and $500 million. a. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Outlays have been adjusted to remove the effects of those timing shifts. b. Gross spending, excluding the effects of Medicare premiums and other offsetting receipts. (Net Medicare spending is shown in the addendum section.) c. Spending to subsidize health insurance purchased through the marketplaces established under the Affordable Care Act and provided through the Basic Health Program and spending to stabilize premiums for health insurance purchased by individuals and small employers. d. Includes outlays for the American Opportunity Tax Credit and other credits. e. Includes Temporary Assistance for Needy Families, Child Support Enforcement, Child Care Entitlement to States, and other programs that benefit children. f. Includes benefits for retirement programs in the civil service, foreign service, and Coast Guard; benefits for smaller retirement programs; and annuitants’ health care benefits. g. Includes veterans’ compensation, pensions, and life insurance programs. h. Provides funding for health care, claims processing, and certain other incidental expenses related to providing care to veterans exposed to toxic substances. i. Primarily the GI Bill and similar education benefits. j. Cash payments from Fannie Mae and Freddie Mac to the Treasury are recorded as offsetting receipts in 2024 and 2025. Beginning in 2026, CBO’s estimates reflect the net lifetime costs—that is, the subsidy costs adjusted for market risk—of the guarantees that those entities will issue and of the loans that they will hold. CBO counts those costs as federal outlays in the year of issuance. APPENDIX B: THE BUDGET OUTLOOK IN TABLES THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 25 Table B-5 . Changes in Discretionary Budget Authority From 2024 to 2025 Billions of dollars Actual, Enacted, Percentage 2024 2025 Change change Defense Base fundinga 886 888 2 ** Nonbase funding Emergency funding not subject to the capsb * * 0 0 Emergency funding resulting in cap adjustmentsc 67 12 -56 -82.6 Other nonbase funding 0 0 0 n.a. Subtotal, nonbase funding 68 12 -56 -82.5 Effect of caps under section 102 of the FRA 0 -38 -38 n.a. Subtotal, defense 954 862 -92 -9.7 Nondefense Base fundinga,d 749 747 -1 ** Nonbase funding Emergency funding not subject to the capsb 70 68 -2 -2.6 Emergency funding resulting in cap adjustmentsc 56 118 61 109.3 Other nonbase funding 29 29 * -1.0 Subtotal, nonbase funding 155 215 59 38.3 Effect of caps under section 102 of the FRA 0 0 0 n.a. Subtotal, nondefense 904 962 58 6.5 Total Base fundinga 1,635 1,636 1 ** Nonbase funding Emergency funding not subject to the capsb 70 68 -2 -2.6 Emergency funding resulting in cap adjustmentsc 124 130 6 4.7 Other nonbase funding 29 29 * -1.0 Subtotal, nonbase funding 223 226 4 1.6 Effect of caps under section 102 of the FRA 0 -38 -38 n.a. Total 1,858 1,824 -34 -1.8 Addendum: Caps under section 101 of the FRA Defense 886 895 9 1.0 Nondefense 704 711 7 1.0 Caps under section 102 of the FRA Defense 850 850 0 0 Nondefense 736 736 0 0 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. FrA = Fiscal responsibility Act of 2023; n.a. = not applicable; * = between zero and $500 million; ** = between -0.5 percent and 0.5 percent. a. Consists of all discretionary appropriations except those that have been designated as an emergency requirement or for disaster assistance, certain program integrity activities (which identify and reduce overpayments in some benefit programs), certain fire suppression operations, certain funding for the Army Corps of Engineers, and programs designated in the 21st Century Cures Act. Funding in this category is constrained by the caps established by sections 101 and 102 of the FrA. b. Consists almost entirely of funding designated as an emergency requirement and provided by the Infrastructure Investment and Jobs Act, the Bipartisan Safer Communities Act, and section 443 of the Consolidated Appropriations Act, 2023. Section 103 of the FrA stipulated that such funding is exempt from the caps. c. Consists of funding, designated as an emergency requirement in keeping with section 251 of the Deficit Control Act, that changes the level of the caps. d. Because compliance with statutory caps is based on cost estimates produced when appropriation legislation is enacted—rather than CBO’s baseline—funding exceeds the level of the caps. Most of the difference stems from net reductions to mandatory funding that were included in appropriation acts. When those reductions are reflected in CBO’s baseline, they appear as mandatory spending. 26 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table B-6 . Key Projections in CBO’s Baseline Percentage of GDP Annual average 2027– 2031– 2025 2026 2030 2035 Revenues Individual income taxes 8.7 9.5 9.9 9.9 Payroll taxes 5.8 5.9 5.9 5.9 Corporate income taxes 1.7 1.6 1.3 1.2 Other a 0.9 0.9 0.9 1.1 Total revenues 17.1 17.8 18.1 18.2 Outlays Mandatory Social Security 5.2 5.3 5.6 5.9 Major health care programsb,c 5.8 5.8 6.1 6.5 Other b 3.0 2.8 2.6 2.5 Subtotal 14.0 14.0 14.3 14.9 Discretionary b 6.1 6.1 5.9 5.4 Net interest 3.2 3.2 3.5 3.9 Total outlays 23.3 23.3 23.6 24.2 Deficit (-) d -6.2 -5.5 -5.6 -6.1 Debt held by the public at the end of the period 100 102 109 118 Addendum: Social Security Revenuese 4.5 4.6 4.6 4.7 Outlaysf 5.2 5.3 5.6 5.9 Contribution to the deficit (-)d,g -0.7 -0.7 -0.9 -1.2 Medicare Revenuese 1.5 1.5 1.5 1.6 Outlaysb,f 3.8 3.9 4.1 4.7 Offsetting receipts -0.7 -0.7 -0.8 -0.9 Contribution to the deficit (-)d,g -1.7 -1.7 -1.8 -2.2 GDP at the end of the period (trillions of dollars) 30.1 31.3 36.4 43.9 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. This table satisfies a requirement specified in section 3111 of S. Con. res. 11, the Concurrent resolution on the Budget for Fiscal year 2016. GDP = gross domestic product. a. Consists of excise taxes, remittances from the Federal reserve System, customs duties, estate and gift taxes, and miscellaneous fees and fines. b. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Outlays have been adjusted to remove the effects of those timing shifts. c. Consists of outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, and the Children’s Health Insurance Program, as well as subsidies for health insurance purchased through the marketplaces established under the Affordable Care Act and related spending. d. When outlays exceed revenues, the result is a deficit. Values in this row were calculated by subtracting outlays from revenues; thus, negative values indicate deficits or contributions to deficits. e. Includes payroll taxes other than those paid by the federal government on behalf of its employees; those payments are intragovernmental transactions. Also includes income taxes paid on Social Security benefits, which are credited to the trust funds. f. Does not include outlays related to the administration of the program, which are discretionary. For Social Security, outlays do not include intragovernmental offsetting receipts stemming from the employer’s share of payroll taxes paid to the Social Security trust funds by federal agencies on behalf of their employees. g. The contribution to the deficit shown in this row differs from the change in the trust fund balance for the associated program. It does not include intragovernmental transactions, interest earned on balances, or outlays related to the administration of the program. Appendix C: The Economic Outlook in Tables The economic projections in this report incorporate information through December 4, 2024, and reflect the assumption that current laws generally remain unchanged. For the Congressional Budget Office’s economic projections, see Table C-1. For the agency’s projections of real GDP and its components, see Table C-2. For key inputs in CBO’s projections of real potential GDP, see Table C-3. And for a comparison of the agency’s current and previous projections for the 2024–2034 period, see Table C-4. Table C-1 . CBO’s Economic Projections for Calendar Years 2025 to 2035 Percent Annual average Estimated, 2028– 2030– 2024 2025 2026 2027 2029 2035 Change from fourth quarter to fourth quarter Gross domestic product Real a 2.3 1.9 1.8 1.8 1.8 1.8 Nominal 4.9 4.1 3.9 3.8 3.8 3.8 Inflation PCE price index 2.5 2.2 2.1 2.0 2.0 2.0 Core PCE price index b 2.9 2.3 2.1 2.0 2.0 2.0 Consumer price index c 2.7 f 2.3 2.4 2.3 2.2 2.2 Core consumer price index b 3.3 f 2.4 2.3 2.3 2.3 2.3 GDP price index 2.4 2.2 2.0 2.0 2.0 2.0 Employment cost index d 3.7 3.5 3.3 3.2 3.0 2.9 Payroll employment (average monthly change, in thousands) e 187 f 90 58 46 52 57 Fourth-quarter level Unemployment rate 4.1 f 4.3 4.4 4.4 4.4 g 4.3 h Change from year to year Gross domestic product Real a 2.7 2.1 1.8 1.8 1.8 1.8 Nominal 5.2 4.4 3.9 3.8 3.8 3.8 Inflation PCE price index 2.5 2.2 2.1 2.0 2.0 2.0 Core PCE price index b 2.8 2.5 2.1 2.0 2.0 2.0 Consumer price index c 3.0 f 2.2 2.4 2.3 2.2 2.2 Core consumer price index b 3.4 f 2.6 2.4 2.3 2.3 2.3 GDP price index 2.4 2.2 2.1 2.0 2.0 2.0 Employment cost index d 3.9 3.5 3.4 3.2 3.1 2.9 Annual average Unemployment rate 4.0 f 4.3 4.4 4.4 4.4 4.4 Interest rates Effective federal funds rate i 5.1 f 4.0 3.5 3.3 3.3 3.2 3-month Treasury bills 5.0 f 3.8 3.3 3.2 3.2 3.1 10-year Treasury notes 4.2 f 4.1 3.9 3.9 3.9 3.8 Tax bases (percentage of GDP) Wages and salaries 42.6 42.8 43.1 43.2 43.5 43.6 Domestic corporate profits j 11.4 11.1 10.7 10.3 9.6 9.5 Data sources: Congressional Budget Office; Bureau of Economic Analysis; Bureau of Labor Statistics; Federal reserve. See www.cbo.gov/publication/60870#data. GDP = gross domestic product; PCE = personal consumption expenditures. a. real values are nominal values that have been adjusted to remove the effects of changes in prices. b. Excludes prices for food and energy. c. The consumer price index for all urban consumers. d. The employment cost index for wages and salaries of workers in private industry. e. Calculated by dividing by 12 the net change in nonfarm payrolls from the fourth quarter of one calendar year to the fourth quarter of the next year. f. Actual value for 2024. g. Value for the fourth quarter of 2029. h. Value for the fourth quarter of 2035. i. The median interest rate that financial institutions charge each other for overnight loans of their monetary reserves, weighted by loan volume. j. Adjusted to exclude the effects of tax rules on depreciation allowances and the effects of changes in prices on the value of inventories. 28 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table C-2 . Projected Growth of Real GDP and Its Components Annual average Estimated, 2028– 2030– 2024 2025 2026 2027 2029 2035 Change from fourth quarter to fourth quarter (percent) Real GDP 2.3 1.9 1.8 1.8 1.8 1.8 Components of real GDP Consumer spending 2.8 2.0 1.4 1.5 1.8 2.2 Business fixed investment a 3.1 2.8 2.8 2.8 2.3 2.7 Residential investment b 2.5 6.3 6.6 3.6 1.4 -0.8 Purchases by federal, state, and local governments c 2.4 0.2 0.2 0.2 0.1 0.2 Federal 2.7 -0.4 -0.1 -0.1 -0.1 0.2 State and local 2.3 0.6 0.5 0.4 0.3 0.2 Exports 1.7 1.9 3.5 3.8 2.8 2.2 Imports 5.4 2.3 1.8 1.6 1.3 2.3 Inventory investment (billions of 2017 dollars) d 16.5 -2.2 6.1 -0.1 1.7 1.1 Contributions to the growth of real GDP (percentage points) Components of real GDP Consumer spending 1.9 1.4 1.0 1.0 1.2 1.5 Business fixed investment a 0.4 0.4 0.4 0.4 0.3 0.4 Residential investment b 0.1 0.3 0.3 0.2 0.1 * Purchases by federal, state, and local governments c 0.4 * * * * * Federal 0.2 * * * * * State and local 0.2 0.1 0.1 * * * Exports 0.2 0.2 0.4 0.4 0.3 0.2 Imports -0.7 -0.3 -0.2 -0.2 -0.2 -0.3 Inventory investment d 0.1 * * * * * Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. real values are nominal values that have been adjusted to remove the effects of changes in prices. GDP = gross domestic product; * = between -0.05 and 0.05 percentage points. a. Purchases of new equipment, nonresidential structures, and intellectual property products (such as software) by private companies and nonprofit institutions. b. Spending on home construction (new single-family and multifamily structures, manufactured homes, and dormitories), home improvements, and brokers’ commissions and other ownership-transfer costs. c. Based on the national income and product accounts. d. The change in private inventories. APPENDIX C: THE ECONOMIC OUTLOOK IN TABLES THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 29 Table C-3 . Key Inputs in CBO’s Projections of Real Potential GDP Percent Projected average Average annual growth annual growth Overall, Overall, 1950– 1974– 1982– 1991– 2002– 2008– 1950– 2025– 2030– 2025– 1973 1981 1990 2001 2007 2024 2024 2029 2035 2035 Overall economy Real potential GDP a 4.0 3.1 3.2 3.3 2.3 1.9 3.1 2.2 1.9 2.0 Potential labor force b 1.6 2.4 1.6 1.2 1.0 0.6 1.3 0.9 0.4 0.6 Potential labor force productivity c 2.3 0.7 1.6 2.0 1.3 1.4 1.7 1.3 1.4 1.4 Nonfarm business sector Real potential output 4.1 3.4 3.5 3.8 2.4 2.3 3.3 2.5 2.2 2.3 Potential hours worked 1.4 2.1 1.6 1.4 0.1 0.7 1.2 0.9 0.5 0.6 Capital services d 4.3 4.0 3.9 4.2 2.9 2.5 3.7 2.4 2.2 2.3 Potential total factor productivity e 1.7 0.6 1.1 1.4 1.4 1.0 1.3 1.1 1.1 1.1 Contributions to the growth of real potential output (percentage points) Potential hours worked 0.9 1.4 1.1 0.9 0.1 0.5 0.8 0.6 0.3 0.4 Capital services d 1.4 1.3 1.3 1.4 0.9 0.8 1.2 0.8 0.7 0.7 Potential total factor productivity e 1.7 0.6 1.1 1.4 1.4 1.0 1.3 1.1 1.1 1.1 Total contribution 4.0 3.4 3.4 3.8 2.4 2.3 3.3 2.4 2.1 2.3 Potential labor productivity f 2.6 1.2 1.8 2.4 2.3 1.6 2.1 1.6 1.7 1.6 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. real values are nominal values that have been adjusted to remove the effects of changes in prices. The table shows compound annual growth rates over the specified periods. Those rates are calculated from the fourth quarter of the year immediately preceding each period to the fourth quarter of the last year of the period. GDP = gross domestic product. a. CBO’s estimate of the amount of real GDP that could be produced if labor and capital were employed at their maximum sustainable rates. b. CBO’s estimate of how big the labor force would be if economic output and other key variables were at their maximum sustainable amounts. c. The ratio of real potential GDP to the potential labor force. d. The services provided by capital goods (such as software, equipment, and factories) that constitute the actual input in the production process. e. The average real output per unit of combined labor and capital services, excluding the effects of business cycles. f. The ratio of potential output to potential hours worked in the nonfarm business sector. 30 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Table C-4 . CBO’s Current and Previous Economic Projections for Calendar Years 2024 to 2034 Percent Annual average Overall, 2024 2025 2026 2024–2028 2029–2034 2024–2034 Change from fourth quarter to fourth quarter Real GDP a January 2025 2.3 1.9 1.8 1.9 1.8 1.9 June 2024 2.0 2.0 1.8 1.9 1.8 1.8 Nominal GDP January 2025 4.9 4.1 3.9 4.1 3.8 3.9 June 2024 4.6 4.1 3.6 3.9 3.8 3.9 Inflation PCE price index January 2025 2.5 2.2 2.1 2.2 2.0 2.0 June 2024 2.7 2.1 1.9 2.1 2.0 2.0 Core PCE price index b January 2025 2.9 2.3 2.1 2.3 2.0 2.1 June 2024 3.0 2.3 2.1 2.3 2.0 2.1 Consumer price index c January 2025 2.6 2.3 2.4 2.4 2.2 2.3 June 2024 3.0 2.3 2.2 2.4 2.2 2.3 Core consumer price index b January 2025 3.2 2.4 2.3 2.5 2.3 2.4 June 2024 3.4 2.5 2.3 2.6 2.2 2.4 GDP price index January 2025 2.4 2.2 2.0 2.1 2.0 2.0 June 2024 2.6 2.0 1.8 2.0 2.0 2.0 Employment cost index d January 2025 3.7 3.5 3.3 3.3 3.0 3.1 June 2024 4.0 3.5 3.3 3.4 3.0 3.2 Real potential GDP e January 2025 2.3 2.3 2.3 2.2 1.9 2.1 June 2024 2.1 2.2 2.1 2.1 1.9 2.0 Continued APPENDIX C: THE ECONOMIC OUTLOOK IN TABLES THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 31 Table C-4. Continued CBO’s Current and Previous Economic Projections for Calendar Years 2024 to 2034 Percent Annual average Overall, 2024 2025 2026 2024–2028 2029–2034 2024–2034 Annual average Unemployment rate January 2025 4.0 4.3 4.4 4.3 4.4 4.3 June 2024 3.9 4.0 4.2 4.2 4.5 4.3 Interest rates Effective federal funds rate f January 2025 5.1 4.0 3.5 3.9 3.3 3.5 June 2024 5.3 4.8 3.8 4.1 3.0 3.5 3-month Treasury bills January 2025 5.0 3.8 3.3 3.7 3.1 3.4 June 2024 5.2 4.5 3.6 3.8 2.8 3.3 10-year Treasury notes January 2025 4.2 4.1 3.9 4.0 3.8 3.9 June 2024 4.5 4.1 3.7 3.9 4.0 3.9 Tax bases (percentage of GDP) Wages and salaries January 2025 42.6 42.8 43.1 43.0 43.6 43.3 June 2024 43.3 43.5 43.7 43.6 43.9 43.8 Domestic corporate profits g January 2025 11.4 11.1 10.7 10.7 9.5 10.0 June 2024 10.2 10.1 9.8 9.8 9.0 9.4 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. GDP = gross domestic product; PCE = personal consumption expenditures. a. real values are nominal values that have been adjusted to remove the effects of changes in prices. b. Excludes prices for food and energy. c. The consumer price index for all urban consumers. d. The employment cost index for wages and salaries of workers in private industry. e. CBO’s estimate of the amount of real GDP that could be produced if labor and capital were employed at their maximum sustainable rates. f. The median interest rate that financial institutions charge each other for overnight loans of their monetary reserves, weighted by loan volume. g. Adjusted to exclude the effects of tax rules on depreciation allowances and the effects of changes in prices on the value of inventories. Appendix D: Tax Expenditures Many exclusions, deductions, credits, and preferential Tax expenditures have a large effect on the federal bud- rates in the federal tax system cause revenues to be lower get. In fiscal year 2025, the value of all the tax expendi- than they would be otherwise for any underlying set of tures in the individual and corporate income tax systems tax rates. Such provisions resemble federal spending and (including their effects on payroll taxes) is estimated to contribute to the budget deficit; thus, they are known as be $2.3 trillion, or 7.6 percent of gross domestic prod- tax expenditures.1 uct (GDP).4 That amount, which was calculated by the Congressional Budget Office on the basis of estimates Like federal spending, tax expenditures provide finan- prepared by JCT, equals about 44 percent of all federal cial assistance for specific activities, entities, or groups revenues in 2025 and exceeds projected outlays for all of people. However, the budgetary treatment of tax discretionary programs combined (see Figure D-1). expenditures differs from that of spending programs. Tax expenditures increase the deficit by reducing the Simply adding up the estimates for specific tax expen- government’s revenue collections, although the amount ditures does not account for the interactions that may of forgone revenues attributable to specific tax expendi- occur among those tax provisions. For instance, the total tures (or to tax expenditures in general) is not typically tax expenditure for all itemized deductions would be recorded separately in the budget, unlike outlays for smaller than the sum of the separate tax expenditures for each spending program.2 The Congressional Budget and each deduction. The reason is that all taxpayers would Impoundment Control Act of 1974 (Public Law 93-344) claim the standard deduction if there were no itemized requires that the federal budget list tax expenditures. deductions; but if only one or a few itemized deduc- The Administration regularly publishes estimates of tax tions were removed, many taxpayers would still choose expenditures prepared by the Treasury Department’s to itemize. The progressive structure of the tax brackets Office of Tax Analysis, and the Congress publishes esti- (meaning that higher rates apply to higher income) mates prepared by the staff of the Joint Committee on ensures that the opposite would be the case with income Taxation (JCT).3 exclusions. In other words, the tax expenditure for all exclusions considered together would be greater than 1. Sec. 3(3) of the Congressional Budget and Impoundment the sum of the separate tax expenditures for each exclu- Control Act of 1974, codified at 2 U.S.C. §622(3) (2023), sion. In 2025, those and other factors are expected to defines tax expenditures as “those revenue losses attributable to be approximately offsetting, so the total amount of tax provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax see Congressional Budget Office, How Specifications of the liability.” Reference Tax System Affect CBO’s Estimates of Tax Expenditures (December 2021), www.cbo.gov/publication/57543; Joint 2. The exception is the portion of refundable tax credits that exceeds Committee on Taxation, Estimates of Federal Tax Expenditures for a taxpayer’s tax liability; that amount is recorded in the budget as Fiscal Years 2024–2028, JCX-48-24 (December 11, 2024), mandatory spending. www.jct.gov/publications/2024/jcx-48-24. The Treasury’s definition of tax expenditures is broadly similar to JCT’s. 3. For this analysis, the Congressional Budget Office adopted JCT’s See Treasury Department, Tax Expenditures Fiscal Year definition of tax expenditures as deviations from a “normal” 2026 (November 27, 2024), https://tinyurl.com/msmf3r3e. income tax structure. For the individual income tax, that structure includes existing regular tax rates, the standard deduction, 4. Unlike JCT, CBO includes estimates of the largest payroll personal exemptions, and deductions of business expenses. For tax expenditures. As defined by CBO, a normal payroll tax the corporate income tax, that structure includes the statutory tax structure includes the existing payroll tax rates as applied to a rate, generally defines income on an accrual basis (meaning that broad definition of compensation, which consists of cash wages future income and expenses are recorded when they are incurred and fringe benefits. Tax expenditures that reduce the tax base rather than when payments are exchanged), and allows for costs for payroll taxes also decrease spending for Social Security by to be recovered according to a specified depreciation system that reducing the earnings base used to calculate Social Security is less favorable than under current law. For more information, benefits. 34 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Figure D-1 . Estimated Outlays, Revenues, and Tax Expenditures in Fiscal Year 2025 Percentage of GDP Outlaysa Revenues Tax expenditures 16 12 Corporate income 8 tax expenditures Payroll tax expenditures 4 Individual income tax expenditures 0 Mandatory Discretionary Net interest Individual Payroll Other Allb income taxes taxes Tax expenditures are provisions of the tax system (such as tax credits and deductions) that cause revenues to be lower than they would be otherwise. Like federal spending programs, tax expenditures contribute to the budget deficit. In 2025, the total revenues forgone because of tax expenditures are projected to equal 7.6 percent of GDP (or $2.3 trillion). Data source: Congressional Budget Office, using estimates by the staff of the Joint Committee on Taxation. See www.cbo.gov/publication/60870#data. GDP = gross domestic product. a. The outlay portions of refundable tax credits are included in tax expenditures as well as in mandatory outlays. In 2025, they are estimated to total 0.8 percent of GDP. b. This total is the sum of the estimates for each separate tax expenditure and does not account for interactions among them. However, CBO estimates that the total for all tax expenditures roughly equals the sum of the estimates for each separate tax expenditure. Because estimates of tax expenditures are based on people’s behavior with current provisions of the tax code in place, they do not reflect the amount of revenues that would be collected if provisions were eliminated and taxpayers adjusted their activities accordingly. expenditures is projected to roughly equal the sum of the repealed and taxpayers’ behavior was unchanged. Such individual tax expenditures. estimates do not represent the amount of revenues that would be raised if those provisions were eliminated, Estimates of tax expenditures measure the difference because the changes in incentives that would result from between households’ and businesses’ tax liability under eliminating those provisions would lead households and current law and the tax liability they would have incurred businesses to modify their behavior in ways that would if the provisions generating those tax expenditures were lessen the effect on revenues. Appendix E: Table and Figure Notes This appendix provides details about the tables and figures presented in the main text of the report. The Budget Outlook, by Fiscal Year Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Outlays and deficits have been adjusted to exclude the effects of those timing shifts. CHIP = Children’s Health Insurance Program; GDP = gross domestic product. Total Outlays and Revenues Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. All pro- jections presented here have been adjusted to exclude the effects of those timing shifts. Historical amounts have been adjusted as far back as the available data will allow. GDP = gross domestic product. Outlays, by Category Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. All pro- jections presented here have been adjusted to exclude the effects of those timing shifts. Historical amounts have been adjusted as far back as the available data will allow. GDP = gross domestic product. Revenues, by Category Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Revenues in the “other” category consist of excise taxes, remittances from the Federal Reserve System, customs duties, estate and gift taxes, and miscellaneous fees and fines. GDP = gross domestic product. 36 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Total Deficit, Net Interest Outlays, and Primary Deficit Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that would have ordinarily been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. All pro- jections presented here have been adjusted to exclude the effects of those timing shifts. Historical amounts have been adjusted as far back as the available data will allow. GDP = gross domestic product. Changes in CBO’s Projections of the 10-Year Deficit Since June 2024 Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Federal Debt Held by the Public Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. GDP = gross domestic product. The Economic Outlook, by Calendar Year Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. For 2024, values for real GDP, inflation as measured by the PCE price index, and the tax bases are estimates; values for inflation as measured by the consumer price index, payroll employment, the unemployment rate, and interest rates are actual values. GDP = gross domestic product; PCE = personal consumption expenditures. Growth of Real GDP Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. GDP = gross domestic product. Residential Investment Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Unemployment Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Projections in this figure are fourth-quarter values. Wages Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Overall Inflation and Core Inflation Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Interest Rates Data source: Congressional Budget Office. See www.cbo.gov/publication/60870#data. Projections in this figure are fourth-quarter values. About This Document This volume is one of a series of reports on the state of the budget and the economy that the Congressional Budget Office issues each year. It satisfies the requirement of section 202(e) of the Congressional Budget Act of 1974 for CBO to submit to the Committees on the Budget periodic reports about fiscal policy and to provide baseline projections of the federal budget. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations. CBO consulted members of its Panel of Economic Advisers during the development of this report. Although the agency’s outside advisers provided considerable assistance, they are not responsible for the contents of this report; that responsibility rests solely with CBO. The following pages list CBO’s staff members who contributed to this report by preparing the economic, revenue, and spending projections; writing the report; reviewing, editing, fact-checking, designing, and publishing it; compiling the supplemental materials posted along with it on CBO’s website; and providing other support. The report is available at www.cbo.gov/publication/60870. CBO seeks feedback to make its work as useful as possible. Please send comments to communications@cbo.gov. Phillip L. Swagel Director January 2025 38 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Economic Projections The economic projections were prepared by the Macroeconomic Analysis Division, with contributions from analysts in other divisions. That work was supervised by Devrim Demirel, Robert Arnold, and Jaeger Nelson. Nicholas Abushacra · Housing, model and data management Joyce Bai · Financial markets Aaron Betz · Effects of fiscal policy, potential output, productivity Daniel Fried · Net exports, exchange rates, energy prices Edward Gamber · Labor markets, current-quarter analysis Ron Gecan · Energy prices Mark Lasky · Business investment, housing Chandler Lester · Inflation, house prices Kyoung Mook Lim · Federal, state, and local government spending and revenues; effects of fiscal policy Michael McGrane · Financial markets, Federal Reserve’s balance sheet, quantifying uncertainty Christine Ostrowski · Consumer spending, income Natalia Reyes · Motor vehicle sector, research assistance Jeffrey Schafer · Interest rates, monetary policy Byoung Hark Yoo · Quantifying uncertainty Revenue Projections The revenue projections were prepared by the Tax Analysis Division, supervised by John McClelland, Edward Harris, Molly Saunders-Scott, and Joshua Shakin. In addition, the staff of the Joint Committee on Taxation provided valuable assistance. Kathleen Burke · Individual income taxes Dorian Carloni · Business taxation Nathaniel Frentz · Federal Reserve System’s remittances, miscellaneous fees and fines Bilal Habib · Tax modeling Jack Lynch · Customs duties Shannon Mok · Estate and gift taxes Daniel Page · Excise taxes James Pearce · Capital gains realizations, wage distribution, tax modeling Kevin Perese · Tax modeling Kurt Seibert · Payroll taxes, depreciation, tax modeling Jennifer Shand · Corporate income taxes Molly Sherlock · Energy and excise taxes Naveen Singhal · Capital gains realizations, tax modeling ABOUT THIS DOCUMENT THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 39 Ellen Steele · Refundable tax credits Emma Uebelhor · Customs duties James Williamson · Retirement income, estate and gift taxes Spending Projections The spending projections were prepared by the Budget Analysis Division, with contributions from analysts in other divisions. That work was supervised by Chad Chirico, Christina Hawley Anthony, Sam Papenfuss, Barry Blom, Megan Carroll, Elizabeth Cove Delisle, Sean Dunbar, Kathleen FitzGerald, Ann E. Futrell, Justin Humphrey, Sarah Masi, David Newman, Robert Reese, Asha Saavoss, and Emily Stern of the Budget Analysis Division, as well as by Chapin White, Tamara Hayford, and Alexandra Minicozzi of the Health Analysis Division and by Sebastien Gay of the Financial Analysis Division. Defense, International Affairs, and Veterans’ Affairs Noah Callahan · Veterans’ health care Sunita D’Monte · International affairs Caroline Dorminey · Defense (procurement) Paul B. A. Holland · Veterans’ education benefits, reservists’ education benefits, veterans’ home loans William Ma · Defense (operation and maintenance, intelligence programs, other defense programs) Christopher Mann · Defense (facilities, energy, nuclear programs) Aldo Prosperi · Defense (research and development, cybersecurity) David Rafferty · Military retirement, compensation for radiation exposure and energy employees’ occupational illness, immigration Dawn Sauter Regan · Defense (military personnel) Matt Schmit · Military health care Logan Smith · Veterans’ compensation and pensions, other benefits for disabled veterans, toxic exposures fund Education, Finance, and Housing Julia Aman · Federal Deposit Insurance Corporation, National Credit Union Administration, Orderly Liquidation Fund, Federal Housing Administration, Bureau of Indian Affairs Joyce Bai · Student loans Margot Berman · Student loans Jeremy Crimm · Law enforcement, justice assistance, homeland security, Postal Service, immigration Michael Falkenheim · Federal Deposit Insurance Corporation, student loans David Hughes · Commerce, Consumer Financial Protection Bureau, Universal Service Fund Wendy Kiska · Pension Benefit Guaranty Corporation, student loans Leah Koestner · Student loans, higher education programs Noah Meyerson · Pension Benefit Guaranty Corporation Zunara Naeem · Fannie Mae and Freddie Mac, Federal Housing Finance Agency, housing assistance Garrett Quenneville · Elementary and secondary education, Pell grants 40 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Mitchell Remy · Veterans’ housing, Fannie Mae and Freddie Mac Jon Sperl · Community and regional development, Federal Emergency Management Agency, judicial branch, administration of justice Aurora Swanson · Securities and Exchange Commission, Small Business Administration David Torregrosa · Federal Deposit Insurance Corporation Byoung Hark Yoo · Fannie Mae and Freddie Mac, Federal Housing Administration Health Austin Barselau · Medicare Ezra Cohn · prescription drugs, National Institutes of Health, Public Health Service Cyrus Ekland · World Trade Center Health Program, Consumer Product Safety Commission Alexander Gniewecki · Medicare Ryan Greenfield · Prescription drugs, Food and Drug Administration Jessica Hale · Health insurance marketplaces, private health insurance, Centers for Disease Control and Prevention Cornelia Hall · Medicare Caroline Hanson · Health insurance coverage Nianyi Hong · Health insurance coverage Ben Hopkins · Health insurance coverage Claire Hou · Health insurance coverage Katherine Kim · Medicare Sean Lyons · Health insurance coverage Julianna Mack · Health insurance coverage Eamon Molloy · Health insurance coverage Hudson Osgood · Medicare, Public Health Service Romain Parsad · Health insurance coverage Allison Percy · Health insurance coverage Aaron Pervin · Medicaid, Occupational Safety and Health Administration, Mine Safety and Health Administration Lara Robillard · Medicare Sarah Sajewski · Medicare Julia Sheriff · Medicare Robert Stewart · Medicaid, Children’s Health Insurance Program, Indian Health Service Carolyn Ugolino · Medicaid, Health Resources and Services Administration Emily Vreeland · Health insurance marketplaces, private health insurance, Federal Employees Health Benefits program Amy Zettle · Medicaid, Substance Abuse and Mental Health Services Administration Chris Zogby · Health insurance coverage Noah Zwiefel · Medicare ABOUT THIS DOCUMENT THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 41 Income Security Susan Yeh Beyer · Child nutrition and other nutrition programs, Smithsonian Institution, arts and humanities Meredith Decker · Unemployment insurance, job training programs Jennifer Gray · Supplemental Nutrition Assistance Program and other nutrition programs Jada Ho · Refugee and Entrant Assistance program, Child Care and Development Block Grant Justin Latus · Supplemental Security Income, Administration on Aging Michael McGrane · Extended benefits for unemployment insurance Susanne Mehlman · Temporary Assistance for Needy Families, child support enforcement, foster care, child care programs, Low Income Home Energy Assistance Program Noah Meyerson · Old-Age and Survivors Insurance, Social Security trust funds Delaney Smith · Disability Insurance, rehabilitation services, Social Services Block Grant, support programs for children and families, immigration Natural and Physical Resources Tiffany Arthur · Agriculture Kelly Durand · General government David Hughes · Outer Continental Shelf receipts Aaron Krupkin · Energy, air, water, and other transportation Willow Latham-Proença · Energy, highways, mass transit, Amtrak, spectrum auction receipts Lilia G. Ledezma · Conservation and land management Erik O’Donoghue · Agriculture Emilia Oliva · Agriculture Matthew Pickford · General government, legislative branch, recreational resources Alaina Rhee · Energy and water resources Aurora Swanson · Pollution control and abatement, other natural resources Other Areas and Functions Shane Beaulieu · Computer applications and data systems Breanna Browne-Pike · Federal civilian retirement and federal pay Aaron Feinstein · Other interest, monthly Treasury data, historical data Avi Lerner · Debt, interest on the public debt Samuel Liedtka · Appropriation bills (Interior and Related Agencies; Military Construction and Veterans Affairs) Amber Marcellino · Budget projections George McArdle · Appropriation bills (Agriculture and Food and Drug Administration; State and Foreign Operations) Amy McConnel · Appropriation bills (Commerce, Justice, and Science; Financial Services and General Government; Homeland Security) Hieu Ngo · Computer applications and data systems 42 THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035 JANUAry 2025 Dan Ready · Budget projections and national income and product accounts Mark Sanford · Appropriation bills (Defense) Youstiena Shafeek · Budget projections and appropriation bills Esther Steinbock · Appropriation bills (Energy and Water Development; Transportation and Housing and Urban Development) J’nell Blanco Suchy · Appropriation bills (Labor, Health and Human Services, and Education; Legislative Branch), scorekeeping for authorization acts Writing Amber Marcellino wrote the budget outlook, Edward Gamber wrote the economic outlook, and Dan Ready and Aaron Feinstein wrote Appendix A with assistance from Jennifer Shand. Breanna Browne-Pike wrote Appendix B, Edward Gamber wrote Appendix C, Kathleen Burke wrote Appendix D, and Christine Browne and Youstiena Shafeek compiled Appendix E. Reviewing, Editing, Fact-Checking, Designing, and Publishing Mark Doms, Mark Hadley, and Jeffrey Kling reviewed the report. The editing and publishing were handled by CBO’s editing and publishing group, supervised by Lora Engdahl and John Skeen, and the agency’s communications team, supervised by Leigh Angres. Christine Bogusz, Christine Browne, Scott Craver, Michael Fialkowski, Christian Howlett, Brett Kessler, Rebecca Lanning, Bo Peery, and Caitlin Verboon edited and proofread the report and supplemental material; Casey Labrack and Jorge Salazar created the graphics; Jorge Salazar prepared the text for publication; and Annette Kalicki published the report on CBO’s website. Nicholas Abushacra, Margot Berman, Jodi Capps, Alexander Gniewecki, Jada Ho, Jack Lynch, Daniel Page, Natalia Reyes, Youstiena Shafeek, Emma Uebelhor, and Grace Watson fact-checked the report. Nicholas Abushacra, Natalia Reyes, and Youstiena Shafeek coordinated the preparation of figures and tables related to the budget and economic projections. Nicholas Abushacra, Aaron Feinstein, Avi Lerner, Jack Lynch, Daniel Page, Natalia Reyes, and Youstiena Shafeek compiled data and supplemental information, and Annette Kalicki and Simone Thomas coordinated the presentation of those materials on CBO’s website.
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By the Numbers (PDF)
The Budget and Economic Outlook: 2025 to 2035 By the Numbers JANUARY | 2025 The Budget Outlook, by Fiscal Year Percentage of GDP Billions of dollars Average, Actual, Actual, 1975–2024 2024 2025 2026 2035 2024 2025 2026 2035 Revenues 17.3 17.1 17.1 17.8 18.3 4,918 5,163 5,580 8,031 Individual income taxes 8.0 8.4 8.7 9.5 10.0 2,426 2,621 2,968 4,413 Payroll taxes 6.0 5.9 5.8 5.9 5.9 1,709 1,759 1,840 2,605 Corporate income taxes 1.8 1.8 1.7 1.6 1.2 530 524 495 517 Other 1.5 0.9 0.9 0.9 1.1 253 259 277 496 Outlays 21.1 23.7 23.3 23.3 24.4 6,826 7,028 7,294 10,730 Mandatory 11.1 14.3 14.0 14.0 15.1 4,130 4,228 4,386 6,626 Social Security 4.4 5.0 5.2 5.3 6.0 1,454 1,572 1,664 2,624 Major health care programs 3.5 5.8 5.8 5.8 6.7 1,669 1,754 1,832 2,949 Medicare 2.1 3.2 3.1 3.2 4.0 910 942 1,000 1,753 Medicaid, CHIP, and marketplace subsidies 1.3 2.6 2.7 2.7 2.7 759 812 831 1,196 Other mandatory 3.2 3.5 3.0 2.8 2.4 1,006 902 891 1,053 Discretionary 7.9 6.3 6.1 6.1 5.3 1,815 1,848 1,897 2,322 Defense 4.2 3.0 2.9 2.8 2.4 855 859 866 1,053 Nondefense 3.7 3.3 3.3 3.3 2.9 960 989 1,031 1,268 Net interest 2.1 3.1 3.2 3.2 4.1 881 952 1,010 1,783 Total deficit (-) -3.8 -6.6 -6.2 -5.5 -6.1 -1,907 -1,865 -1,713 -2,699 Primary deficit (-) -1.7 -3.6 -3.0 -2.2 -2.1 -1,026 -913 -703 -916 Debt held by the public at the end of each period 49.7 97.8 99.9 101.7 118.5 28,199 30,103 31,883 52,056 See Appendix B of the report. When October 1 (the first day of the fiscal year) falls on a weekend, certain payments that ordinarily would have been made on that day are instead made at the end of September and thus are shifted into the previous fiscal year. Outlays and deficits have been adjusted to remove the effects of those shifts. CHIP = Children’s Health Insurance Program; GDP = gross domestic product. The Economic Outlook, by Calendar Year Annual average Estimated, 2028– 2030– 2024 2025 2026 2027 2029 2035 Change from fourth quarter to fourth quarter (percent) Real (inflation-adjusted) GDP 2.3 1.9 1.8 1.8 1.8 1.8 Inflation PCE price index 2.5 2.2 2.1 2.0 2.0 2.0 Consumer price index 2.7 2.3 2.4 2.3 2.2 2.2 Payroll employment (net monthly change, in thousands) 187 90 58 46 52 57 Annual average (percent) Unemployment rate 4.0 4.3 4.4 4.4 4.4 4.4 Interest rates Effective federal funds rate 5.1 4.0 3.5 3.3 3.3 3.2 3-month Treasury bills 5.0 3.8 3.3 3.2 3.2 3.1 10-year Treasury notes 4.2 4.1 3.9 3.9 3.9 3.8 Tax bases (percentage of GDP) Wages and salaries 42.6 42.8 43.1 43.2 43.5 43.6 Domestic corporate profits 11.4 11.1 10.7 10.3 9.6 9.5 See Appendix C of the report. GDP = gross domestic product; PCE = personal consumption expenditures. www.cbo.gov | @uscbo www.cbo.gov/publication/60870
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