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If current laws governing taxes and spending remain in e�ect (CBO’s baseline projection), debt held by the public will fall from
73 percent of GDP in fiscal year 2012 to 58 percent of GDP in 2022. If policymakers altered those laws to maintain many policies that
have been in e�ect in recent years (CBO’s alternative fiscal scenario), debt would climb to 90 percent of GDP by 2022. In either case,
debt would be relatively high by historical standards.
Federal Debt Held by the Public, Historically and As Projected in CBO’s Baseline and Under an Alternative Fiscal Scenario(Percentage of GDP)
C ONGRESSIONAL B UDGET O FFICE
August 2012http://go.usa.gov/7QY
Alternative Fiscal Scenario
CBO’s BaselineProjection
ProjectedActual140
120
100
80
60
40
20
01940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
An Update to theBudget and Economic Outlook:
Fiscal Years 2012 to 2022August 2012
The Budget Outlook
Congressional Budget O�ice
Deficits under CBO’s current-law baseline projection average about 1 percent of GDP over the 2013–2022 period. By comparison, under
an alternative scenario, in which some changes specified in current law would not occur and many tax and spending policies that have
been in e�ect in recent years would continue instead, deficits over that period would average about 5 percent of GDP.
Deficits Projected in CBO’s Baseline and Under an Alternative Fiscal Scenario(Percentage of GDP)
C ONGRESSIONAL B UDGET O FFICE
8
7
6
5
4
3
2
1
02012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Additional Debt Service
Prevent Spending Cuts
Extend Tax Policies
Baseline
August 2012http://go.usa.gov/7QY
The caps on discretionary spending—either with the required automatic reductions (as in CBO’s baseline) or without them (as in the
alternative fiscal scenario)—will necessitate a reduction in the real resources available for many government programs, compared with
the funding provided for 2012. If, instead, funding was allowed to grow at the rate of inflation, it would be 17 percent higher in 2022
than the amounts projected in the baseline.C ONGRESSIONAL B UDGET O FFICE
Total Discretionary Budget Authority Excluding War Funding, Disaster Relief, and Program Integrity Initiatives (Percentage of GDP)
12
10
8
6
4
2
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Historical Funding and CBO’s Baseline
Funding for 2012 Adjusted for In�ation
Excluding EnforcementProcedures
ProjectedActual
August 2012http://go.usa.gov/7QY
Congressional Budget O�ice
An Update to theBudget and Economic Outlook:
Fiscal Years 2012 to 2022August 2012
The Economic Outlook
With modest de�cits anticipated for much of the 10-year projection period of CBO’s current-law baseline, debt held by the public
recedes as a percentage of GDP. However, if some of the changes speci�ed in current law did not occur and certain current policies
were continued instead, debt held by the public would rise to 94 percent of GDP by the end of 2022, the highest �gure since just
after World War II.
Federal Debt Held by the Public, Historically and As Projected in CBO’s Baseline and Under an Alternative Fiscal Scenario (Percentage of GDP)
C ONGRESSIONAL B UDGET O FFICE
January 2012
http://go.usa.gov/nPi
The economy has continued to expand modestly this year. Real (in�ation-adjusted) GDP rose at an average annual rate of 1.7 percent in
the first half of the year, somewhat slower than in 2011 and less than its average rate during the previous expansion. CBO anticipates
that the pace of economic expansion will increase slightly during the rest of 2012.
Real Gross Domestic Product(Percentage change, fourth quarter to fourth quarter)
C ONGRESSIONAL B UDGET O FFICE
4
3
2
1
0
-1
-2
-3
-4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2.9
0.4
1.9
3.9
2.9 2.82.4 2.2 2.4
-0.1
-3.3
2.0
First Half1.7
Recession Recession
August 2012http://go.usa.gov/7QY
Business investment has grown rapidly over the past year. Real (in�ation-adjusted) business fixed investment—in structures,
equipment, and software—grew by 10.2 percent over the year that ended in the second quarter of 2012. Despite that growth, the total
amount of net investment (fixed investment minus depreciation) as a fraction of GDP remains unusually low.
Real Business Fixed Investment(Percentage change from same quarter of previous year)
C ONGRESSIONAL B UDGET O FFICE
20
10
0
-10
-20
-302000 2002 2004 2006 2008 2010 2012
-9.5
-20.1
12.5
10.211.0
August 2012http://go.usa.gov/7QY
A recovery in the housing market appears to be under way. Real (in�ation-adjusted) residential investment—spending on home
construction and improvements, mobile homes, and brokers’ commissions—was almost 11 percent higher in the second quarter of 2012
than in the same quarter last year. House prices seem to have reached their bottom and have been rising in 2012.
Housing Market Indicators(Percentage change from same quarter of previous year)
C ONGRESSIONAL B UDGET O FFICE
20
10
0
-10
-20
-302000 2002 2004 2006 2008 2010 2012
House Prices
Real Residential Investment
10.7
2.2
August 2012http://go.usa.gov/7QY
Economic growth among the nation’s leading trading partners, which peaked in mid-2010, has continued to slow, while the U.S.
economy has continued to grow at a modest pace since mid-2011. That di�erent pattern of growth is a primary factor behind CBO's
forecast of weaker net exports in the second half of 2012. (Actual data include the July 2012 revisions to the national income and
product accounts; projected data do not.)
Economic Growth in the United States and Among Its Leading Trading Partners(Percentage change from same quarter of previous year)
C ONGRESSIONAL B UDGET O FFICE
6
4
2
0
-2
-4
-6
2000 2005 2010 2015 2020
Leading Trading Partners
United States
ProjectedActual
August 2012http://go.usa.gov/7QY
The share of unemployment accounted for by the long-term unemployed—people who have been seeking work for more than
26 consecutive weeks—has topped 40 percent for the past two and a half years. By comparison, that share was about
22 percent in 2003, in the aftermath of the 2001 recession.
Long-Term Unemployment(Percent)
C ONGRESSIONAL B UDGET O FFICE
50
40
30
20
10
02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
First Half
11.4 11.8
18.4
22.1 21.819.6
17.619.7
31.5
43.3 43.842.2
17.6
Recession Recession
August 2012http://go.usa.gov/7QY
In�ationary pressures remain subdued: The average rate of in�ation in consumer prices during the year ending in the
second quarter of 2012 was less than 2 percent.
Inflation(Percentage change in prices from same quarter of previous year)
C ONGRESSIONAL B UDGET O FFICE
Overall
Core
5
4
3
2
1
0
-12000 2002 2004 2006 2008 2010 2012
August 2012http://go.usa.gov/7QY
Because of the sharp deficit reduction that will occur under current law, CBO projects that the unemployment rate will rise to about 9 percent in
the fourth quarter of 2013. Under an alternative scenario, in which some changes specified in current law would not occur and many tax and
spending policies that have been in e�ect in recent years would continue instead, unemployment would remain near 8 percent in 2013.
Unemployment Rate(Percent)
C ONGRESSIONAL B UDGET O FFICE
12
10
8
6
4
2
0
5.82003, 4Q
4.42006, 4Q
9.12013, 4Q
8.0 2013, 4Q
2000 2005 2010 2015 2020
Alternative Fiscal Scenario
ProjectedActual
8.22012, 2Q
9.92009, 4Q
CBO’s Baseline
Projection
August 2012http://go.usa.gov/7QY
3.92000, 4Q
CBO expects that real (in�ation-adjusted) GDP will stay below the economy’s potential—a level that corresponds to a high rate of use
of labor and capital—until 2018. Potential GDP is projected to grow at an average annual rate of 2.4 percent between 2018 and 2022
and by an average of 2.2 percent for the 2012–2022 projection period. (Actual data include the July 2012 revisions to the national
income and product accounts; projected data do not.)
GDP and Potential GDP( Trill ions of 2005 dollars)
C ONGRESSIONAL B UDGET O FFICE
2000 2005 2010 2015 2020
ProjectedActual
Potential GDP
GDP
20
18
16
14
12
10
0
August 2012http://go.usa.gov/7QY
Since the end of the recession, labor income has fallen as a share of gross domestic income—the sum of all income earned in the
production of GDP—reinforcing its downward trend since 1980. In CBO’s projections, labor income grows faster over the next decade,
bringing its share to about 61 percent by 2022, just below the historical average since 1980. (Actual data include the July 2012 revisions
to the national income and product accounts; projected data do not.)
Labor Income(Percentage of gross domestic income)
C ONGRESSIONAL B UDGET O FFICE
Average, 1980 to 2011 (61.9%)
65
64
63
62
61
60
59
01980 1985 1990 1995 2000 2005 2010 2015 2020
ProjectedActual
August 2012http://go.usa.gov/7QY
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