CBO gives a better outlook for US budget and economy

The Congressional Budget Office recently updated its Budget and Economic Outlook for the next 10 years. And it’s got some good news on the demographic front.

In CBO’s current projections, the number of people who are working or actively seeking employment continues to expand at a moderate pace through 2026. Higher population growth in those years, mainly from increased immigration, more than offsets a decline in labor force participation due to slowing demand for workers and the rising average age of the population. A large proportion of recent and projected immigrants are expected to be 25 to 54 years old—adults in their prime working years.

This increased amount of immigration means the future increase in population is well above what the CBO projected this time last year.

2023

2024

The CBO says this added immigration is going to keep the economy from having a larger slowdown in growth in the coming years.

CBO is now projecting a lower average rate of economic growth from 2024 to 2027 than it did last February (2.0 percent a year versus 2.4 percent), largely because of slower projected growth in sectors of the economy that are sensitive to interest rates, such as consumer spending, investment, and net exports. The downward revision to economic growth resulting from higher projected interest rates is partly offset by an increase in economic activity over the 2024–2027 period stemming from greater projected net immigration. From 2028 to 2033, real GDP is now projected to grow at a higher average rate than CBO forecast last February (2.0 percent a year versus 1.8 percent), mainly because of faster projected growth in output per worker and the larger labor force.

CBO has lowered its projection of the average unemployment rate over the 2024–2027 period (to 4.3 percent from 4.7 percent) because of stronger-than-expected economic growth in 2023. That stronger growth pushed the unemployment rate in the fourth quarter of 2023 below what CBO forecast last February. Although the unemployment rate is projected to rise in 2024 as the economy slows, it is expected to be lower, on average, than in CBO’s previous projections. After 2027, CBO’s projections of the unemployment rate are roughly the same as they were last February.

Not really what the “Party of Business” is trying to put over, as the GOP fear-mongers about immigration and tries to stir up stupid white people about something that is generally a net positive on our economy. And the CBO goes on to add that the US labor force participation rate is also projected to be higher than previously estimated in no small part due to immigration.

That's not coming a moment too soon, because a large number of Boomer-aged Americans are leaving the labor force, as record highs in the stock market and a good economy allow for more people to be able to retire.

Huge numbers of Americans leaving workplace in a surprise second wave of post-COVID retirement boom, @axios rpts: https://t.co/2ssCen2aqg

— Mark Albert (@malbertnews) February 20, 2024

Huge numbers of Americans are leaving the workplace in a surprise second wave of the post-COVID retirement boom.

Why it matters: An aging country — combined with a booming stock market and a nudge from return-to-office policies — means more working stiffs are preparing to exit the stage.

What's happening: The U.S. has about 2.7 million more retirees than predicted, Bloomberg reports from a model designed by an economist at the Federal Reserve Bank of St. Louis.

That number was 1.5 million six months ago — a more than 80% increase. Before the pandemic, there were often fewer retirees than expected.

As someone who’s got a 50th birthday looming this year, I can understand the sentiment of wanting to get out when you can. And if we have enough immigration to replace those workers, and economic growth to keep up demand for labor, I don’t see a downside to any of this.

The CBO also indicates that the US budget deficit should decline from just under $1.7 trillion in Fiscal 2023 to just over $1.5 trillion in 2024. Most of this is due to a rebound in tax revenues after a significant drop in 2023.

Federal revenues in 2023 totaled $4.4 trillion. At 16.5 percent of GDP, revenues in that year were considerably lower than the 19.4 percent recorded in 2022, which was the highest percentage in more than 20 years. That decline was largely in collections of individual income taxes, which had reached an unprecedented high in 2022. Also contributing to the decline in 2023 were lower remittances from the Federal Reserve, which fell to near zero in that year as rising short-term interest rates pushed the agency’s expenses above its income.

CBO expects total receipts to temporarily jump to 17.5 percent of GDP in 2024 as a result of the collection of certain postponed tax payments, before declining to 17.1 percent of GDP in 2025. Receipts are projected to subsequently rise to 17.9 percent by 2034, largely because of scheduled changes in tax provisions and because the Federal Reserve is anticipated to begin once again remitting significant amounts to the Treasury….

Individual income tax receipts declined sharply in relation to GDP last year—from 10.4 percent in 2022 to 8.1 percent in 2023. That reduction occurred in part because asset values and realizations of capital gains fell, and also because the Internal Revenue Service (IRS) postponed until 2024 certain tax payment deadlines for taxpayers in areas affected by natural disasters. (Otherwise, those payments would have been due in 2023.) CBO expects receipts to climb to 8.8 percent of GDP in 2024 as those delayed payments come in and fall to 8.6 percent of GDP in 2025 because no further delays are anticipated. Receipts then grow from 2025 to 2027 because scheduled changes in tax provisions, including an increase in most tax rates, are projected to drive up receipts in relation to taxable personal income. Real bracket creep....also contributes to rising receipts over time.

Now, deficits are expected to generally rise from there under current law (with the exception of 2026, when the GOP Tax Scam expires), and annual deficits are projected to go back over $2 trillion in 2031. But the projected cumulative deficits over the next decade are $1.4 trillion lower than they were this time last year.

My last point is that not only do things look a bit better than they did this time last year both fiscally and economically, but that our budget deficit really isn't an economic issue if our dollars stays strong and inflation stays below 3-4% annual rate (as it has for the last 18 months). And if you do think the budget deficit is something we should be concerned about, the solution of TAXING THE RICH BACK TO 1990s LEVELS solves a lot of that very quickly.