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Congressional Budget Office. The Economic Outlook and Fiscal Policy Choices Testimony before the Committee on the Budget United States Senate September 28, 2010. Douglas W. Elmendorf Director. Labor Force Participation and Unemployment Rates. Percent.

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congressional budget office
Congressional Budget Office

The Economic Outlook and

Fiscal Policy Choices

Testimony before the Committee on the Budget

United States Senate

September 28, 2010

Douglas W. Elmendorf


policy options
Policy Options
  • Policymakers cannot reverse all of the effects of the housing and credit boom, the subsequent bust and financial crisis, and the deep recession. However, in CBO’s judgment, there are both monetary and fiscal policy options that, if applied at a sufficient scale, would increase output and employment during the next few years.
  • Those same fiscal policy options would increase federal debt, which is currently larger relative to the size of the economy than it has been in more than 50 years—and is headed higher.
  • If policymakers wanted to achieve both stimulus and sustainability, a combination of policies would be required: changes in taxes and spending that would widen the deficit now but reduce it relative to baseline projections after a few years.
cumulative effects of policy options on employment in 2010 and 2011 range of low to high estimates
Cumulative Effects of Policy Options on Employment in 2010 and 2011, Range of Low to High Estimates

Note: Assumes enactment early in 2010.

effects of policy options on output and employment in 2010 to 2015 assuming enactment in early 2010
Effects of Policy Options on Output and Employment in 2010 to 2015, Assuming Enactment in Early 2010
effect of four tax policy options on federal revenues and marginal tax rates 2011 2012 and 2020
Effect of Four Tax Policy Options on Federal Revenues and Marginal Tax Rates, 2011, 2012, and 2020
long term unemployment rate
Long-Term Unemployment Rate


Note: The long-term unemployment rate is the percentage of people in the labor force who have been unemployed for longer than 26 weeks.

projected federal revenue and spending in 2020
Projected Federal Revenue and Spending in 2020

With Tax Cuts Extended and

AMT Indexed

Current Law (Baseline)

shares of federal spending projected for 2020 in cbo s august baseline
Shares of Federal Spending Projected for 2020 in CBO’s August Baseline

“Other Health Programs” includes: Health insurance subsidies, exchanges, and related spending; Department of Defense Medicare-Eligible Retiree Health Care Fund (including TRICARE for Life); Children’s Health Insurance Program, and other programs.