The Effects of Recent Legislation on the Economy and the Budget

The Effects of Recent Legislation on the Economy and the Budget

January 7, 2022

Presentation at the American Economic Association Annual Meeting

Phillip L. Swagel

Director

For more information about the meeting, see https://tinyurl.com/bderdaww.

Effects of Pandemic-Related Legislation From March and

April 2020 on the Deficit and on GDP, Fiscal Years 2020 to 2023

			Cumulative Effect on
	Effect on the Deficit	Cumulative Effect on GDP	GDP per Dollar of Effect
Policy	(Billions of dollars)	(Billions of dollars)	on the Deficit (Dollars)
Paycheck Protection Program
and Related Provisions	628	226	0.36
Enhanced Unemployment
Compensation	442	297	0.67
Recovery Rebates for
Individuals	292	175	0.60
Direct Assistance for State and
Local Governments	150	132	0.88
Other Spending Provisions	700	548	0.78
Other Revenue Provisions	425	157	0.37
Total	---	---	--
2,637	1,535	0.58

See Congressional Budget Office, The Effects of Pandemic-RelatedLegislation on Output (September 2020), Table 3, www.cbo.gov/publication/56537. GDP = gross domestic product.

Likely Range of the Effects of Pandemic-Related Legislation From March and April 2020 on Real GDP

CBO's likely range is

intended to cover roughly the middle two-thirds of the outcomes after accounting for uncertainty about how much changes in federal spending and revenues affect overall demand and how much changes in overall demand affect output in the short term.

See Congressional Budget Office, The Effects of Pandemic-RelatedLegislation on Output (September 2020), Figure 1, www.cbo.gov/publication/56537. GDP = gross domestic product.

Net Increase in the Deficit From Major Pandemic-Related Legislation (Enacted and Considered)

The effects on the deficit were much larger in 2020 and 2021 than they will be from 2022 to 2030, CBO estimates.

CARES = Coronavirus Aid, Relief, and Economic Security Act; CAA = Consolidated Appropriations Act; ARPA = American Rescue Plan Act. a. Changes in federal deficits, excluding debt service, from legislative changes. See www.cbo.gov/publication/56517, Table A-1.

b. Changes in federal deficits, excluding debt service, from legislative changes. See www.cbo.gov/publication/56970, Table 1-6. c. Changes in federal deficits, excluding debt service, from legislative changes. See www.cbo.gov/publication/57263, Table A-1.

1. Seewww.cbo.gov/publication/57406.
2. Seewww.cbo.gov/publication/57627.

Net Increase in the Deficit From the Build Back Better Act, as Passed and With Modifications

CBO estimates that the deficit would increase by $3.0 trillion from 2022 to 2031 under modifications to the Build Back Better Act that would make various policies permanent rather than temporary (as specified by Senator Lindsey Graham and Congressman Jason Smith).

By comparison, the deficit would increase by

$0.2 trillion over that period under the version of the bill passed by the House of Representatives.

See Congressional Budget Office, "Year-by-Year Projections" (supplemental material for a letter to the Honorable Lindsey Graham and the Honorable Jason Smith regarding the

budgetary effects of making specified policies in the Build Back Better Act permanent, December 10, 2021), www.cbo.gov/publication/57673.