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_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Budget Office (CBO)

A CBO Report

 

The Effects of Automatic Stabilizers on the Federal Budget [27 May 2010]

May 2010

http://www.cbo.gov/ftpdocs/114xx/doc11471/05-27-AutomaticStabilizers.pdf

[full-text, 11 pages]

 

[excerpt]

This report measures the effect on the budget of automatic

stabilizers, which are automatic changes in revenues

and outlays that are driven by the business cycle.

Those stabilizers mitigate the decline of real income in

recessions and dampen its growth in booms. The

Congressional Budget Office (CBO) estimates that in fiscal

year 2000, automatic stabilizers contributed to the

budget surplus an amount that was equal to 1.4 percent

of potential gross domestic product (GDP), indicating

that the strength of the economy was significantly augmenting

the budget surplus. By 2002, the automatic

stabilizers’ contribution had turned negative, in CBO’s

estimation, because the economy was operating below its

potential and adding to the budget deficit. Significant

negative contributions persisted through 2004. From

2005 through 2007, the effects of the automatic stabilizers

were quite small because the economy was close to

its potential. More recently, they have contributed

much more to the deficit as the economy has operated

significantly below its potential.

 

Contents

CBO

The Effects of Automatic Stabilizers on the Federal Budget 1

Appendix: Measuring the Budgetary Effects of Automatic Stabilizers 7

Tables

1. The Budget Deficit or Surplus With and Without Automatic Stabilizers and Related Series in Billions of Dollars, 1962 to 2014 3

2. The Budget Deficit or Surplus With and Without Automatic Stabilizers and Related Series as a Percentage of Potential GDP, 1962 to 2014 5

Figure

1. Two Measures of Budget Deficits and Surpluses 2

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  
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