In August the Congressional Budget Office published an update of its predictions for the economy and the budget for this year and next, and all the way out to 2026. We've studied the economic forecast already. Now let's analyze the budget outlook. Here are some excerpts from the budget summary: CBO_Budget Update_August 2016 . (attached below) Read the CBO article on the Budget Outlook for the next ten years. Then write a 175 to 225 word essay with the "takeaway" from this CBO article, including an analysis using the macroeconomic model.
Sometimes after a really long presentation, people ask me "what's the takeaway?" They're looking for a short summary of the main points. This essay should be the "takeaway" from the CBO's analysis of the Federal budget outlook. But it should be more than that. You now know enough about the macroeconomic model to analyze the effects of this budget outlook on the economy. What will happen in the goods and money markets if the CBO projections of fiscal policy come true?
Here are some points that a really good essay will include:
- A really good essay would describe what the CBO expects to happen to Federal spending through 2026, and offer reasons why it will happen.
- A really good essay would describe what the CBO thinks will happen to the Federal budget deficit and the Federal debt through 2026, and after that.
- A really good essay would use the goods market to analyze the effect of predicted changes in the Federal budget deficit through 2026 on output, unemployment and inflation.
- A really good essay would use the goods and money markets to explain how large deficits and debt could reduce potential output growth in coming decades, including a mention of "crowding out"