“In fiscal year 2016, the federal budget deficit will increase in relation to economic output for the first time since 2009, CBO estimates. If current laws generally remained unchanged—an assumption underlying CBO’s baseline projections—deficits would continue to mount over the next 10 years, and debt held by the public would rise from its already high level. CBO’s estimate of the deficit for 2016 has increased since the agency issued its previous estimates in March, primarily because revenues are now expected to be lower than earlier anticipated. In contrast, the cumulative deficit through 2026 is smaller in CBO’s current baseline projections than the shortfall projected in March, chiefly because the agency now projects lower interest rates and thus lower outlays for interest payments on federal debt. Nevertheless, by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years. CBO’s economic forecast—which serves as the basis for its budget projections—indicates that, after a tepid expansion in the first half of 2016, economic growth will pick up in the second half of the year. That faster pace is expected to continue through 2017 before moderating in 2018. In CBO’s estimation, the faster growth over the next two years will spur hiring, increase employment and wages, and put upward pressure on inflation and interest rates. In the latter part of the 10-year projection period, however, output will be constrained by a relatively slow increase in the nation’s supply of labor. The growth in GDP that CBO now projects is slower throughout the 2016–2026 period than the agency projected in January. Weaker-than-expected economic growth indicated by data released since January, recent developments in the global economy, and a reexamination of projected productivity growth contributed to that downward revision. The reduction to CBO’s projections of interest rates reflects the revisions to projected economic growth as well as CBO’s reassessment of the future demand for Treasury securities.”