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Using cyclically adjusted concepts, it shows deficits are mostly structural rather than driven by temporary economic conditions, so deficit reduction requires additional policy actions.",{"@graph":14,"@context":73},[15,34,56],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/document/","Document",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/document/research-report/","Research & 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budget?","Question",{"text":63,"@type":64},"The cyclical component measures how outlays and revenues respond to changes in economic conditions, while the structural component reflects discretionary fiscal policy and other noncyclical elements.","Answer",{"name":66,"@type":61,"acceptedAnswer":67},"How do cyclically adjusted measures affect the interpretation of deficit trends?",{"text":68,"@type":64},"Cyclically adjusted budget deficits increased substantially during the 1980s and explain most of the actual deficits in recent years, indicating that deficits are largely structural rather than caused by cyclical conditions.",{"name":70,"@type":61,"acceptedAnswer":71},"Why must additional policy actions be considered to meet deficit targets?",{"text":72,"@type":64},"Because projected deficits only decline under certain scenarios and, even by OMB projections for balanced-budget timing, deficits remain in slight deficit, reductions depend on structural changes and may require spending cut mechanisms under existing law.","https://schema.org",{"og:url":32,"og:type":75,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":77,"canonical":32},"index,follow",{"doc_id":79,"site_id":7},325650,1790126136,{"code":4,"msg":82,"data":83},"success",[84,88,92,96,101,106,111,115,120,123,127],{"id":22,"doc_module":4,"doc_module_name":25,"category_name":85,"show_sort_weight":86,"slug":87},"Story & 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budget defcis have beenlarge and persistent over the past sev-eral years,rising to a postwar high of$221 billion in fiscal year(FY)1986before declining a record $71 billionin FY 1987.The Congressional BudgetOffice(CBO)and the administration'sOffice of Management and Budget(OMB)project a declining trend of deficits over the next five years(table 1).  \nThe OMB's more optimistic economicassumptions and policy proposalsforesee a steadily declining federaldeficit trend between fiscal years 1988and 1993.Nevertheless,in two of thenext three years,projected deficitsslightly exceed the recently upwardrevised deficit targets initially established under the Gramm-Rudman-Hollings Act(GRH).Between 1991and 1993,they exceed the initial GRHtargets by about $20 billion annually.By 1993—the year now targeted for abalanced budget—the federal budgetwould still be in a slight deficit,according to OMB projections.  \nThe CBO's less optimistic scenarioprojects a jagged downward path ofdeficits between 1988 and 1993.Theprojected deficit path is much higherthan that projected by OMB,andincreasingly exceeds the GRH deficittargets,reaching$134 billion in 1993.  \nThis Economic Commentary dis-cusses the sources of federal budgetdeficits,examines the OMB and CBOforecasts,and suggests the need foradditional policy actions to achieve a  \ndeclining trend of deficits into the1990s.Under either scenario,it islikely that at some point during thenext five years,automatic spendingcuts will be required under the cur-rent GRH Act.  \n# ■ The Cyclically AdjustedFederal Budget\n\nUS.Department of Commerce esti-mates suggest that much of the deficitsare associated with policy decisions,although the federal budget is highlysensitive to changes in economicactivity.To distinguish between thesedeficit sources,analysts divide thebudget into cyclical and structuralcomponents.!The cyclical component of the budget measures theresponse of outlays and revenues tochanges in economic conditionswhile the structural component mea-sures discretionary fiscal policy andother noncyclical components.  \nWe can estimate what federal receiptsand outlays would beif the economywere growing at a trend rate of grossnational product(GNP),free fromcyclical fluctuations;this calculationyields the structural component of thebudget.The difference between theactual and structural measures of receipts and outlays is the cyclical component.This disaggregation helps toseparate the interaction between thefederal budget and economic activity.  \nCurrently,the U.S.Department of Com-merce,Bureau of Economic Analysis(BEA)publishes two alternative esti-  \nMarch 15,1988  \nDespite a two-year deficit reductionplan,government projections for thefive-year federal budget outlook stillshow large deficits.Additional legis-lative actions will be necessary iffederal budget deficits are to bereduced sufficiently to meet annualdeficit targets.  \nmates of the structural budget,alsocalled the cyclically adjusted budget.The high-employment budget measures what the federal budget,on aNational Income and Product Account(NIPA)basis,would be if the unem-ployment rate were 6 percent.Thesecond measure is an estimate of whatthe NIPA-basis federal budget wouldbe if the economy were expandingalong a particular trend path—middleexpansion trend GNP in this case.2  \nCyclically adjusted federal budget defi-cits,measured either way,increasedsubstantially during the 1980s andaccount for the bulk of actual deficitsin recent years.The federal deficit wasreduced in 1987 on both an actualand a cyclically adjusted basis;theactual deficit is now between the twoBEA measures of the structural deficit.  \nThus,under either adjusted measure,structural deficits account for all,oralmost all,of the current federaldeficit.Moreover,BEA estimates of thecyclically adjusted budget suggest thatboth OMB and CBO projected deficitsare mostly structural and that a high-gr","cbCaivKyCWibvIvB","https://ap.wps.com/l/cbCaivKyCWibvIvB","pdf",1193775,"English","# Federal Budget Deficits: Sources and Forecasts\n## The Cyclically Adjusted Federal Budget\n## Composition of Federal Spending","[{\"question\":\"What distinguishes cyclical from structural components of the federal budget?\",\"answer\":\"The cyclical component measures how outlays and revenues respond to changes in economic conditions, while the structural component reflects discretionary fiscal policy and other noncyclical elements.\"},{\"question\":\"How do cyclically adjusted measures affect the interpretation of deficit trends?\",\"answer\":\"Cyclically adjusted budget deficits increased substantially during the 1980s and explain most of the actual deficits in recent years, indicating that deficits are largely structural rather than caused by cyclical conditions.\"},{\"question\":\"Why must additional policy actions be considered to meet deficit targets?\",\"answer\":\"Because projected deficits only decline under certain scenarios and, even by OMB projections for balanced-budget timing, deficits remain in slight deficit, reductions depend on structural changes and may require spending cut mechanisms under existing law.\"}]","Federal Budget Deficits: Sources and Forecasts | PDF",1789971067]