CBO: Automatic Stabilizers Will Barely Curb U.S. Deficits Over Next Decade

The Congressional Budget Office said Monday that automatic stabilizers — the built-in tax and spending shifts that respond to changes in the economy without new legislation — will have little net effect on federal deficits over the next decade, even as deficits adjusted to remove those cyclical effects remain historically high.

In its Aug. 31 report, “Effects of Automatic Stabilizers on the Federal Budget: 2026 to 2036,” CBO estimated that those stabilizers will reduce deficits by less than 0.05% of potential gross domestic product per year on average from 2026 through 2036. Stripping out those effects, federal deficits are still projected to average 6.1% of potential GDP over the period.

That matters because it suggests the government’s projected red ink is being driven much more by structural pressures than by the business cycle. In other words, CBO’s analysis indicates the deficit outlook in its existing baseline is not mainly a temporary byproduct of recession-like weakness or an overheated economy, but a broader fiscal imbalance that persists even after cyclical effects are removed.

CBO said that, in its projections, automatic stabilizers decrease federal deficits by an average of 0.2% of potential GDP from 2026 to 2029, then increase deficits by an average of 0.1% of potential GDP from 2030 to 2036. In dollar terms, the agency estimated stabilizers would reduce deficits by an average of $55 billion a year in the first four years of that span and increase deficits by an average of $39 billion a year in the later years. For 2026 alone, CBO said stabilizers reduce the deficit by $84 billion, or 0.3% of potential GDP.

Automatic stabilizers are the parts of the budget that move automatically as the economy weakens or strengthens. When growth slows, tax receipts typically fall while spending on some safety-net programs rises. When the economy is stronger, the reverse tends to happen. CBO measures those effects by estimating how revenue changes with the gap between actual and potential GDP, and how outlays change with the gap between actual unemployment and the noncyclical unemployment rate.

On the spending side, the report includes unemployment insurance, Medicaid and the Supplemental Nutrition Assistance Program, or SNAP. It does not include Social Security and other transfer programs that CBO does not view as sufficiently tied to the business cycle. It also does not treat discretionary spending or interest payments as automatic stabilizers.

The report also put the coming decade in historical context. From 1976 to 2025, CBO estimated, automatic stabilizers increased deficits by an average of 0.3% of potential GDP per year. Over that same 1976-2025 period, deficits with cyclical effects removed averaged 3.7% of potential GDP, far below the 6.1% average CBO projects for 2026-2036.

CBO emphasized that the analysis is not a new stand-alone fiscal forecast. It is based on the agency’s February 2026 Budget and Economic Outlook baseline and reflects trade policy as of Nov. 20, 2025, along with economic developments and laws in place as of Dec. 3, 2025. That February baseline projected large, persistent deficits over the decade.

“In keeping with CBO’s mandate to provide objective, impartial analysis, the report makes no recommendations,” the Aug. 31 report said.

The upshot is that automatic stabilizers are expected to nudge deficits modestly up or down from year to year, but not by much overall. CBO’s numbers point instead to a larger structural deficit problem that remains even after the normal ups and downs of the economy are taken out of the picture.