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Rise Of Industry (v2.3.1) [GOG]

As federal spending in response to the coronavirus pandemic wanes and the economic expansion continues, the budget deficit in 2022 is expected to shrink substantially from the amounts recorded in 2020 and 2021 (when deficits, relative to the size of the economy, were larger than at any time since World War II). Nevertheless, under the assumption that current laws governing taxes and spending will generally remain unchanged in future years, federal deficits are set to remain large by historical standards and to generally increase throughout the next decade, the Congressional Budget Office projects (see Figure 1-1). Federal debt measured relative to the size of the economy is projected to dip over the next two years and then to rise each year through 2032.

Rise of Industry (v2.3.1) [GOG]

Energy and food prices also increased rapidly in 2021 and continued to rise sharply in 2022 because the supply of energy goods did not keep up with the demand for them as the economy rebounded. Energy prices grew by 30 percent in 2021. Food prices, which are particularly sensitive to fluctuations in transportation costs and other supply disruptions, grew by 5.3 percent that year.

Interest rates on Treasury securities increased in the second half of 2021 and early 2022 as participants in financial markets observed higher-than-expected inflation and anticipated a further tightening of monetary conditions. The interest rate on 3-month Treasury bills increased from slightly above zero in June 2021 to 0.8 percent in April 2022. The interest rate on 10-year Treasury notes increased from 1.5 percent to 2.8 percent over that period. The rise in interest rates on Treasury securities with maturities between 3 months and 10 years was even greater because participants in financial markets expected monetary conditions to tighten and inflation to be higher, on average, over that time horizon.

The agency expects short-term interest rates to increase rapidly in 2022. Long-term interest rates, which remained historically low at the end of 2021, are also expected to rise substantially in 2022. CBO expects both short- and long-term interest rates to rise less rapidly after 2022.

Exports and Imports. CBO projects that, after remaining roughly stable during 2021, the U.S. trade deficit will rise in 2022 before shrinking between 2023 and 2026. In 2022, the projected larger trade deficit is driven by strong growth in imports. That increase in the trade deficit will reverse, CBO projects, starting in the beginning of 2023 as exports rise by 6.0 percent (at an annualized rate) but imports rise by only 1.6 percent over that year. CBO expects growth in exports to outpace growth in imports because economic conditions among major U.S. trading partners are expected to be stronger than economic conditions in the United States, and because the agency expects the recovery in services trade (a sector for which the United States runs a trade surplus) to continue. As a result, the trade deficit is projected to shrink from 4.3 percent of GDP at the beginning of 2022 to 2.8 percent of GDP in early 2026 (it was 2.8 percent of GDP in 2019) as the growth of exports continues to increase, driven by the increased trade in services.

CBO projects that the problems with supply chains that impeded U.S trade flows in 2021 peaked late in that year and will continue to ease in 2022. In 2021, strong global demand for goods strained international supply chains, leading to delayed deliveries and shortages of some imported products and hindering the assembly and delivery of some U.S. exports. Those disruptions included shortages of semiconductors (key components in automobiles and consumer electronics) and shipping containers, logjams at key U.S. ports, and labor shortages in the trucking industry. Those developments also resulted in higher import and export prices; the price indexes for imported goods and exported goods rose by 11 percent and 17 percent, respectively, in 2021. CBO expects that those pressures on global supply chains will ease in the coming year as consumer demand continues to shift back to services and away from goods and as labor shortages in the U.S. transportation industry begin to subside.

Exports. Real exports are expected to continue to rebound in 2022, increasing by 7.4 percent. One factor contributing to that rebound is the improvement in economic conditions abroad, which will boost international demand for U.S. goods and services. CBO projects that the real economic output of major U.S. trading partners will rise by 3.7 percent in 2022, having increased by 3.7 percent in 2021. In addition, as the global effects of the pandemic continue to wane and international travel restrictions are lifted, exports of services (mostly travel and transportation services) are expected to gradually return to their prepandemic levels. As that occurs, and as the pace of foreign economic growth returns to its prepandemic trend, the growth of exports is projected to rise slightly in early 2023 before slowing thereafter.

Social Security. The largest federal spending program, Social Security provides cash benefits to elderly people, to people with disabilities, and to the dependents and survivors of people covered by the program. Last year, Social Security outlays totaled $1.1 trillion, or 5.0 percent of GDP (see Table 3-2). Under current law, outlays for Social Security are projected to rise by $83 billion (or about 7 percent) in 2022. That rate of increase is greater than it has been in recent years, mostly because Social Security beneficiaries received a cost-of-living adjustment (COLA) of 5.9 percent in January 2022, the largest since 1982.

Medicare. Outlays for Medicare, a program that provides subsidized health insurance to people age 65 or older and to some people with disabilities, account for about 30 percent of the projected rise in outlays for the major health care programs from 2021 to 2022. CBO estimates that Medicare outlays (net of offsetting receipts, which are mostly in the form of premiums paid by beneficiaries) will grow from $689 billion to $726 billion, or about 5 percent, from 2021 to 2022. Projected outlays rise further in 2023, by $113 billion, or 16 percent. The growth in those years is affected by recoupments of accelerated and advance payments to Medicare providers recorded in 2021 and 2022, which decrease net outlays.6 Without those recoupments, the projected increases in outlays for Medicare would be 7 percent in 2022 and 8 percent in 2023.

From 2023 to 2025, revenues are projected to decline as a percentage of GDP as temporary factors that have boosted tax receipts in recent years fade away. In 2026 and 2027, by contrast, revenues are projected to rise relative to GDP because of changes to rules governing the individual income tax that are scheduled to occur at the end of calendar year 2025.

In 2021, receipts from individual income taxes totaled $2.0 trillion, or 9.1 percent of GDP. Under current law, and on the basis of receipts observed through late April of this year, CBO expects individual income tax receipts to rise by 28 percent in 2022, to $2.6 trillion. At 10.6 percent of GDP, that total is expected to be the highest amount of individual income tax receipts recorded since 1913, when ratification of the Sixteenth Amendment authorized the federal government to begin collecting income taxes.

The upshot is that the individual income tax system is not indexed for real growth (that is, growth beyond the rate of inflation). Instead, it is partially indexed for inflation, and the indexing occurs with a lag. Together, those features of the system cause projected annual revenues as a percentage of GDP to rise by 0.3 percentage points from 2023 to 2032.

Excise tax revenues are projected to rise from $88 billion in 2022 to $96 billion in 2032. Nevertheless, those receipts are projected to decline slightly relative to GDP. The main reason is that many excise taxes are imposed as a fixed dollar amount per unit sold, and the number of units sold is projected to either grow more slowly than the overall economy or decline in coming years.

Estate and Gift Taxes. In 2021, revenues from estate and gift taxes totaled $27 billion (or just over 0.1 percent of GDP). Revenues from those taxes are projected to remain near that level through 2026 but to rise sharply in 2027, after a scheduled decline at the end of calendar year 2025 in the amounts exempted from estate and gift taxes. CBO projects that receipts from those taxes would total 0.2 percent of GDP in 2032.

Tax expenditures vary greatly in the distribution of their benefits among households in different income groups. Exclusions and deductions from income typically create larger tax expenditures for higher-income taxpayers than for lower-income taxpayers because individual income tax rates rise with income. Similarly, tax expenditures for preferential tax rates are derived from the difference between the ordinary tax rate and the preferential rate, so those tax expenditures accrue mostly to higher- income taxpayers, who have higher ordinary rates. By contrast, the benefits from tax credits are skewed toward lower- and middle-income households, mainly because the largest tax credits phase out to zero as income rises beyond certain thresholds.

Food waste comprised the fourth largest material category, estimated at 63.1 million tons or 21.6 percent of total generation in 2018. Yard trimmings comprised the next largest material category, estimated at 35.4 million tons, or 12.1 percent of total generation, in 2018. This compares to 35 million tons (16.8 percent of total generation) in 1990. The decline in yard trimmings generation since 1990 is largely due to state legislation discouraging yard trimmings disposal in landfills, including source reduction measures such as backyard composting and leaving grass trimmings on the yard.

The total MSW recycled was more than 69 million tons, with paper and paperboard accounting for approximately 67 percent of that amount. Metals comprised about 13 percent, while glass, plastic and wood made up between 4 and 5 percent. 041b061a72


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