This volume is one of a series of reports on the state of the budget and the economy that the Congressional Budget Office (CBO) issues each year. It satisfies the requirement of section 202(e) of the Congressional Budget and Impoundment Control Act of 1974 that CBO submit to the Committees on the Budget periodic reports about fiscal policy and its baseline projections of the federal budget. In accordance with CBO's mandate to provide objective, impartial analysis, the report makes no recommendations. The economic projections were prepared by CBO's Macroeconomic Analysis Division. The revenue estimates were prepared by the agency's Tax Analysis Division, with assistance from the staff of the Joint Committee on Taxation. The spending projections were prepared by CBO's Budget Analysis Division. The federal budget deficit-although starting to shrink-remains very large by historical standards. How much and how quickly the deficit declines will depend in part on how well the economy does over the next few years. Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year under current law. The pace of the economic recovery has been slow since the recession ended in June 2009, and the Congressional Budget Office (CBO) expects that, under current laws governing taxes and spending, the economy will continue to grow at a sluggish pace over the next two years. That pace of growth partly reflects the dampening effect on economic activity from the higher tax rates and curbs on spending scheduled to occur this year and especially next. Although CBO projects that growth will pick up after 2013, the agency expects that the economy's output will remain below its potential until 2018 and that the unemployment rate will remain above 7 percent until 2015.