Output gap

For example, February 2013 data from the Congressional Budget Office showed that the United States had a projected output gap for 2013 of roughly $1 trillion, or nearly 6% of potential GDP.

[11] Also, an underperforming economy can result in reduced investments in areas that pay dividends over the long term, such as education, and research and development.

Indeed, research has found that for each dollar U.S. gross domestic product moves away from potential output, U.S. cyclical budget deficits increase 37 cents.

"[13][14] The criticism addressed to the European Commission include the complexity and contradictions in the methodology (which is in fact the one proposed by experts sitting in the "Output Gap Working Group" and approved by finance ministers in the ECOFIN meetings).

Critics argue the methodology results in a highly pro-cyclical output gap indexes, and sometimes implausible outcomes, in particular in the case of Italy.

[15] In September 2019, several senior officials from the European Commission's including the Director General of the DG ECFIN, Mr Marco Buti, have written a joint article refuting this criticism.