CBO’s work follows processes specified in the Congressional Budget Act of 1974 (which established the agency) or developed by the agency in concert with the House and Senate Budget Committees and the Congressional leadership. Most of the processes that guide CBO’s work have been in place since the early days of the agency in the 1970s.
How do you decide what you study?
CBO’s chief responsibility under the Congressional Budget Act is to help the House and Senate Budget Committees with the matters under their jurisdiction. CBO also supports other Congressional committees—particularly the Appropriations, Ways and Means, and Finance Committees—and the Congressional leadership.
CBO produces a number of reports specified in statute, of which the best known is the annual Budget and Economic Outlook. Other CBO reports that are required by law or have become regular products of the agency owing to a high, sustained level of interest by the Congress are described in products.
In addition, CBO is required by law to produce a formal cost estimate for nearly every bill that is “reported” (approved) by a full committee of either House of Congress; the only exceptions are appropriation bills, which do not receive formal cost estimates. (CBO provides information on their budgetary impact to the appropriation committees.) CBO also produces formal cost estimates at other stages of the legislative process if requested to do so by a relevant committee or by the Congressional leadership. Moreover, the agency produces informal cost estimates for a much larger number of legislative proposals that Congressional committees consider in the process of developing legislation.
Beyond its regular reports and cost estimates, CBO prepares analytic reports at the request of the Congressional leadership or Chairmen or Ranking Minority Members of committees or subcommittees. CBO analysts work with requesters and their staffs to understand the scope and nature of the work that would be most useful to the Congress.
How do you determine the assumptions that underlie your projections and estimates?
All of CBO’s projections and estimates reflect the agency’s objective, impartial, and nonpartisan analytical judgment. CBO’s estimates of spending and revenues under current law and of the effects of proposed legislation depend on myriad projections of economic and technical factors over the next 10 years or longer, as well as projected behavioral responses to federal policies by families, businesses, and other levels of government. Those projections and estimates are always determined on the basis of the professional judgment of CBO’s staff, drawing upon on a detailed understanding of federal programs, careful reading of the research literature, and consultation with outside experts (as discussed in more detail later on this page). The projections and assumptions are not directed or influenced by the Congress in any way.
To be sure, the evolution of specific federal programs, of the budget as a whole, and of the U.S. economy under current law are often very uncertain, as are the possible effects of legislation being considered by the Congress. Therefore, the agency’s goal is to develop estimates that are in the middle of the distribution of possible outcomes and to communicate clearly the basis for those estimates and the uncertainty surrounding them.
In constructing projections of budget outcomes, CBO takes existing law as it stands and does not attempt to predict changes that might be made by the Congress in the future. When the Congress considers modifying current law, CBO provides cost estimates for those modifications. As it prepares those estimates, CBO takes that legislation as it is written and does not attempt to predict the ways in which the Congress might amend that legislation in the future. There is no plausible alternative to that approach. If, instead, CBO incorporated its own predictions of future Congressional action in its analysis of current or proposed laws, that analysis would ultimately be hard to interpret and less useful to the Congress and the public. However, in addition to its budget projections that reflect current law, the agency regularly shows the effects of adopting alternative policies that have been discussed by the Congress, so that the budgetary impact of those alternative policies is clear.
Where do you get your information?
CBO draws on information from a wide variety of sources. A great deal of crucial information comes from the data collected and reported by the government’s statistical agencies. Such data include the national income and product accounts, surveys of labor market conditions and prices, the Statistics of Income database, the Current Population Survey, the Survey of Income and Program Participation, data on National Health Expenditures, and various health care surveys.
In addition, CBO uses data and other information from numerous outside experts, including professors, analysts at think tanks, industry groups, other private-sector experts, and people working for federal agencies and for state and local governments. Some of those consultations occur during regular meetings with the agency’s Panel of Economic Advisers and Panel of Health Advisers; many more consultations occur on an informal, ongoing basis with the myriad contacts of CBO analysts. Those consultations with outside experts complement the knowledge and insights of the talented analysts on the agency’s staff.
How do you ensure your objectivity?
To ensure that CBO’s cost estimates and other analyses are impartial and nonpartisan, the agency draws on the knowledge and insights of outside experts representing a variety of perspectives and applies an intensive internal review process. It makes no policy recommendations and enforces strict rules to prevent financial conflicts of interest by its employees and to limit its employees’ political activities.
Read more about our transparency and objectivity, which includes a longer discussion of CBO's approach to presenting and explaining its work, links to a variety of documents that provide information about CBO's methodologies, and a statement of our conflict of interest policies.
Do you disclose your methodology?
Yes. CBO is required as a matter of law to disclose the basis for each of its cost estimates, and the agency follows that same practice for its reports. Although much of the analysis that CBO undertakes is very technical in nature, the agency works hard to explain the basis for its findings so that Members of Congress, their staff, and outside analysts can understand the results and question the methodologies used. To that end, CBO discloses its methodologies and the reliability of those methodologies in numerous ways.
Read more about our transparency and objectivity.
Who reviews your work?
All of CBO’s estimates and reports are reviewed internally for objectivity, analytical soundness, and clarity. That rigorous process involves multiple people at different levels in the organization. CBO’s analytic reports are also reviewed by outside experts who specialize in the issue at hand. In addition, the agency has a Panel of Economic Advisers and a Panel of Health Advisers, which consist of experts with a wide variety of backgrounds and special knowledge. Current members of those panels are listed below. Although such experts provide considerable assistance, CBO is solely responsible for the quality of its work.
Why don't you make policy recommendations?
Choices about public policy inevitably involve certain sorts of value judgments that CBO does not and should not make. To ensure that CBO’s analysis is objective, impartial, and nonpartisan, the agency does not make recommendations about what policies the Congress should enact.
What is a “baseline projection”?
CBO’s baseline budgetary and economic projections are based on the assumption that current laws governing federal revenues and spending generally remain unchanged. Some specific rules governing baseline projections have been included in legislation (in particular, the Balanced Budget and Emergency Deficit Control Act of 1985) or are developed in consultation with the House and Senate Budget Committees.
The baseline projections are not intended to be a prediction of budgetary outcomes. Rather, the projections reflect CBO’s best judgment about how the economy and the budget will evolve under existing laws. That approach allows the baseline to serve as a neutral benchmark against which Members of Congress can measure the effects of proposed legislation.
How do you produce your economic forecast?
CBO’s economic forecasts cover the major economic variables—gross domestic product, the unemployment rate, inflation, and interest rates—along with a broad array of other economic measures. CBO draws information for its forecasts from ongoing analysis of daily economic events and data, the major commercial forecasting services, consultation with economists both within and outside the federal government, and the advice of the experts on its Panel of Economic Advisers. CBO’s forecasts serve as a basis for its baseline budget projections and, usually, for the Congressional budget resolution.
What sorts of behavioral responses are included in your estimates?
CBO’s analysts try to judge whether proposed policies would affect people’s behavior in ways that would generate budgetary savings or costs, and those effects are routinely incorporated in the agency’s cost estimates. For example, the agency’s estimates include changes in the production of various crops that would result from adopting new farm policies, changes in the likelihood that people will take up certain government benefits when policies pertaining to those benefits are changed, and changes in the quantity of health care services that are provided when Medicare’s payment rates to providers are changed. (Similarly, in its estimates of the budgetary impact of tax legislation, the staff of the Joint Committee on Taxation accounts for behavioral responses to changes in the tax system—for example, changes in the timing and amount of capital gains realizations when the tax rate applicable to capital gains is modified.)
However, CBO’s cost estimates generally do not reflect changes in behavior that would affect total output in the economy, such as any changes in labor supply or private investment resulting from changes in fiscal policy. That is, CBO’s cost estimates generally do not include what is sometimes known as “dynamic scoring.” The convention of not incorporating macroeconomic effects in cost estimates, a practice that has been followed in the Congressional budget process since it was established in 1974, primarily reflects several facts: Doing macroeconomic analysis of all proposed legislation would not be feasible; nearly all legislation analyzed by CBO would have negligible macroeconomic effects anyway (and thus negligible feedback to the federal budget); and estimates of macroeconomic effects are highly uncertain.
In certain reports, though, and for specific pieces of major legislation (when requested), CBO can and does provide macroeconomic analyses of significant proposed changes in fiscal policy. Recent reports incorporating such analyses include the agency’s annual examination of the economic impact of the President’s budget, its annual long-term budget outlook, a 2013 study on the macroeconomic effects of some alternative budgetary paths, the 2012 update to the budget and economic outlook (which shows the consequences of continuing current policies rather than following current law), quarterly reports on the American Recovery and Reinvestment Act, 2011 testimony quantifying the short-term economic impact of alternative policies to increase economic growth and employment, and 2010 testimony on the economic impact of different ways of extending expiring tax provisions. Some of those analyses include the feedback effects of changes in the economy on the federal budget; those feedback effects on the budget tend to be relatively small compared with the direct budgetary effects of the policies analyzed.
Such macroeconomic analyses require complex modeling and a significant amount of time, so they can be produced only for major proposals and reports, and only if time allows. In addition, the analyses capture just some of the channels through which proposed policies would affect the economy, and the resulting estimates of macroeconomic effects may be even more uncertain than estimates of the direct budgetary effects of those policies.
How accurate are your estimates and forecasts?
CBO’s baseline budget and economic projections are intended to show the future paths of the budget and the economy under existing laws. Those baseline projections can then serve as a neutral benchmark against which Members of Congress can measure the effects of proposed legislation. Because the Congress frequently enacts changes to existing laws, however, actual budgetary and economic outcomes are almost certain to differ from CBO’s projections even if the projections are a perfectly accurate forecast conditional on existing laws. The differences between outcomes and projections can be misleading measures of the quality of the projections unless adjustments are made for changes in laws.
Therefore, the agency’s updates of its baseline budget projections always include an analysis of the changes from the previous projections, categorizing them as legislative (the result of new legislation), economic (the result of changes in economic conditions and the economic outlook), and technical (the result of changes in other factors). When CBO updates its baseline economic projections, the agency always describes the nature and sources of the changes from the previous projections. Comparisons of CBO’s economic projections with those of other forecasters—without adjusting for differences in assumed fiscal policy—show that the accuracy of CBO’s projections has been very similar to that of the Blue Chip consensus (an average of private-sector forecasters) and the Administration. (CBO regularly publishes such comparisons.)
Judging the accuracy of CBO’s cost estimates for legislation that is ultimately enacted is often difficult or impossible—sometimes because the legislation was changed after CBO prepared its cost estimate, or because the actual costs or savings resulting from enacting legislation are a small part of a large budget account or revenue stream and cannot be identified. (Here are a few examples of cases in which it is possible to match up results with earlier estimates for specific pieces of legislation.) When spending for a government program turns out to be higher or lower than CBO had expected after a legislative change, it is generally unclear whether the error should be attributed to the previous baseline projection for spending under that program or to the agency’s estimate of the effects of the new legislation. Nonetheless, CBO carefully scrutinizes errors in its projections, reviews data on the spending patterns for federal programs, and consults with outside experts on those programs in order to improve its estimating methodologies.
CBO also endeavors to communicate to the Congress the uncertainty of the agency’s estimates. For example, most of the agency’s analyses of the economic effects of changes in tax and spending policies present ranges of estimated effects, and the agency’s projections of the finances of the Social Security system include ranges of outcomes derived from the uncertainty about key economic and demographic variables.
How do you release your work?
CBO makes its work widely available to the Congress and the public. All of CBO's products (apart from informal cost estimates for legislation being developed privately by Members of Congress or their staffs) are available to the Congress and the public on CBO's website. In addition, an email service and RSS feeds allow subscribers to receive notice when the agency publishes work on topics that interest them.
CBO’s policy is to release publicly all analysis that the agency has conducted of public legislative proposals. Specifically, CBO delivers its formal written cost estimates and analytic reports simultaneously to all interested Members of Congress and their staffs, including in particular the sponsor of legislation or requester of a report, the Chairman and Ranking Minority Member of the committees of jurisdiction, and the budget committees. Right after delivery to the Congress, the agency posts the work on its website for the general public.
CBO also provides informal cost estimates to assist Members of Congress and their staffs in developing legislative proposals. Those informal estimates are preliminary because they do not undergo the same review procedures required for formal estimates, and they are usually prepared when Members or their staffs are evaluating alternative proposals to accomplish their goals and have not made any specific proposals public. In such situations, the agency keeps its informal estimates confidential as long as the proposals are not made public. That procedure enables lawmakers to take budgetary considerations into account while crafting legislation.
Sometimes the Congress begins public consideration of a bill for which CBO has developed such a preliminary estimate but has not had time to complete a careful review of the specific language that has been made public and to prepare a formal cost estimate. In order to promptly make its analysis public in such cases, CBO sometimes provides preliminary results based on the specifications that had been given to it by committee or leadership staff and clearly indicates how those analyses differs from the detailed review of legislative language that underlies its formal cost estimates.
Do other countries have organizations like yours?
A number of other countries have parliamentary budget offices or independent fiscal institutions that provide budgetary and economic information for their legislatures and/or the public. However, the specific responsibilities of such offices vary among countries. The Organisation for Economic Co-operation and Development (OECD) coordinates a network of officials of those offices, and the International Monetary Fund (IMF) has produced a comparison of offices across countries.