The Accuracy of CBO’s Budget Projections for Fiscal Year 2023

After each fiscal year ends, the Congressional Budget Office reviews its projections of federal revenues and outlays and the government’s budget deficit and compares them with actual budgetary outcomes for that year. By assessing the quality of its projections and identifying the factors that might have led to under- or overestimates of particular categories of federal revenues and outlays, CBO seeks to improve the accuracy of its work.

To review its projections for fiscal year 2023, CBO focused on its May 2022 budget projections and updated them to include the estimated effects of subsequently enacted legislation as reported in cost estimates prepared by CBO and the staff of the Joint Committee on Taxation (JCT), typically when the legislation was enacted. Those adjustments increased CBO’s projections of revenues by $26 billion (or 0.5 percent) and increased its projections of outlays by $40 billion (or 0.7 percent).

In addition to incorporating the effects of subsequently enacted legislation, CBO made two further adjustments. Because of their unusual size and nature, the estimated budgetary effects of the Supreme Court’s June 2023 decision prohibiting the Administration’s planned cancellation of outstanding student loans for many borrowers were excluded from this analysis. CBO also removed outlays for Fannie Mae and Freddie Mac from its projections and from estimates of actual outcomes because it accounts for the transactions of those entities differently from how the Administration accounts for them. After those adjustments, the overall differences between CBO’s budgetary projections and actual outcomes were as follows:

• Revenues. CBO’s projection of $4.9 trillion for federal revenues in 2023 was too high—by $0.5 trillion, or 11 percent. That difference was roughly twice the average absolute error of about 6 percent in CBO’s revenue projections for 1983 to 2022.
• Outlays. CBO’s projection of $5.9 trillion for federal outlays in 2023 was too low—by $0.6 trillion, or 9 percent. That difference was more than four times the average absolute error of 2 percent in outlay projections for 1993 to 2022.
• Deficit. Because of the differences between projected and actual revenues and outlays, CBO’s deficit projection of $1.0 trillion for 2023 was $1.0 trillion less than the actual amount. That difference was equal to 3.9 percent of gross domestic product (GDP)—more than three-and-a-half times the average absolute error of 1.1 percent of GDP in the agency’s deficit projections for 1985 to 2022.

The three categories of revenues and outlays with the largest misestimates accounted for nearly three-fourths of the difference between the projected and actual deficit. An overestimate of receipts from individual income taxes contributed the most to the deficit difference (accounting for 38 percent of that total), followed by underestimates of net interest outlays (21 percent) and spending for higher education (14 percent).