CBO
The Congressional Budget Office (CBO) is a nonpartisan federal agency within the legislative branch of the United States government that provides objective, independent analyses of budgetary and economic issues to assist Congress in evaluating legislative proposals and fiscal policy options.[1] Established by the Congressional Budget and Impoundment Control Act of 1974, the CBO was created to enhance Congress's role in budgeting as a counterbalance to the executive branch's Office of Management and Budget, delivering data-driven projections without policy recommendations.[2] Its core functions include producing cost estimates for proposed legislation, developing baseline projections of federal revenues, outlays, deficits, and debt under current law, and issuing economic forecasts that inform mandatory spending programs like Social Security and Medicare.[3] The agency employs economists, budget analysts, and other specialists—totaling around 250 staff as of recent reports—to generate transparent reports and interactive data tools accessible to lawmakers and the public.[4] The CBO's analyses have shaped pivotal debates on fiscal sustainability, such as long-term projections showing rising debt-to-GDP ratios driven by entitlement growth and interest costs, underscoring structural imbalances in federal finances absent policy changes.[5] Notable for its adherence to conventional scoring rules that assume temporary provisions expire as written—often leading to discrepancies with political expectations—the agency has faced scrutiny over projection accuracy in areas like healthcare cost containment and revenue from tax reforms, where empirical outcomes have diverged from estimates due to behavioral responses and economic variables not fully anticipated.[6] Despite claims of neutrality, methodological choices, such as dynamic scoring for major bills incorporating macroeconomic feedback, have drawn bipartisan critiques for under- or over-stating impacts, highlighting the challenges of forecasting in complex causal environments.[3] Overall, the CBO remains a cornerstone for evidence-based deliberation, prioritizing empirical baselines over normative advocacy in an era of escalating mandatory spending projected to exceed 70% of the budget by mid-century.[5]History
Establishment in 1974
The Congressional Budget and Impoundment Control Act of 1974, signed into law by President Richard Nixon on July 12, 1974, established the Congressional Budget Office (CBO) as a nonpartisan agency to provide Congress with objective analyses of budgetary and economic issues.[7][8] This legislation overhauled the federal budget process by requiring Congress to approve an annual budget resolution setting revenue and spending guidelines, shifting the fiscal year end from July 1 to October 1, and introducing the reconciliation process for expedited consideration of fiscal legislation.[7] The creation of the CBO stemmed from escalating conflicts between Congress and the executive branch, particularly Nixon's widespread impoundment of congressionally appropriated funds, which lawmakers argued undermined legislative authority over spending.[9][8] Prior to 1974, Congress relied heavily on the president's Office of Management and Budget (OMB) for fiscal projections, creating an imbalance where executive analyses often shaped legislative decisions; the CBO was designed to furnish independent evaluations, enabling Congress to better challenge and refine executive budget proposals.[9][4] Alice M. Rivlin was appointed as the CBO's founding Director and sworn in on February 25, 1975, by Speaker of the House Carl Albert, marking the agency's operational launch.[10] Under her leadership, the CBO began producing baseline budget projections and cost estimates for legislation, supporting the new House and Senate Budget Committees established by the Act to coordinate fiscal policy.[10][7] The agency also facilitated congressional review of presidential impoundment requests, reinforcing legislative oversight of executive spending deferrals or rescissions.[7]Post-1974 Developments and Reforms
The Congressional Budget Office began operations on February 24, 1975, initially with a staff of approximately 60 employees focused on providing Congress with independent budget analyses to counterbalance executive branch projections.[8] Under its founding Director Alice Rivlin, who served from 1975 to 1983, the agency quickly expanded its scope to include semiannual budget outlooks and cost estimates for pending legislation, adapting to the fragmented implementation of the 1974 Budget Act amid persistent deficits driven by economic stagnation and rising entitlement spending.[8] This period saw CBO's role evolve from basic scorekeeping to more sophisticated economic forecasting, though early challenges included congressional reliance on ad hoc adjustments rather than strict adherence to multi-year budget resolutions. The Balanced Budget and Emergency Deficit Control Act of 1985, commonly known as Gramm-Rudman-Hollings, marked a pivotal reform by imposing statutory deficit targets declining to zero by fiscal year 1991, with automatic sequestration of spending if targets were missed.[11] CBO, alongside the Office of Management and Budget, was tasked with jointly estimating annual deficits to assess compliance, elevating the agency's prominence in enforcement mechanisms and necessitating refined projection methodologies for discretionary and mandatory outlays.[12] The Supreme Court struck down the act's automatic sequestration provision in 1986 for violating the separation of powers, prompting Congress to amend it in 1987 via the Balanced Budget and Emergency Deficit Control Reaffirmation Act, which relaxed targets to fiscal year 1993, deferred deeper cuts, and retained CBO's estimating duties while shifting some sequestration authority to congressional committees.[13] These changes underscored CBO's nonpartisan credibility but highlighted tensions in enforcing fiscal discipline against political resistance to cuts. Further reforms came with the Budget Enforcement Act of 1990, embedded in the Omnibus Budget Reconciliation Act, which supplanted Gramm-Rudman-Hollings' aggregate deficit goals with enforceable caps on discretionary appropriations and a pay-as-you-go (PAYGO) rule requiring offsets for net increases in mandatory spending or revenue reductions over five- and ten-year windows.[13] CBO's cost estimates became integral to BEA compliance, as the agency scored legislation for adherence to caps and PAYGO, influencing congressional deliberations on reconciliation bills that achieved $500 billion in deficit reduction through spending restraints and tax adjustments by 1995.[14] The framework was extended in 1997 under the Balanced Budget Act, incorporating CBO projections of surpluses by 2002 and reinforcing the agency's mandate for baseline assumptions that assume continuation of current law, even amid debates over dynamic scoring effects.[11] Throughout the 1980s and 1990s, successive directors—including Rudy Penner (1983–1987), Robert Reischauer (1989–1995), and June O'Neill (1995–1999)—oversaw methodological advancements, such as improved econometric models for long-term outlooks extending to 2006 by the late 1990s, amid staff growth to support expanded demands.[15] These developments entrenched CBO's function as a fiscal referee, though critics noted occasional underestimation of spending growth in baselines due to optimistic economic assumptions.[16]Key Milestones in the 21st Century
In 2001, the Congressional Budget Office projected a cumulative unified budget surplus of $5.6 trillion over the following decade under then-current policies, reflecting optimistic economic assumptions and fiscal restraint; however, subsequent tax reductions, the 2001 recession, and increased outlays for defense and homeland security reversed this outlook, with deficits resuming by fiscal year 2002. This period highlighted CBO's role in baseline projections amid shifting economic conditions, prompting refinements in its forecasting methodologies to incorporate greater sensitivity to policy changes and external shocks. The mid-2000s saw leadership transitions that emphasized health care and long-term fiscal analysis, including under Director Douglas Holtz-Eakin (2003–2005), who oversaw cost estimates for the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, initially scoring its 10-year cost at $395 billion before later upward revisions due to higher-than-expected enrollment and drug spending. Peter Orszag (2007–2008) advanced microsimulation models for entitlement programs, enhancing CBO's capacity to project demographic-driven costs in Social Security and Medicare, amid growing concerns over entitlement growth outpacing revenues. During the 2008–2009 financial crisis and subsequent recovery, Director Douglas Elmendorf (2009–2015) directed analyses of major legislation, including the Patient Protection and Affordable Care Act of 2010, which CBO estimated would reduce deficits by $124 billion over 2010–2019 through a combination of coverage expansions offset by payment reforms and taxes. In 2015, following House rule changes, CBO incorporated macroeconomic feedback effects—known as dynamic scoring—into cost estimates for legislation impacting GDP by 0.25 percent or more, aiming to capture behavioral responses and economic growth influences on revenues and outlays. Under Director Keith Hall (2015–2019), CBO focused on improving projection accuracy, issuing evaluations of past forecasts that revealed systematic underestimation of Medicare spending growth. Phillip Swagel, appointed in 2020, led responses to the COVID-19 pandemic, scoring relief packages like the CARES Act at $2.2 trillion in direct spending and loan authorities, contributing to a fiscal year 2020 deficit of $3.1 trillion. In March 2021, CBO expanded its standard reports to include 30-year extensions of budget and economic projections, providing deeper insights into long-term debt sustainability amid aging demographics and rising interest costs. These developments underscored CBO's adaptation to complex fiscal challenges, though critiques from conservative analysts have noted persistent over-optimism in revenue forecasts and underestimation of mandatory spending, attributing such discrepancies to baseline assumptions favoring current law extensions.[17]Organization and Operations
Internal Structure and Staffing
The Congressional Budget Office (CBO) comprises the Office of the Director, which provides centralized leadership and coordination, and ten specialized divisions that conduct the agency's core analytical work.[6] These divisions cover distinct policy domains, including Budget Analysis, Financial Analysis, Health Analysis, Labor, Income Security, and Long-Term Analysis, Macroeconomic Analysis, Management, Business, and Information Services, Microeconomic Studies, National Security, Natural Resources and Housing, and Health, Retirement, and Long-Term Analysis.[6] Each division is led by a director or assistant director reporting to the CBO Director, enabling focused expertise in areas such as fiscal projections, health care costs, macroeconomic forecasting, and national defense budgeting.[18] CBO employs approximately 275 staff members, the majority of whom are economists or public policy analysts holding advanced degrees, supplemented by lawyers, information technology specialists, and other professionals.[19] [4] About 80 percent of employees possess advanced degrees, reflecting a hiring emphasis on technical expertise rather than political alignment.[20] The agency maintains a strictly nonpartisan approach, selecting personnel solely based on professional competence without regard to political affiliation, party affiliation, or ideology, as mandated by its enabling legislation and internal practices.[21] [4] The largest contingent of analysts specializes in health policy, aligning with the significant portion of federal spending devoted to health programs.[4] Under the Office of the Director, key roles include the Deputy Director for oversight of operations, the Chief Economist for macroeconomic guidance, and support staff handling administrative and communications functions.[22] Divisions operate semi-autonomously but collaborate on cross-cutting analyses, such as long-term budget outlooks that integrate inputs from multiple units. Staffing levels have remained relatively stable, supporting CBO's mandate to produce timely, impartial estimates without expansion tied to political cycles.[19] This structure facilitates rigorous, evidence-based work while minimizing bureaucratic layers, with total personnel costs funded through annual congressional appropriations averaging around $100 million in recent fiscal years.[19]Leadership and Appointment Process
The Director of the Congressional Budget Office is appointed jointly by the Speaker of the House of Representatives and the President pro tempore of the Senate, following consideration of recommendations from the chairmen and ranking minority members of the House and Senate Budget Committees.[23] This process, established under Section 202 of the Congressional Budget and Impoundment Control Act of 1974, requires selection without regard to political affiliation and solely based on the appointee's fitness to perform the duties of the office.[24] The Director serves a four-year term and may be reappointed, with the option to continue in the role beyond term expiration until a successor is appointed.[19] The Deputy Director is appointed by the Director and serves at the Director's pleasure during the term of the appointing Director, assuming the role of acting Director in cases of resignation, incapacity, or absence.[24] Unlike the Director, the Deputy Director position does not require congressional involvement in the selection process and has no fixed term independent of the Director's tenure.[25] This appointment structure aims to insulate CBO leadership from executive branch influence, ensuring the agency's independence in providing objective budget analysis to Congress, as the Director reports directly to the Budget Committees rather than to party leadership or the President.[1] Since CBO's establishment, 10 individuals have served as Director, with terms reflecting the bipartisan consultation process to maintain nonpartisanship.[19]Budget and Resources
The Congressional Budget Office (CBO) receives its funding exclusively through annual appropriations approved by Congress, as established under the Congressional Budget and Impoundment Control Act of 1974.[26] For fiscal year 2026, CBO requested appropriations of $75.8 million, representing an 8.2 percent increase or $5.8 million over the prior year's level, primarily to support personnel costs (86.6 percent of the total) and operational expenses such as information technology and data acquisition.[26] [27] These appropriations enable CBO to maintain independence from executive branch influence, with no reliance on fees, grants, or other external revenue sources that could introduce conflicts of interest.[4] CBO's staffing resources consist of approximately 275 full-time employees as of early 2025, the majority of whom are economists, public policy analysts, or attorneys holding advanced degrees, selected solely based on professional competence without regard to political affiliation.[4] [19] The fiscal year 2026 budget request anticipates modest expansion to 285 employees to address growing demands from congressional committees for analyses on complex legislation, including health care, tax policy, and long-term fiscal projections.[28] This lean staffing model—far smaller than comparable executive agencies—relies on high expertise and efficient resource allocation, with employees often rotating between divisions to build institutional knowledge and adaptability to evolving legislative priorities.[19] In addition to direct appropriations, CBO leverages shared congressional resources for facilities and administrative support, but maintains autonomy in analytical operations through in-house computing infrastructure and access to federal data under statutory protections.[4] Historical funding trends show steady growth aligned with inflation and workload increases; for instance, the agency's budget rose from about $55 million in fiscal year 2020 to the current request level, reflecting expanded mandates without proportional staff bloat.[26] This structure ensures fiscal restraint while prioritizing rigorous, impartial analysis over expansive bureaucracy.Mandate and Core Functions
Budget Baseline Projections
The Congressional Budget Office prepares budget baseline projections as a benchmark illustrating the path of federal revenues, outlays, deficits or surpluses, and debt under the assumption that current laws governing taxes and spending generally remain unchanged.[29] These projections span the current fiscal year and the subsequent decade, providing Congress with a standard against which to evaluate the budgetary effects of proposed legislation.[30] By law, under the Congressional Budget and Impoundment Control Act of 1974, the baseline must adhere to specific conventions, such as projecting discretionary spending at amounts provided in the most recent appropriations acts adjusted for inflation and assuming the continuation of mandatory spending programs as authorized.[31] Baseline projections incorporate an economic forecast developed by CBO, which informs estimates of revenues and certain spending categories, alongside demographic trends and technical factors like program caseloads.[32] Revenues are projected based on scheduled changes in tax law, including the expiration of temporary provisions unless extended by legislation. Mandatory outlays, encompassing programs like Social Security and Medicare, follow statutory formulas and eligibility rules without assuming policy alterations. Discretionary outlays assume funding grows with the GDP price index after the first year, while net interest payments are calculated from projected debt levels and Treasury interest rates.[33] These assumptions yield a "current law" scenario rather than a prediction of likely outcomes, enabling consistent scoring of bills relative to the baseline.[29] CBO develops baselines using econometric models, historical data, and consultations with executive agencies, with detailed methodologies published for transparency.[31] Projections for selected mandatory programs are updated up to three times annually, while the full budget baseline accompanies the annual Budget and Economic Outlook report, typically released in January or February, with a midsummer update incorporating recent economic data.[34] In its January 17, 2025, Budget and Economic Outlook for 2025 to 2035, CBO projected a federal budget deficit of $1.9 trillion for fiscal year 2025, with cumulative deficits reaching $20 trillion over the 2025–2034 period under baseline assumptions.[35] Federal debt held by the public was forecasted to rise to 116 percent of gross domestic product by 2034, driven primarily by growth in mandatory spending and interest costs outpacing revenue increases.[36] Revenues were estimated to average 18.2 percent of GDP over the decade, while outlays averaged 23.3 percent, reflecting structural imbalances in entitlement programs and demographics.[37]Cost Estimates for Legislation
The Congressional Budget Office (CBO) produces cost estimates for nearly every bill approved by a full committee of the House of Representatives or the Senate, as required under the Congressional Budget and Impoundment Control Act of 1974.[38] These estimates quantify the projected effects of legislative proposals on federal outlays, revenues, and deficits over specified periods, serving to inform congressional deliberations and enforce budget rules such as the Statutory Pay-As-You-Go Act of 2010.[39][40] Estimates are prepared relative to CBO's baseline budget projections, which incorporate assumptions of current law continuation, including scheduled expirations of temporary provisions unless the legislation alters them.[41] CBO typically issues 600 to 800 such estimates annually, including preliminary versions for unreported bills upon request and formal ones post-committee approval.[40] The cost-estimating process follows a structured four-step methodology: first, analysts fully interpret the legislation's provisions in consultation with congressional staff; second, they project the budgetary impacts using economic models, historical data, and expert consultations; third, they evaluate uncertainties and interactions among provisions; and fourth, they document assumptions, methods, and rationale in the estimate.[42] Estimates distinguish between direct spending (mandatory outlays not requiring annual appropriations, such as entitlements), revenues (tax collections and other receipts), and discretionary spending (subject to annual appropriation acts).[39] For authorizing legislation, projections cover a 10-year window for direct spending and revenues, while discretionary authorizations are scored over five years unless otherwise specified; appropriations bills, by contrast, are scored against the prior year's levels or baseline funding trajectories.[40][18] Scorekeeping adheres to guidelines emphasizing current-law baselines, avoiding assumptions about future policy changes or administrative actions not codified in law.[41] For instance, proposed extensions of expiring tax cuts are scored as increasing deficits unless offset, reflecting the baseline's assumption of reversion to pre-expiration rules.[43] Estimates generally provide point projections but may include ranges or qualitative discussions of uncertainty, particularly for complex behavioral responses or economic interactions.[42] In reconciliation bills, estimates support instructions limiting deficit increases, with CBO providing unified scores for multipartisan packages.[38] These analyses exclude non-budgetary effects, such as regulatory costs to private entities, focusing solely on federal fiscal impacts.[39]Economic and Long-Term Outlooks
The Congressional Budget Office produces economic outlooks as integral components of its baseline budget projections, forecasting macroeconomic variables such as real gross domestic product (GDP) growth, unemployment rates, inflation measures, interest rates, and labor market indicators over a 10-year horizon. These projections, published annually in reports like "The Budget and Economic Outlook: 2025 to 2035" released on January 17, 2025, assume continuation of current laws and incorporate estimates of potential output growth, which CBO projects to average 1.8 percent annually from 2025 to 2035 due to moderating labor force expansion and steady productivity gains.[35] Inflation is forecasted to align with the Federal Reserve's 2 percent target by 2026, with core personal consumption expenditures (PCE) prices rising at 2.0 percent yearly thereafter, while short-term interest rates (three-month Treasury bills) are expected to average 2.5 percent and long-term rates (10-year Treasury notes) 3.7 percent over the decade.[35] Unemployment is anticipated to peak at 4.5 percent in 2025 before declining to 4.2 percent, reflecting cyclical adjustments from recent policy shifts and supply-side factors.[35] CBO's economic outlooks underpin revenue and spending baselines by linking fiscal aggregates to GDP, wages, and interest-sensitive outlays; for instance, the January 2025 projections estimate federal revenues at 18.2 percent of GDP on average, driven by individual income taxes comprising over half of receipts, while outlays reach 23.3 percent of GDP, yielding deficits totaling $20 trillion cumulatively from 2025 to 2034 and public debt climbing to 118 percent of GDP by 2035.[35] These forecasts draw from econometric models calibrated to historical data and incorporate exogenous assumptions, such as total factor productivity growth at 1.3 percent per year, informed by demographic trends like slowing population growth to 0.4 percent annually.[35] Updates, such as the September 2025 "Current View of the Economy From 2025 to 2028," adjust for emerging data, projecting real GDP 0.1 percent higher than prior estimates by 2028 due to stronger-than-expected output in early 2025.[44] In parallel, CBO issues biennial long-term budget outlooks extending 30 years, emphasizing structural fiscal pressures from demographics and entitlement growth. The March 27, 2025, "Long-Term Budget Outlook: 2025 to 2055" projects federal deficits averaging 6.5 percent of GDP, with public debt surging from 100 percent of GDP in 2025 to 156 percent by the mid-2040s and beyond, as mandatory spending—led by Social Security and Medicare—rises from 13.5 percent to 15.8 percent of GDP by 2055 amid an aging population where the worker-to-retiree ratio falls from 2.8 to 2.3.[45] [46] Economic assumptions include potential GDP growth decelerating to 1.6 percent annually over the period, constrained by labor force shrinkage from lower fertility rates (1.7 births per woman) and immigration averaging 0.7 million net annually, offset partially by productivity at 1.2 percent yearly.[45] Net interest costs escalate to 6.5 percent of GDP by 2055, exceeding defense and nondefense discretionary outlays combined, under baseline interest rate paths where 10-year Treasuries average 4.0 percent long-term.[45] These outlooks highlight causal drivers of fiscal trajectories, such as entitlement expansions outpacing revenue bases without reforms, and provide Congress with scenario analyses under alternative assumptions, including higher productivity or policy changes, though they maintain a current-law baseline to avoid endorsing specific interventions.[47] CBO's projections, while nonpartisan, have faced scrutiny for underestimating interest rate persistence or over-relying on optimistic productivity trends, but they consistently reveal debt dynamics where compounding deficits amplify borrowing costs, potentially crowding out private investment absent corrective measures.[45]Analytical Methodology
Projection Models and Assumptions
The Congressional Budget Office (CBO) employs an integrated framework of econometric models, statistical analyses, and expert judgment to generate baseline economic projections that underpin its budget forecasts, assuming current laws governing revenues and spending remain unchanged. These models decompose gross domestic product (GDP) into supply-side factors—such as potential labor supply, capital stock accumulation, and total factor productivity (TFP)—using a neoclassical growth accounting approach akin to the Solow model, while short-term fluctuations are captured through demand-side dynamics and output gaps relative to potential GDP.[48] Labor force projections derive from demographic trends, incorporating age-specific participation rates, immigration inflows calibrated to recent legal and policy-enforced levels, and educational attainment distributions.[49] Capital services are estimated via investment models that account for depreciation, tax incentives under current law, and expected returns, with TFP trends extrapolated from historical data adjusted for technological advancements and structural shifts.[50] Inflation and interest rate projections rely on monetary policy rules, such as variants of the Taylor rule, informed by Federal Reserve targets and historical correlations, with inflation measured by the personal consumption expenditures (PCE) price index assumed to stabilize near 2 percent over the medium term absent policy changes.[51] Unemployment forecasts target the nonaccelerating inflation rate of unemployment (NAIRU), estimated through Phillips curve relationships linking wage pressures, labor market slack, and expected inflation, while incorporating Okun's law for output-unemployment linkages. Demographic assumptions emphasize an aging population and slowing growth, projecting U.S. population increases averaging 0.4 percent annually through 2055, driven by net immigration (projected at levels consistent with post-2020 enforcement trends) offsetting declining fertility rates below replacement levels and rising life expectancy.[49][52] These inputs feed into revenue models estimating individual and corporate income taxes as shares of GDP, sensitive to bracket creep, deductions, and economic cycles, and spending models for mandatory programs like Social Security and Medicare that scale with demographics and per-capita health costs growing faster than GDP.[5] To address uncertainty, CBO supplements point estimates with probabilistic simulations, including Bayesian vector autoregression (BVAR) models that condition forecasts on historical macroeconomic interdependencies and stochastic shocks to variables like productivity or interest rates, generating distributions for deficits and debt under alternative scenarios.[53][54] Long-term projections (beyond 10 years) heighten sensitivity to structural assumptions, such as TFP growth (historically averaging 1.2 percent annually post-1947, with recent forecasts around 1.0-1.5 percent) and the real interest rate-growth differential (r-g), where persistent negative values amplify debt dynamics via compounding effects on interest costs relative to revenues.[55] Assumptions exclude discretionary policy shocks or major geopolitical events, focusing instead on trend reversion, though CBO periodically publishes sensitivity analyses varying key parameters like productivity by ±0.5 percentage points to illustrate fiscal implications.[56] This methodology prioritizes mechanical extrapolation from enacted laws and observable trends, with periodic updates reflecting new data from sources including the Bureau of Economic Analysis, Bureau of Labor Statistics, and Social Security Administration.[48]Static vs. Dynamic Scoring Debates
The Congressional Budget Office (CBO) primarily employs static scoring, also termed conventional scoring, which estimates the budgetary effects of proposed legislation by incorporating microeconomic behavioral responses—such as changes in individual labor supply or firm investment decisions—but excluding broader macroeconomic feedback on aggregates like gross domestic product (GDP), employment, or interest rates.[57] In contrast, dynamic scoring integrates these macroeconomic effects, projecting how policy-induced changes in incentives might alter overall economic output, thereby influencing revenues and outlays through feedback loops; for instance, tax reductions could stimulate growth and partially offset initial revenue losses.[58] This distinction arises because static methods hold the economy's path fixed absent policy changes, while dynamic approaches model causal interactions between fiscal policy and economic variables, reflecting principles of supply-side incentives and aggregate demand responses.[59] Debates over adopting dynamic scoring intensified in the mid-2010s, driven by Republican-led congressional majorities seeking to highlight growth-enhancing effects of tax reforms amid static estimates that often projected larger deficits.[60] In February 2015, the House Budget Committee revised rules to mandate dynamic estimates from CBO and the Joint Committee on Taxation (JCT) for major legislation—defined as measures with budgetary impacts exceeding 0.25% of GDP over five or ten years or $1 trillion in nominal dollars—prompting CBO Director Keith Hall to outline implementation using models like the Joint Committee on Taxation's macro model and CBO's overlapping generations framework.[61] [62] Proponents, including organizations like the Tax Foundation, argue dynamic scoring yields more realistic projections by accounting for empirically observed policy-induced behavioral shifts, such as increased investment from lower corporate taxes, which static methods overlook and thus risk understating long-term fiscal benefits.[63] Critics, including the Center on Budget and Policy Priorities, contend it injects excessive uncertainty due to model variability—where different assumptions yield feedback effects ranging from negligible to substantial—and may enable deficit-expanding policies by relying on optimistic growth forecasts that historical data rarely fully validates.[64] CBO's analyses have consistently shown dynamic effects to be modest in magnitude, with wide uncertainty bands; for example, in evaluating a hypothetical 10% individual income tax rate cut, CBO estimated macroeconomic offsets to revenue losses at 0% to 28% of the static baseline, underscoring that such feedback rarely reverses primary fiscal impacts.[65] This empirical restraint aligns with CBO's nonpartisan mandate but fuels partisan disputes: Republicans have praised dynamic scoring for the 2017 Tax Cuts and Jobs Act (TCJA), where JCT's estimates indicated a 0.7% GDP boost over a decade partially mitigating revenue shortfalls, while Democrats highlight instances like CBO's 2021 assessment of the American Rescue Plan, where dynamic outlays slightly exceeded static due to inflationary pressures without corresponding revenue gains.[66] [60] Methodological critiques persist, as dynamic models depend on assumptions about elasticities and multipliers that diverge across institutions—e.g., CBO's conservative debt crowding-out effects versus more expansive private-sector variants—potentially amplifying biases if not transparently bounded.[67] Despite these tensions, dynamic scoring remains selectively applied, required only for high-impact bills since 2015, with CBO emphasizing its supplementary role to avoid overreliance on projections prone to revision as new data emerges.[68]Data Sources and Transparency Practices
The Congressional Budget Office (CBO) primarily draws on administrative data from federal agencies, including the Department of the Treasury, Office of Management and Budget, Social Security Administration, and Department of Health and Human Services, to inform its budget projections and cost estimates.[69] Economic projections incorporate historical data on output, prices, labor markets, interest rates, income, and potential GDP from sources such as the Bureau of Economic Analysis and Bureau of Labor Statistics, supplemented by analyses of daily economic events and inputs from major commercial forecasting services.[5] [6] CBO analysts also review relevant research literature and consult external experts to refine assumptions about program behaviors and revenue sources under current law.[3] Transparency is a stated top priority for CBO, with the agency committing to open access to its analyses by posting all cost estimates, reports, and baseline projections on its website without embargo, enabling public scrutiny by lawmakers, staff, and researchers.[70] [4] Publications detail not only results but also methodologies, key assumptions, uncertainties, and limitations, such as how estimates might vary with alternative economic or policy scenarios, to facilitate understanding and replication efforts.[70] CBO releases accompanying data files, including spreadsheets for budget baselines and economic variables, up to three times annually for selected programs, allowing users to examine underlying figures.[34] In annual transparency plans, such as the 2025 review of 2024 activities, CBO outlines ongoing enhancements, including expanded explanations of projection models, responses to public inquiries, and congressional testimony on methods, while noting challenges like proprietary data restrictions that limit full model code releases.[71] The agency has increased data dissemination since the early 2010s, providing downloadable files for major outlooks, though independent evaluations suggest room for further openness in raw datasets and simulation tools to improve verifiability.[72] These practices aim to support objective analysis amid partisan debates, with CBO maintaining nonpartisan staffing to insulate data handling from political influence.[70]Accuracy Assessments
Historical Track Record of Projections
The Congressional Budget Office (CBO) has produced baseline budget projections annually since its inception in 1975, with formal evaluations of accuracy beginning in the 1980s. Short-term projections, particularly for the budget year (typically one year ahead), exhibit relatively low average errors: revenues have been overestimated by an average of 1.2 percent from 1984 to 2023, while outlays show an average absolute error of 3 percent for projections from 1993 to 2023, with a tendency toward overestimation. Deficit projections for the budget year from 1985 to 2023 have an average absolute error of 1.1 percent of GDP, often overestimating the deficit due to combined revenue and outlay biases. These metrics, calculated using absolute errors and root mean square errors, indicate directional accuracy but persistent directional biases, such as underestimating revenue growth amid economic expansions.[73][74][75] Longer-horizon projections reveal larger discrepancies. For economic forecasts, CBO's two-year and five-year outlooks from 1984 to 2024 have similar accuracy, with average errors slightly overestimating growth by small margins, though errors widen beyond five years due to compounding uncertainties in fiscal policy and macroeconomic variables. Independent analyses highlight inefficiencies: budgetary projections from 1984 to 2016 fail efficiency tests, as errors do not diminish with additional information, and accuracy has not improved over time despite methodological refinements. Debt projections specifically from 1996 to 2008 underestimated debt held by the public by an average of 39 percent in the final forecast year, reflecting underestimation of persistent deficits driven by spending growth.[76][77][78][79]| Projection Horizon | Key Metric | Typical Bias | Period Covered |
|---|---|---|---|
| Budget Year (Revenues) | 1.2% average error | Overestimate | 1984–2023[74] |
| Budget Year (Outlays) | 3% absolute error | Overestimate | 1993–2023[73] |
| Budget Year (Deficits) | 1.1% of GDP absolute error | Overestimate | 1985–2023[73] |
| 5-Year Economic | Small positive error in growth | Overestimate | 1984–2024[76] |
| 10+ Year Debt | 39% underestimate | Underestimate | 1996–2008 final year[79] |