Congressional Budget Office
Director’s Blog

Today CBO released an evaluation of the accuracy of its economic forecasts by comparing those forecasts with the economy’s actual performance and with the projections of other forecasters. The study examines the two-year ahead forecast accuracy and the five-year ahead forecast accuracy for a variety of macroeconomic variables, such as real GDP, inflation, and interest rates. Thirty-two CBO forecasts, those made early each year from 1976 to 2007, are included in the study.  Such evaluations help guide CBO’s efforts to improve the quality of its forecasts and also assist Members of Congress in their use of CBO’s estimates.

Since publishing its first macroeconomic forecast in 1976, CBO has compiled a forecasting track record that is comparable in quality with that of the Administration and that of the Blue Chip consensus. In particular, the accuracy of CBO’s two-year forecasts between 1982 and 2007 paralleled that of the forecasts published by the Blue Chip consensus and the Administration over the same period. The accuracy of CBO’s five-year projections also generally corresponded to that of other forecasters, although the Administration’s projections of types of income (such as wages and salaries, and profits) as a share of national output had slightly smaller errors. Comparing CBO’s forecasts with those of the Blue Chip consensus suggests that when the agency’s predictions of the economy’s performance missed by the largest margin, those errors probably reflected problems shared by other forecasters in predicting turning points in the business cycle.

CBO’s forecasting record provides a measure of the uncertainty underlying forecasts under normal circumstances. However, the current degree of economic dislocation exceeds that of any previous period in the past half-century, so the uncertainty inherent in current forecasts exceeds the historical average.

In the past few days, I’ve received many calls and e-mail messages from people around the country commenting on my participation in a meeting this past Monday at the White House.  Most of these people expressed their concern about CBO’s ability to carry out its responsibilities with its traditional independence and nonpartisanship.  I appreciate the interest in CBO’s work, so let me try to allay those fears.

The President asked me, and other experts in the room, for our insights into possible ways to reduce the nation’s health care spending.  The very capable staff at CBO has thought a lot about this subject, and I shared those thoughts with the President.  Although the audience was unique, my comments were no different from what we have said publicly on numerous other occasions.  The CBO staff and I have offered our thoughts on this subject to the Congress and the public in published reports and letters, and we have discussed them in many meetings with Members of Congress and their staffs of both political parties.  Across the range of topics we study, we deliberately spend a lot of time explaining our thinking to policymakers, because we believe that such openness is a responsibility of our agency and can help policymakers to reach better-informed policy decisions.  But we never adjust our analysis or conclusions to please our audience (as the reaction to various CBO reports amply demonstrates).

CBO will continue to do what it has always done—provide independent, nonpartisan analysis for the Congress, communicate that information as clearly as possible, and provide as much transparency as possible about our methodology and assumptions.  A visit to the White House won’t change that a bit!

While not working hard to produce estimates of varying kinds for the U.S Congress, the Congressional Budget Office’s staff often uses its formidable energies to help charitable organizations. As part of their ongoing commitment to the fight against breast cancer, members of our staff, friends, and family members participated in the Susan G. Komen Race for the Cure by walking or running the 5K race around the National Mall or by making pledges to the team or to individual team members. As a result of staff participation in fundraising, which included a CBO office bake sale, CBO was ranked number one in the Congressional category, surpassing 20 Congressional teams for top honors by raising a total of $3,578.50. CBO’s team was led by Simone Thomas, a CBO webmaster and cancer survivor, who has led annual efforts to raise funds for this important cause.

I am delighted to announce that this morning CBO was recognized by the Partnership for Public Service as one of the “Best Places to Work in the Federal Government.”  CBO ranked third overall in the small agency category.

The Partnership uses the results of employee satisfaction surveys to evaluate agencies based on factors that create a positive work environment, such as employee skills/mission match, work/life balance, and effective leadership. Results for all participating federal agencies are available at  www.bestplacestowork.org. This was the first time CBO entered survey data in the rankings competition.

We credit these excellent results to our wonderful staff!  In spite of the pressures we face daily with the increasing legislative demands and turnaround times, in the end, it is the people, how we work together, and how we care about each other that define CBO.  I am so pleased that I have the good fortune to work with such terrific, dedicated, and intelligent colleagues.

Policymakers’ focus on climate change has shaped one of CBO’s principal areas of work.  Last week, I testified on the distribution of the costs of reducing carbon dioxide (CO2) emissions through a cap-and-trade system, and CBO issued a report on the potential impacts of climate change. Those are but the most recent contributions to CBO’s growing body of research on climate change issues, which includes work on the effect of climate change on the United States, options for reducing greenhouse-gas emissions, the effect of those options on different segments of our society, and the effect of proposed legislation on the federal budget.  All of CBO’s work on climate issues can be found on CBO’s Web site under the special section for climate change.

The publication of those products provides me with an opportunity to introduce to you the dedicated staff of budget analysts and economists at CBO who work on climate issues.  Analyzing the broad set of issues surrounding climate change truly requires a team effort that draws on a diverse set of skills and professional experiences.  Most of the formal training of the members of the climate team is in public policy analysis and economics. That formal training has been supplemented by many years of experience following developments in climate science, analyzing different policy options, and understanding the impacts of climate policy on different industries and parts of our economy.  The members of the team are:

Bruce Arnold
David Austin
Kim Cawley
Juan Contreras
Bob Dennis
Terry Dinan
Justin Falk
Ron Gecan
Teri Gullo
Dan Hoople
Joseph Kile
Rob Johansson
Mark Lasky
Susanne Mehlman
Ryan Miller
David Moore
Kevin Perese
Amy Petz
Frank Sammartino
Bob Shackleton
Natalie Tawil
Philip Webre
David Weiner

Today’s Wall Street Journal quotes me saying that CBO has between 40 and 50 people working “more than full time” on health reform.  Yesterday’s Politico included me in an article about “Names, Faces to Watch for In Debate Over Care,” and the story referred to “Elmendorf and his team of anonymous analysts.”

Clearly, analyzing health reform proposals is a team effort. Indeed, projecting the behavioral consequences and budgetary impact of a variety of proposals to make major changes in a sector that accounts for one-sixth of the U.S. economy poses an enormous analytical challenge.  CBO is meeting that challenge because of the skill, knowledge, and hard work of our talented staff (and of our colleagues on the staff of the Joint Committee on Taxation, with whom we are collaborating in this effort). 

Because CBO believes that its estimating methodology should be as transparent as possible, perhaps our estimating team should be transparent as well.  In that spirit, here are the previously anonymous analysts at CBO who deserve a great deal of credit for their fine work analyzing health reform and related legislative proposals (I realize this list has more than 50 names; that’s because some of these people have other responsibilities beyond health reform):

CBO has a panel of economic advisers that includes many distinguished economists (some of whom are former CBO directors). We host periodic meetings of the advisers at our office and solicit the advisers’ views between meetings via email exchanges and phone calls. Through these interactions, we benefit from the advisers’ understanding of cutting-edge research, current economic conditions and the economic outlook, and the budget and economic policy process. As a result of the advisers’ comments, the quality of CBO’s economic analysis is greatly enhanced. The advisers for 2009 are:

We appreciate these advisers’ contribution to our work, and we look forward to continuing to benefit from their knowledge and experience.

CBO has a panel of health advisers consisting of widely recognized experts in health policy. Members of the panel have a variety of backgrounds, areas of knowledge, and experience. We host periodic meetings of the advisers at our office and solicit their views between meetings via e-mail exchanges and conference calls. Through these interactions, we benefit from the advisers’ understanding of cutting-edge research and the latest developments in health care delivery and financing. As a result, the quality of CBO’s analysis of health policy is greatly enhanced. (The agency also has a panel of economic advisers, which I will discuss in an upcoming blog entry.) The health advisers for 2009 and 2010 are:

We appreciate these advisers’ contribution to our work.  We look forward to continuing to benefit from their knowledge and experience as we undertake very complex analyses of proposals for major changes in the nation’s health care system.

Hello.  I’m Doug Elmendorf, the new director of the Congressional Budget Office.  I am honored to be appointed to this position and excited to be joining the talented and dedicated analysts here at CBO.

I want to begin by thanking Bob Sunshine, the deputy director of CBO, who has served as acting director since Peter Orszag resigned in November.  Bob has earned the admiration and appreciation of everyone at CBO for his dedicated service over many years and his sure-handed leadership during the past two months.

Perhaps I should tell you a little about me:  I have spent my career as an economist working on public policy.  After receiving my PhD at Harvard, I taught there for several years (including a course on American economic policy) and then moved to Washington.  My first job in Washington was as an analyst at CBO (and it’s great to be back).  Then, I worked in turn at the Federal Reserve Board, the White House Council of Economic Advisers, the Treasury Department, and again at the Federal Reserve.  Most recently, I was a senior fellow at the Brookings Institution.  In the course of these jobs and in my own research, I have spent a great deal of time thinking about budget policy, Social Security, Medicare, national health reform, the financial system, macroeconomic analysis and forecasting, economic volatility, and more.

More important, probably, is to remind you about the role of CBO.  Our mission is to provide information to the Congress to help it make effective budget and economic policy.  We are committed to providing information that is:

• Objective – representing not our personal opinions but the consensus and diversity of views of experts from around the country;
• Insightful – applying the best new evidence and innovative ideas as well as the lessons of experience;
• Timely – responding as quickly as possible to the needs of the Congress; and 
• Clearly presented and explained – so that policymakers and analysts understand the basis for our findings and have the opportunity to question our assumptions.

At this time of financial and economic crisis, and with many long-standing budgetary and economic challenges also demanding attention, policymakers will be making unusually difficult and consequential decisions.  We at CBO understand the responsibility we bear in this process and are looking forward to our further opportunity to assist the Congress in its efforts to enact good public policy.

By the way, many people have asked whether I intend to continue this blog, and I am happy to let you know that I will.  I hope the blog will continue to increase people’s understanding of our work at CBO.  Please keep reading.

CBO has been privileged, for the past two years, to have Peter Orszag as its Director.  During that time, he worked tirelessly to ensure that the Congress received the timely, high quality, budget and economic information and policy analysis that it needs to address the important public policy issues facing our nation.  He also expanded the agency’s focus on key areas like climate change and health care, with particular emphasis on the long-term fiscal threat posed by rising health care costs.  CBO’s work, under his leadership, was done, as always, in a scrupulously objective and nonpartisan manner. 

Peter’s broad knowledge, energy, wisdom, and dedication have been enormous assets to CBO, and the agency wishes him well as he begins the next phase of his career in public service.

Bob Sunshine, Acting Director