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our processes
In preparing its cost estimates and other analyses, as required by law or requested by Members of Congress, CBO uses data and other information from a wide variety of sources, consults with outside experts representing a variety of perspectives, and applies a rigorous internal review process that involves multiple people at different levels in the organization. All of CBO's formal written cost estimates and analyses of budgetary and economic issues are delivered to all interested parties simultaneously and posted on the agency’s website.
how does CBO decide what it studies?
CBO’s chief responsibility under the Congressional Budget Act of 1974 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.
The agency produces several statutory reports needed for the budget process. In addition, CBO is required by law to produce a cost estimate for every bill that is reported by a full committee of either House of Congress. The only exception to this rule is for appropriation bills, which do not receive a formal cost estimate. We sometimes produce cost estimates at other stages of the legislative process if requested to do so by a relevant committee or by the Congressional leadership.
In addition to cost estimates and statutory reports, the agency produces analytic studies at the request of the Congressional leadership or Chairmen or Ranking Minority Members of committees or subcommittees. CBO analysts work with the requester’s staff to understand the scope and nature of the work to be done. We draw conclusions in the same impartial, objective manner that we apply to our cost estimates and statutory reports.
where do you get your information?
CBO relies on the rich data sources from the government’s statistical agencies. Those sources include the national income and product accounts, the census of manufacturers, the Statistics of Income database, the Current Population Survey, and various national health surveys. CBO also uses information provided by relevant government agencies and industry groups to meet specific needs. In addition, the agency seeks outside experts’ advice on specific analytic matters, such as the outlook for agricultural production, spending projections for Medicare and Medicaid, and business prospects in the telecommunications industry.
do you disclose your methodology?
Yes. We are required as a matter of law to disclose the basis for each of our cost estimates. We follow that same practice for our analytic studies.
CBO employs standard methods of economic and budgetary analysis. To answer many questions, the agency develops analytic models or uses models available from others. CBO also closely follows professional developments in economics and related disciplines, and we consult regularly with outside experts in a broad range of relevant fields for guidance on ongoing work.
what kinds of assumptions do you make about what the Congress will do?
We take proposed legislation as it is written and do not attempt to predict the intent of future Congresses. There is no plausible alternative to that approach. All of CBO’s work reflects our objective, impartial, nonpartisan judgment. That stance precludes the agency from speculating on what the Congress might do or from offering advice as to what any Congress ought to do.
That said, the agency regularly shows the effects of adopting alternative policies that have been discussed by the Congress, so that the impact of those alternative policies is clear. When the Congress considers modifying current law, CBO provides cost estimates for those modifications when they are considered.
what is a “baseline projection”?
CBO produces the baseline by assuming, in general, that current spending and revenue laws continue without changes. The baseline is constructed according to rules set forth in law and is not intended to be a prediction of future budgetary outcomes. Rather, the projections reflect CBO’s best judgment about how the economy and other factors will affect federal revenues and spending under existing laws. That allows the baseline to serve as a neutral benchmark against which Members of Congress can measure the budgetary effect of proposed legislation.
what is an economic forecast?
CBO’s economic forecasts involve the major economic variables—gross domestic product, unemployment, inflation, and interest rates—along with a broad array of other economic indicators. 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.
who reviews your work?
All CBO estimates and reports are reviewed internally for objectivity, analytical soundness, and clarity. CBO’s reports are also reviewed by outside subject matter experts. In addition, the agency has a Panel of Economic Advisers and a Panel of Health Advisers. Those groups—whose membership includes previous CBO directors, other distinguished economists, and acknowledged experts in health care—meet to review the agency’s economic forecasts and to advise the agency on its analyses of health care issues. Although such experts provide considerable assistance, CBO is solely responsible for the accuracy of its work.
how do you ensure objectivity and transparency?
CBO is responsible for providing nonpartisan and thoughtful analysis to the Congress, and we are proud that our success in carrying out that mission, for more than 35 years, is widely acknowledged both on and off Capitol Hill. We have the utmost confidence in the objectivity of the work CBO produces, and we devote considerable time and energy to explaining the basis for our findings as clearly as possible.
Read more about our objectivity and transparency, 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.
What sorts of behavioral responses are included in CBO’s 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 our cost estimates. For example, our 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, which has been a basis for the Congressional budget process since it was established in 1974, reflects the facts that doing macroeconomic analysis of all proposed legislation would not be feasible, that nearly all legislation considered by CBO would have negligible macroeconomic effects anyway, and that estimates of macroeconomic effects are highly uncertain.
However, when requested, CBO can and does provide macroeconomic analyses of significant proposed changes in fiscal policy. Recent reports incorporating such analyses include our annual examination of the economic impact of the President’s budget, our annual long-term budget outlook, our 2011 study on the effects of an illustrative policy for reducing budget deficits, our 2012 update to the budget and economic outlook (which shows the consequences of continuing current policies rather than following current law), our quarterly reports on the American Recovery and Reinvestment Act, our 2011 testimony quantifying the short-term economic impact of alternative policies to increase economic growth and employment, and our 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.
Such macroeconomic analyses require complex modeling and a significant amount of time, so they can be produced only for major proposals 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 budgetary effects of those policies.
how accurate are your estimates and forecasts?
CBO’s baseline budget projections are intended to show the future paths of federal spending and revenues under current law and policies. The baseline is meant to serve as a neutral benchmark that lawmakers can use to measure the effects of proposed changes to spending and taxes. Thus, the baseline is not intended to be a prediction of future budgetary outcomes, and actual budgetary outcomes are almost certain to differ from CBO’s baseline projections. When issuing new baseline projections, CBO always presents an analysis of the changes from the previous baseline, categorizing them as legislative (the result of new legislation), economic (the result of changes in the economic forecast), and technical (the result of changes in other factors).
Historically, the accuracy of CBO’s economic forecasts has been very similar to the accuracy of those by the Blue Chip consensus (an average of private-sector forecasters) and the Administration. CBO regularly evaluates the accuracy of its economic forecasts and publishes its track record.
who is allowed to see your work?
CBO makes its work widely available to Members of Congress and their staff, and the public. All of our formal cost estimates and reports are posted on our website, and you can sign up for our RSS feeds or subscribe to the agency’s email service to receive notice when we publish work of interest to you.
how do you release your work?
CBO’s policy is to release publicly all analysis of public legislative proposals. As part of its mission as an independent, nonpartisan agency, CBO delivers its formal written cost estimates and analyses of budgetary and economic policy issues to all interested parties simultaneously. Our work is delivered to the Chairman and Ranking Minority Member of the committee of jurisdiction, to the sponsor, and to the budget committee, as appropriate. After delivery to the Congress, our work is posted to our website for the general public.
CBO also provides informal cost estimates to assist Members in evaluating proposals. Those informal estimates are preliminary because they do not undergo the same review procedures required for formal estimates. They are usually prepared when a committee or Member is in the process of developing legislation and has not made the proposal public. In such situations, the committee or Member usually asks CBO to keep the estimate confidential, and the agency does so as long as the proposal is not made public. That procedure enables lawmakers to take budgetary considerations into account while crafting legislation.