Processes

CBO's work follows processes that are specified in the Budget Act or that it has developed in concert with the House and Senate Budget Committees and Congressional leadership. Most of the processes that guide CBO's work have been in place since the 1970s. The agency is required by law to describe the basis for its cost estimates and follows the same practice for its reports.


How does CBO decide what to 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 sustained interest from the Congress are described in products.

The agency is required by law to produce a cost estimate for nearly every bill that is approved by a full committee of either the House or the Senate; the only exceptions are appropriation bills, which do not receive written cost estimates but whose budgetary effects CBO estimates for the Appropriations Committees. The agency also publishes cost estimates at other stages of the legislative process if requested to do so by a relevant committee or by the Congressional leadership. Moreover, CBO fulfills numerous requests for technical assistance as committees are crafting legislation, as amendments to bills are being debated, and at other times in the legislative process.

Beyond its regular reports and cost estimates, CBO prepares analytic reports at the request of the Congressional leadership or of the Chairmen or Ranking Members of committees or subcommittees. CBO’s managers and analysts work with requesters and their staffs to understand the scope and nature of the work that would be most useful to the Congress.

What methodology does CBO use in its analyses?

All of CBO's work reflects the agency's objective, impartial, and nonpartisan analytical assessments. Those assessments are based on several factors:

  • A detailed understanding of federal programs and revenue sources;
  • Careful reading of the relevant research literature;
  • Extensive analysis of data collected and reported by the government's statistical agencies and by private organizations (for example, 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, various health care surveys, and data on financial transactions); and
  • Consultation with numerous outside experts, including professors, think-tank analysts, representatives of industry groups, other private-sector experts, and employees of federal, state, and local governments.

CBO does not attempt to predict the ways in which the Congress might amend existing laws or modify legislative proposals being considered. Therefore, the agency's baseline budget and economic projections generally follow current laws (as well as rules for constructing baseline projections that are specified in law or that CBO and the Budget Committees have developed). In addition, CBO regularly shows the effects of adopting alternative policies that have been discussed by the Congress.

How particular federal programs, the budget as a whole, and the U.S. economy would evolve under current law is often uncertain, as are the effects of legislation being considered by the Congress. CBO aims to develop estimates that are in the middle of the range of likely outcomes and to clearly communicate the basis for those estimates and their uncertainty. In addition, the agency describes and explains the revisions to its budget and economic projections, and it reports on the accuracy of those projections.

Does CBO disclose its methodology?

Yes. CBO is required by law to disclose the basis for each of its cost estimates, and the agency follows the same practice for its reports.

Read more about how CBO ensures the transparency of its work.

Who reviews CBO’s 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, when that is practical. In some cases, those experts are members of CBO's Panel of Economic Advisers or Panel of Health Advisers. Although such experts provide considerable assistance, CBO is solely responsible for its work.

Why doesn’t CBO make policy recommendations?

Choices about public policy inevitably involve 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.

Read more about CBO’s objectivity.

What is a “Baseline Projection”?

CBO’s baseline budget and economic projections are based on the assumption that current laws governing federal revenues and spending will 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 have been developed by CBO 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 does CBO produce its economic forecasts?

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 economic forecasts are based on current laws governing federal taxes and spending (and on additional rules for constructing baseline budget projections that are specified in law or that have been developed by CBO and the Budget Committees). At the same time, the agency’s economic forecasts serve as a basis for its baseline budget projections.

What behavioral responses are included in CBO’s estimates?

CBO's analysts assess the extent to which proposed policies would affect people's behavior in ways that would, in turn, affect federal revenues or spending; those effects are routinely reflected in the agency's cost estimates and reports. For example, the agency's estimates include changes in crop production that would result if the Congress adopted new farm policies, changes in the likelihood that people would take up certain government benefits if the Congress altered policies pertaining to those benefits, and changes in the quantity of health care services that would be provided if the Congress adjusted Medicare's payment rates for certain providers. (Similarly, in its estimates of the budgetary effects of tax legislation, the staff of the Joint Committee on Taxation accounts for behavioral responses to changes in the tax system—for example, changes that would take place in the timing and size of capital gains realizations if the tax rate applicable to capital gains was modified.)

Although CBO's cost estimates reflect likely behavioral responses to a proposal, with a few exceptions they generally do not include what is sometimes known as dynamic analysis. Dynamic analysis refers to instances in which CBO takes into account further behavioral changes that would affect total output in the economy. Those broad macroeconomic changes—which include changes in the labor supply or private investment—resulting from changes in fiscal policy can in turn have budgetary consequences. By long-standing convention, those consequences are not generally reflected in CBO's cost estimates. However, the agency provides such information at the request of the Budget Committees when practicable.

How do CBO’s analyses whose scope is budget as a whole differ from those for specific pieces of legislation?

CBO’s analyses whose scope is the budget as whole—such as those examining the Budget Control Act of 2011, the President’s budget, and alternative scenarios in reports on the long-term budget outlook—incorporate, among many other things, the effects on federal interest payments of such broad proposals’ changes to the total amount of federal debt. To be consistent with long-standing procedures used by the Congress for budget enforcement purposes, CBO does not include such effects in cost estimates for specific pieces of legislation or other analyses of specific proposals.

Analyses by CBO can also incorporate the macroeconomic effects of government policy, and the resulting feedback effects on the federal budget. In particular, the Concurrent Resolution on the Budget for Fiscal Year 2016 requires such analyses for major pieces of legislation, as discussed above. Those analyses account for the effect on federal interest payments of changes to interest rates that would result from proposed policies. In its presentation of results, CBO also includes the effects on federal interest payments of changes in the total amount of federal debt if the analytic scope is the budget as a whole, as when examining the President’s budget, but does not if it is limited to a specific piece of legislation, such as repealing the Affordable Care Act.

How accurate are CBO’s 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 then serve as a neutral benchmark against which Members of Congress can measure the effects of proposed legislation. Because lawmakers frequently enact changes to laws, however, actual budget 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. Therefore, the differences between projections and outcomes can be misleading measures of the quality of the projections unless adjustments are made for changes in laws.

The agency’s updates of its baseline budget projections 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). CBO also regularly publishes comparisons of its economic projections with those of other forecasters. Those comparisons—which do not adjust 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.

Judging the accuracy of CBO’s cost estimates for legislation that is ultimately enacted is often quite difficult—generally 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 separately identified. As a result, when spending for a government program turns out to be higher or lower than CBO had expected after a legislative change, it is usually unclear whether the error should be attributed to the previous baseline projection for spending under that program or to CBO’s estimate of the effects of the new legislation. Nonetheless, CBO carefully scrutinizes errors in its projections, reviews data on spending patterns for federal programs, and consults with outside experts on those programs in order to improve its estimating methodology.

CBO also endeavors to communicate to the Congress the uncertainty of the agency’s estimates. For example, most of CBO’s analyses of the economic effects of changes in tax and spending policies present ranges of estimated effects; the agency’s long-term budget projections show the effects of alternative outcomes for key demographic and economic variables; and the agency’s projections of the finances of the Social Security system include ranges of outcomes derived from uncertainty about key variables.

How does CBO make its work available?

CBO releases information in ways that make it widely available, and the agency keeps the Congress informed about its completed and forthcoming work.

Releasing the Agency's Work. CBO aims to make its work readily accessible to the Congress and the public. In some circumstances, however, the needs of the Congress as it formulates legislation lead CBO to keep the results of an analysis confidential. The agency's procedure for releasing the results of an analysis depends on which of the two broad categories of the agency's work it falls into.

The first category consists of cost estimates and analytic reports that address public legislative proposals or broad policy issues. Public legislative proposals include introduced bills and amendments, proposals in the President's budget, policy options that CBO has analyzed in one of its reports, and bills that have been voted on by committees or by the House or Senate. They also include proposals that have been widely discussed in the public domain or that have been publicly discussed in some detail by their sponsors.

CBO publicly releases all of its cost estimates and analytic reports. It delivers its work to interested Members of Congress and their staffs, including the sponsor of legislation or requester of a report, the Chair and Ranking Member of the committees of jurisdiction, and the Budget Committees. Soon after delivery to those key interested parties, the agency posts the work on its website. In addition, an email service, Twitter announcements, and RSS feeds notify subscribers when the agency publishes work on a particular topic. Occasionally, when CBO analyzes legislative proposals that are already public, there is not enough time to publish a cost estimate. In such cases, communications about CBO's analysis are available to any interested party in the Congress. Finally, if a requester withdraws a request for an analytic report when the work undertaken is substantially complete or would continue to inform Congressional deliberations, CBO will proceed with its plan to release the report publicly.

The second broad category of CBO's work consists of technical assistance. Members and their staff often evaluate alternative proposals to accomplish a goal before they make a specific proposal public, and they need the flexibility to modify that proposal—sometimes in response to CBO's preliminary estimates—before it becomes public. CBO's analysts typically give committee staff preliminary estimates on a broad range of legislative options, allowing them to consider different approaches before deciding on a specific legislative path. In such situations, the agency recognizes that the confidentiality of its work is critical to a committee's deliberations, so it keeps its preliminary estimates confidential until the proposals are made public. Those communications are preliminary because they do not undergo the same review required for cost estimates.

Sometimes the Congress begins public consideration of a proposal for which CBO has developed a preliminary estimate but has not had time to complete a careful review of the legislative language that has been made public and to prepare a cost estimate. In such cases, CBO sometimes releases publicly its preliminary analyses.

Keeping the Congress Informed. To provide the Congress with a comprehensive review of its work, CBO releases a catalogue of its completed projects in its annual request for appropriations. For recently released reports, an email notification is sent to interested staff. The agency also publishes quarterly reports listing recent publications and work in progress, which may include reports, working papers, testimonies, interactive tools, and cost estimates for bills that were ordered reported by a committee or that were the subject of a motion to be placed on the consensus calendar in the House of Representatives. For example, the quarterly reports list the topics of requested reports that are expected to be released in the coming months. When the publication of such a report is imminent, CBO announces the title on its website. The agency revisits the ways it notifies the Congress about its work at the start of each Congress.

Do other countries have organizations like CBO?

A number of other countries have parliamentary budget offices or independent fiscal institutions that provide budgetary and economic information for their legislatures and the public. However, the responsibilities of such offices vary among countries. The Organisation for Economic Co-operation and Development coordinates a network of officials of those offices.