How CBO Prepares Baseline Budget Projections

The Congressional Budget Act of 1974, often called the Budget Act, established the House and Senate Committees on the Budget to set federal spending policy and identify priorities for allocating budgetary resources. To support those committees in carrying out their responsibilities, it also established CBO and required the agency to provide an annual report on spending, revenues, and deficits with subsequent revisions to that annual report.

To fulfill that requirement, at least twice each year, CBO provides the Congress with projections of revenues from each major revenue source, spending for every federal budget account, and the resulting deficits, along with forecasts for the nation’s economy. Those baseline projections are constructed to reflect an assumption that current laws governing taxes and spending would generally remain in place during the current fiscal year and for the ensuing 10 years. Baseline projections furnish the Congress with a neutral benchmark to use in determining whether proposed legislation is subject to various budget enforcement procedures. Most of the rules that govern baseline construction are specified in law, although some have been developed by CBO in consultation with the House and Senate Committees on the Budget.

CBO’s projections are published as tables and described narratively in its publications. One set of regular reports, The Budget and Economic Outlook, typically begins with a January release that is followed by updates in the spring and summer. The spring report often is released in conjunction with CBO’s analysis of the President’s budget request and reflects data and information that normally become available when the request is transmitted. Most commonly, the spring revision of the baseline underlies the Congressional budget resolution, and the effects of most legislation on mandatory spending and revenues are estimated relative to that baseline. The summer update reflects new information about spending and revenues for the current year, any newly enacted legislation, and any significant new macroeconomic developments.

CBO’s baseline projections are the result of a process that at various stages involves most of the agency’s staff. The projections are available online by program and in regularly posted collections of supplemental information.

In general, the process of developing a projection for a spending account or revenue source consists of:

• Analyzing actual results from previous years,
• Incorporating CBO’s economic forecast,
• Ensuring consistency with current law,
• Modeling spending and revenues appropriately, and
• Reviewing the resulting projections.

In keeping with its mandate to provide objective, impartial analyses, CBO never makes recommendations in its products. This document provides answers to questions that CBO is frequently asked about how it prepares its baseline projections for the budget.