Each year, CBO produces projections of the budget and the economy, hundreds of formal cost estimates, and dozens of reports, while providing technical assistance to Congressional staff as they develop thousands of legislative proposals and amendments. CBO provides that information in a variety of ways and at various points in the legislative process.
Budget and Economic Projections
CBO regularly publishes projections of budgetary and economic outcomes that are based on the assumption that current laws regarding federal spending and revenues will generally remain in place. Those projections cover the 10-year period used in the Congressional budget process. CBO also publishes annual reports about those projections. The reports usually describe the differences between the current projections and previous ones; compare the economic projections with those of other forecasters; and show the budgetary effects of some alternatives to the fiscal policies underlying CBO’s projections. A detailed description of the methods used to project spending and revenues and the rules that govern the creation of those projections is available in How CBO Prepares Baseline Budget Projections. In addition, the process used to create the economic projections, including how CBO ensures consistency between them and the budget projections, is described in How CBO Produces Its 10-Year Economic Forecast.
The budget projections (which are known as the baseline) are a neutral benchmark that the Congress can use in assessing the budgetary effects of legislation. When CBO publishes cost estimates for proposed changes in law that would affect mandatory spending or revenues, they are based on the budget baseline. The baseline is also used in CBO’s analytical reports to assess the effects of possible changes in fiscal policy. The budget committees typically use CBO’s baseline as the starting point for budget resolutions; when they consider policy changes that may be incorporated in those resolutions, they often use estimates of the cost of those changes that are relative to the baseline. Finally, the Congress can use the baseline when determining whether new legislation would be subject to rules and procedures related to budget enforcement.
The baseline projections are not intended to be a prediction of budgetary outcomes. Rather, the projections are CBO’s best estimates of how the budget would evolve if existing laws did not change. They are updated two or three times per year (typically in the winter, spring, and summer) through a process that involves most of CBO’s staff. Once a year, usually in the spring or summer, CBO produces a detailed extended baseline, which focuses on the coming 30 years; the agency also produces an interim extended baseline in the winter. The economic projections are generally updated twice a year (typically in the winter and summer).
The Congressional Budget Act of 1974 (often called the Budget Act) requires CBO, to the extent practicable, to prepare cost estimates for legislation that authorizing committees have ordered reported—that is, agreed to send to the full House or Senate for consideration. Over the past decade, the agency has produced such estimates for more than 95 percent of reported bills.
In addition to reported bills, CBO sometimes provides estimates for legislation at other stages of the process, including introduced bills, amendments, other proposals, and legislative acts that have been passed by one or both chambers. Of the total number of estimates produced in the past decade, 13 percent were for such types of legislation. Over the past five years, the total number of estimates published by CBO has steadily increased each year, and in 2017 the agency issued 740 estimates.
Various provisions in the Budget Act—especially in sections 202, 402, and 424—govern how CBO prepares cost estimates. The statutory requirements were designed to ensure that CBO prioritizes estimates for the legislation that is likeliest to receive active consideration by the Congress. Individual Members can ask for formal estimates, but the Budget Act directs CBO to give priority to committees, particularly the House and Senate Budget Committees. Given CBO’s staffing, it generally is not possible to satisfy requests for formal estimates that do not come from the budget committees, the committees with jurisdiction over a proposed change in law, or the Congressional leadership, but CBO analysts work on individual Members’ requests as time permits.
CBO’s cost estimates provide information that the Congress can use as it implements rules and procedures to enforce budgetary rules or targets. However, those cost estimates are only advisory. They can—but do not have to—be used in budget enforcement. Moreover, CBO does not enforce budgetary rules; the budget committees do. In keeping with its mandate to provide objective, impartial analyses, CBO never makes recommendations in its cost estimates or other products.
Answers to many of the common questions regarding CBO’s process for producing cost estimates are available in How CBO Prepares Cost Estimates. For example, that document discusses the rules that govern what budgetary effects are identified in an estimate.
Each cost estimate tells a concise story about a legislative proposal’s likely effects on federal outlays or revenues, compared with what would happen under current law (that is, with what would occur if the proposal was not enacted). For bills that would authorize discretionary activities or programs—those whose funding is controlled by annual appropriation acts—cost estimates typically provide budgetary information for a 5-year period. For bills that would affect mandatory spending or revenues, the period is 10 years. For most tax legislation, CBO uses estimates provided by the staff of the Joint Committee on Taxation (JCT).
In addition to formal, written estimates for bills approved by committees, CBO devotes substantial effort to providing technical assistance, sometimes including preliminary estimates, at other stages of the legislative process—such as when legislation is being developed or when amendments to legislation are being considered. Such technical assistance occurs primarily through staff-to-staff communications, and it takes place very frequently—for the development of thousands of legislative proposals and amendments each year. In some cases, preliminary estimates are prepared when Members or their staffs are evaluating alternative proposals to accomplish their goals, have not made any specific proposals public, and need the flexibility to modify their proposals before they become public, sometimes in response to CBO’s preliminary estimates.
In such situations, CBO recognizes that the confidentiality of its work is critical to committees’ deliberations, so it keeps preliminary analysis and estimates confidential as long as the proposals are not made public. In contrast, the formal estimates are posted on CBO’s website.
In addition to budget projections, economic projections, and cost estimates, CBO publishes dozens of reports each year at the request of the Congress and to provide background information about CBO’s analyses. That background information enhances the transparency of the agency’s work. The reports include:
- A reestimate of the President’s annual budget proposal that is independent of the estimates provided by the Administration;
- A monthly analysis of federal spending and revenues;
- A periodic reference volume examining numerous options for reducing budget deficits; and
- Analytic reports that examine particular federal spending programs, aspects of the tax code, and budgetary and economic challenges.
Principles and Rules That Govern Baseline Projections and Cost Estimates
Most of the principles and rules that govern the formulation of baseline projections and cost estimates are set in law. Others originated in budget resolutions, House or Senate rules, conference reports that accompanied budget legislation, and the 1967 Report of the President’s Commission on Budget Concepts. In addition, some have been developed by CBO in consultation with the House and Senate Budget Committees; such consultations are necessary to resolve uncertainty about how to implement the rules in particular cases.
For two reasons, the principles and rules governing the construction of the baseline directly affect cost estimates. First, in those estimates, the budgetary effects of provisions that would affect mandatory spending and revenues are measured in relation to the baseline projections. Second, the estimates follow the same underlying principles. For example, if a rule requires CBO to assume in the baseline that an expiring program will be extended, the agency will estimate the cost or savings from a proposed change to the expiring program in relation to a spending path in which the program is extended.