CBO regularly publishes baseline projections of federal revenues and outlays for the current fiscal year and the ensuing decade. Those projections, which reflect the assumption that current laws governing taxes and spending will generally remain unchanged over the period, typically underlie the budget resolutions prepared by the House and Senate Budget Committees and CBO’s cost estimates for proposed legislation. After each fiscal year has ended, CBO undertakes a detailed review of actual spending, as reported by the Administration, to assess the quality of the agency’s outlay projections. Such an evaluation helps CBO to improve the accuracy of its projections over time by identifying the factors that might have led to under- or overestimates of federal spending in particular categories.
In March 2016, CBO projected that federal outlays for fiscal year 2017 would total $4.1 trillion—about $65 billion, or 1.6 percent, more than the actual amount reported by the Administration’s Office of Management and Budget for 2017. (That $65 billion difference reflects an adjustment to take into account the estimated effects of legislation enacted after CBO’s baseline was completed, and it excludes spending related to Fannie Mae and Freddie Mac.) That difference is smaller than the mean absolute error of 2.3 percent for projections made for 1993 to 2016.
How CBO Conducted This Analysis
This analysis focuses on projections for 2017 from CBO’s March 2016 baseline primarily because the budgetary effects of legislation considered by the Congress in that year typically were measured against that baseline. The report also briefly compares 2017 spending estimated in CBO’s June 2017 baseline with actual 2017 outlays.
Any comparison of CBO’s projections with actual spending is complicated by legislation enacted after CBO completes its projections. CBO does not attempt to predict future legislative changes or their effects on outlays when it prepares its baseline budget projections; actual outlays invariably differ from CBO’s projections as a result of changes in federal law.
For this retrospective analysis, therefore, CBO adjusted its projections to incorporate the estimated budgetary effects of subsequently enacted legislation. In addition, the agency removed outlays for the housing entities Fannie Mae and Freddie Mac from its projections and from the actual amounts reported by the Administration because CBO and the Administration account differently for the transactions of those entities.