The Accuracy of CBO’s Baseline Estimates for Fiscal Year 2019
In its 2018 projections for fiscal year 2019, CBO overestimated revenues and underestimated outlays by 0.8 percent and 0.1 percent, respectively. CBO’s projection of the federal budget deficit in 2019 was less than the actual amount by 0.1 percent of GDP.
After each fiscal year has ended, CBO reviews its baseline projections of federal revenues, outlays, and deficits and compares them with actual budgetary outcomes for that year. By assessing the quality of its projections and identifying the factors that might have led to under- or overestimates of federal revenues and outlays in particular categories, CBO seeks to improve the accuracy of its work.
This report reviews CBO’s projections for fiscal year 2019 (specifically, those that were reported in what CBO calls its adjusted April 2018 baseline) and compares them with actual outcomes. The differences between the projections and the outcomes for revenues, outlays, and the deficit were smaller than the mean absolute errors in projections for previous years.
To make the comparison, CBO updated its projections to account for subsequently enacted legislation. CBO also removed outlays for Fannie Mae and Freddie Mac from both its projections and the actual outcomes because CBO and the Administration account differently for the transactions of those housing entities. With those adjustments, the overall differences were as follows:
- Revenues. CBO’s projection of $3.49 trillion for federal revenues in 2019 was too high—by $28 billion, or 0.8 percent. That difference was much smaller than the mean absolute error of 5.0 percent in revenue projections made for the years from 1983 to 2018.
- Outlays. CBO’s projection of $4.46 trillion for federal outlays in 2019 was too low—by $3 billion, or 0.1 percent. That difference was likewise much smaller than the mean absolute error of 2.3 percent in outlay projections made for the years from 1993 to 2018.
- The Deficit. Those outlay and revenue differences resulted in a deficit projection for 2019 that was $31 billion less than the actual amount: $972 billion rather than $1,004 billion. That difference was equal to 0.1 percent of gross domestic product (GDP). by comparison, the mean absolute error in deficit projections made for 1985 to 2018 equaled 1.0 percent of GDP.
How CBO Conducted This Analysis
CBO regularly publishes baseline projections of federal revenues, outlays, and deficits for the current fiscal year and the ensuing decade. Those projections reflect the assumption that current laws governing taxes and spending will generally remain unchanged. This analysis focuses on the projections for 2019 in CBO’s adjusted April 2018 baseline, primarily because the budgetary effects of legislation that the congress has considered over the past year typically were measured against that baseline.
Any comparison of CBO’s projections with actual outcomes is complicated by legislation that was enacted after the projections were completed. CBO does not attempt to predict future legislative changes or their effects on revenues and outlays when it prepares its baseline budget projections, but actual revenues and outlays invariably differ from CBO’s estimates as a result of such changes.
To account for those changes, CBO updated its projections to incorporate the estimated effects of subsequent legislation. In total, CBO increased the revenue projections for 2019 in the adjusted April 2018 baseline by $0.2 billion and increased the outlay projections by $2.4 billion. Those amounts reflect the cost estimates that CBO and the staff of the Joint committee on Taxation prepared when the legislation was enacted— rather than actual amounts, which cannot be identified in most cases. As a result, any errors in the initial cost estimates are included in the differences discussed in this analysis. The increase that CBO made in its outlay projections also includes the estimated increase in spending for interest on the federal debt that resulted from enacted legislation, although those effects were not included in the cost estimates.