CBO Describes Its Cost-Estimating Process

The Congressional Budget Act of 1974, often called the Budget Act, established the House and Senate Committees on the Budget to set broad federal tax and spending policy. To support those committees in carrying out their responsibilities, it also established the Congressional Budget Office and required CBO to prepare estimates of the cost of legislation at certain points in the legislative process. Various provisions that act—primarily sections 202, 402, and 424—govern CBO’s preparation of cost estimates.

Provisions in other budget laws—for example, section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985—also contain instructions about how to project spending and revenues. In addition, CBO’s cost estimates are guided by precedent and rules that originated in budget resolutions, rules of the House or the Senate, and the 1967 Report of the President’s Commission on Budget Concepts. Other rules have been jointly developed by the House and Senate Budget Committees, the Office of Management and Budget, and CBO.

CBO’s cost estimates provide information that Members of Congress can use when considering how to vote on legislation and that the Congress can use as it implements rules and procedures when considering legislation that would affect the federal budget. However, CBO’s cost estimates are advisory only. They can—but need not—be used to enforce budgetary rules or targets. Moreover, CBO does not enforce budgetary rules; the Budget Committees do. And, in keeping with its mandate to provide objective, impartial analyses, CBO never makes recommendations in its cost estimates or other products.

This document provides answers to questions that CBO is frequently asked about how it prepares cost estimates. CBO’s web page about cost estimates provides more information and access to completed estimates. For an explanation of key terms used throughout this report, seeCommon Budgetary Terms
Explained; for detailed definitions, see CBO’s Glossary.