Congressional Budget Office
CBO, the Budget Process, and the Outlook Presentation at the Robert H. Smith School of Business,
University of Maryland
February 23, 2016
Keith Hall Director This presentation draws on An Introduction to the Congressional Budget Office (April 2015), www.cbo.gov/about/overview; and The Budget and Economic Outlook: 2016 to 2026 (January 2016), www.cbo.gov/publication/51129.
1 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO’s Origin and Staff
2 CO N GR ES S IO N A L B UDGE T O F F IC E
The Congressional Budget Office, along with the House and Senate Budget Committees, was created by the Congressional Budget and Impoundment Control Act of 1974 to play an important role in the budget process of the United States.
3 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO was created to provide the Congress with analysis of budgetary and economic issues in an objective and impartial manner. The agency is strictly nonpartisan.
4 CO N GR ES S IO N A L B UDGE T O F F IC E
The Director is appointed jointly by the Speaker of the House and president pro tempore of the Senate to a term of four years.
CBO has about 235 employees (most with advanced degrees), who are hired solely on the basis of professional competence, without regard to political affiliation.
5 CO N GR ES S IO N A L B UDGE T O F F IC E
Examples of CBO’s Role in the U.S. Budget Process
6 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO’s budget and economic outlook offers an economic forecast and projection of federal spending and revenues under current law—known as baseline projections—over the next 10 years. It is usually released in late January and updated in March and in August.
7 CO N GR ES S IO N A L B UDGE T O F F IC E
The President’s budget request is a comprehensive proposal for the federal government. It is usually submitted to the Congress early in February.
8 CO N GR ES S IO N A L B UDGE T O F F IC E
In its analysis of the President’s budget, CBO estimates the budgetary effects of the President’s proposals on the basis of its own economic projections and budget models. That analysis is typically released in March.
9 CO N GR ES S IO N A L B UDGE T O F F IC E
A concurrent budget resolution approved by both chambers sets each committee’s allocation of spending authority for the next fiscal year and aggregate spending and revenue levels for at least five years—usually on the basis of CBO’s baseline and estimates for proposed policy changes.
10 CO N GR ES S IO N A L B UDGE T O F F IC E
Authorizing legislation broadly authorizes the creation and operation of an agency, program, or activity. CBO provides estimates of the budgetary resources necessary to implement such legislation during its consideration.
Annual appropriation laws separately provide funding for many federal programs. CBO analyzes those bills as well.
11 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO’s Products and Activities
12 CO N GR ES S IO N A L B UDGE T O F F IC E
Baseline budget projections and economic forecasts covering the 10-year period used in the Congressional budget process Analysis of the President’s budget Cost estimates for legislation, including
analyses of federal mandates Scorekeeping for enacted legislation Long-term budget projections Analytic reports examining specific federal
programs, aspects of the tax code, and budgetary and economic challenges
13 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO does not:
Make policy recommendations
Enforce budget rules
Write legislation
Implement programs or regulations
Evaluate historical performance of government programs
14 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO’s Estimates
15 CO N GR ES S IO N A L B UDGE T O F F IC E
CBO’s cost estimates generally focus on the next 5 or 10 years but sometimes look out 20 years or more.
They are meant to reflect the middle of the distribution of possible outcomes.
16 CO N GR ES S IO N A L B UDGE T O F F IC E
The estimates incorporate behavioral responses to the extent feasible, on the basis of the available evidence.
They are open to new information and may change as a result, and they include explanations of the analysis to the extent feasible.
17 CO N GR ES S IO N A L B UDGE T O F F IC E
The Economic Outlook
18 CO N GR ES S IO N A L B UDGE T O F F IC E
Key Economic Indicators
19 CO N GR ES S IO N A L B UDGE T O F F IC E
Projected Contributions to the Growth of Real GDP
20 CO N GR ES S IO N A L B UDGE T O F F IC E
Employment Shortfall
Millions of People
21 CO N GR ES S IO N A L B UDGE T O F F IC E
The Labor Force, Employment, and Unemployment
Percentage of the Population
22 CO N GR ES S IO N A L B UDGE T O F F IC E
Labor Force Participation Rates
Percent
23 CO N GR ES S IO N A L B UDGE T O F F IC E
Hourly Labor Compensation
Percentage Change
24 CO N GR ES S IO N A L B UDGE T O F F IC E
The Budget Outlook
25 CO N GR ES S IO N A L B UDGE T O F F IC E
Total Deficits or Surpluses
Percentage of Gross Domestic Product
26 CO N GR ES S IO N A L B UDGE T O F F IC E
Spending and Revenues Projected in CBO’s Baseline, Compared With Actual Values in 1966 and 1991 Percentage of Gross Domestic Product
27 CO N GR ES S IO N A L B UDGE T O F F IC E
Revenues, by Major Source
Percentage of Gross Domestic Product
28 CO N GR ES S IO N A L B UDGE T O F F IC E
Major Changes in Projected Revenues From 2016 to 2026
29 CO N GR ES S IO N A L B UDGE T O F F IC E
Outlays, by Type of Spending
Percentage of Gross Domestic Product
Discretionary
Mandatory
Net Interest3.0
15.0
5.2
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 20260
4
8
12
16 Actual Projected
30 CO N GR ES S IO N A L B UDGE T O F F IC E
Number of People Age 65 or Older, by Age Group
Millions of People
1966 1976 1986 1996 2006 2016 2026 2036 20460
20
40
60
80
100
65 to 74
75 to 84
85 to 94
95 or Older
Actual Projected
31 CO N GR ES S IO N A L B UDGE T O F F IC E
Federal Debt Held by the Public
Percentage of Gross Domestic Product
