TL/DR –
The Congressional Budget Office (CBO) often misses the economic projections used by Congress to shape legislation, according to an analysis by nonprofit watchdog Open the Books (OTB). The OTB report claimed that while the agency’s routine forecasting has generally been accurate, it has underestimated the costs of tax-and-spend policies and overestimated losses from tax reductions. The report also criticized the lack of transparency in the CBO, with the agency exempt from the Freedom of Information Act, resulting in information such as staff compensation costs being unavailable to the public.
Watchdog Highlights Congressional Budget Office’s Frequent Errors
According to a new review by a non-profit organization promoting government transparency, the Congressional Budget Office’s (CBO) economic projections, which are significantly relied upon by members of Congress from both parties for crafting legislation, often fall off target by large amounts.
The report by Open the Books (OTB) has criticized the agency, which claims to be ‘objective’ and ‘nonpartisan,’ for its tendency to underestimate the costs associated with tax-and-spend policies and Democratic initiatives. At the same time, it overestimates the economic losses resulting from Republican-led initiatives like tax cuts. Though CBO’s routine forecasting has been generally accurate, OTB found that significant policy initiatives have been misjudged widely according to the agency’s own self-audits.
“From 1983 to 2024, the average absolute error in revenue projections was 6 percent, with overestimations and underestimations occurring at about the same rate,” explains OTB. The agency has audited its own predictions every year since 2017.
The Washington Stand’s analysis of the annual over- and under-estimations by CBO for federal revenues, outlays, and their impact on the annual budget deficit from 2017 to 2025 showed an average of 8.2% for the five years where CBO underestimated revenues collected by the Department of the Treasury. Meanwhile, an average of 4% was found for the three years of overestimations.
CBO Projections Often Miss the Mark
When looking at CBO projections for annual outlays or spending, there were five years where the agency’s projection underestimated the actual amount by an average of 3.42%. Over-estimations averaged 2.43% in the three years. The projections for the impact on the federal government’s annual budget deficit included three years of underestimates by an average of 1.7% of GDP, and five years of over-estimation by 1.9% of GDP on average.
The OTB report highlighted a pattern where CBO’s projections often fell in line with the Office of Management and Budget (OMB) in the White House. However, the congressional forecasters’ projections were frequently and significantly off on major legislation.
Several instances where the CBO incorrectly projected the costs associated with major legislation were noted in the OTB report. These include the Affordable Care Act, the American Rescue Plan Act of 2021, the Inflation Reduction Act of 2022, and the American Recovery and Reinvestment Act.
For instance, despite working closely with legislators on the Affordable Care Act, the CBO’s initial cost estimate for Obamacare was $788 billion between 2010 and 2019. By 2012, the estimate for the period of 2012-2022 had risen to $1.76 trillion – an upward revision of $972 billion or 123%.
Similarly, for the American Rescue Plan Act of 2021, the CBO predicted the expanded Child Tax Credit would cost about $109 billion. However, when the possibility of extending the credit was considered, the cost was revised to $185 billion, marking a 70% increase.
The watchdog also drew attention to the CBO’s lack of transparency, likely due to Congress exempting itself from the Freedom of Information Act (FOIA), which includes agencies like the CBO. As a result, while the number of staffers at the CBO is known, and how many work on specific issue areas, the public does not have access to their individual compensation costs.
OTB noted that, while the CBO was created to provide nonpartisan and unbiased economic predictions, it has increasingly become entangled in the legislative process. “The agency suffers from a lack of transparency on staff and salary data while producing reports on ideologically charged issues like health care and climate change, influencing billions of dollars of spending,” OTB observed.
The CBO declined to comment on the OTB report but pointed out that it publishes information about its estimating methods and the accuracy of its projections here. It also provides materials explaining its analytical approach to health care policy here and here.
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