What Is the Congressional Budget Office?

FT Contributor  | 

The Congressional Budget Office (CBO) is a federal agency that’s not tied to one political party. Its main job is to assist in analyzing the federal budget and potential legislation that’s being discussed in the House and Senate. The CBO looks into how a new budget and legislation affect the country’s economic future.

While it’s up to Congress and the president to develop a federal budget that addresses mandatory spending, public debt, and discretionary spending, the CBO is in charge of ensuring the budget is realistic. Both negative and positive impacts to the economy are noted in the CBO reports.

The CBO director reports to the House and Senate and assists the budget committees in creating a federal budget that provides funding where it’s needed without increasing the federal deficit exponentially. There are 250 staff members in the CBO and most of them hold advanced degrees in public policy or economics.

The Role of the CBO

The CBO must complete several tasks that relate to the federal economy and budget. By creating these analyses and calculations, the CBO assists Congress and the president in deciding whether legislation and budget changes are beneficial to the economy’s future.

Provides Budget Analyses

One of the most important tasks the CBO performs is analyzing the federal budget. When a budget is created by the president, the CBO creates 20 different economic analyses of the proposed budget to see how it affects important programs and issues. Some of these analyses include the following:

  • U.S. Nuclear Forces costs.
  • Federal debt.
  • Public spending on transportation improvements.
  • Federal taxes and the distribution of income.
  • Long-term budget projections for the Social Security program.

When reporting on the outlook for the federal budget, the CBO analyzes how it will affect the economy in the coming decade. It predicts whether the economy will experience a budget surplus and approximately how much public debt will rise in the coming years. This allows Congress members to discuss how the proposed budget will affect the federal economy’s future.

Updates Revenue Production

When the CBO publishes reports on how proposed legislation or the president’s budget would affect the economy, it also provides updates on revenue production. It looks into how the federal government makes its revenue, which is usually through individual, corporate, and payroll taxes.

By updating the revenue production estimates along with the proposed budget, it’s easier to see how the economy will likely benefit from the proposed legislation. When updating revenue production, the CBO also analyzes the gross domestic product (GDP) and how it relates to the proposed budget. This is important because government spending is one component that makes up the GDP. Through this analysis, it’s easier to see the differences between the GDP, revenue, and federal deficit.

Prepares Bill Estimates

When Congress proposes a bill, it’s the CBO’s job to provide estimates on how the bill will affect the federal budget and economy. A thorough analysis of the economic impact a bill has on the federal budget helps members of the House and Senate, as well as the president, decide if it’s beneficial to pass the legislation.

The Importance of the CBO

The CBO is an important part of the legislation and federal budget process. It provides a bipartisan viewpoint on the federal economy and how certain actions will affect the future of the economy.

CBO reports assist Congress members in deciding whether to vote to pass specific proposed bills by offering insight on bills’ potential impacts on the economy. For example, in the 2008 financial crisis, the CBO helped Congress figure out how to pass legislation that would help small businesses and stimulate the economy for the long term without too many negative effects.

The CBO offers public reports on the state of the economy and its outlook for citizens to review. These reports include important information on how the president’s budget affects the overall economy and public debt. This holds the president and Congress accountable for implementing a federal budget and legislation that won’t have too many negative impacts on the federal economy’s future.

What Is a CBO Score?

A CBO score is the analysis the agency completes for a budget or proposed legislation. When the CBO creates a cost estimate analysis for a bill, it projects how this piece of legislation will affect the federal economy over the next 10 years.

The positive or negative impacts are weighed and a CBO score is created in relation to the bill. The score looks at the bill and economy at current face value and doesn’t take into consideration any other changes to legislation that may occur in the future. This score helps Congress members and the president decide if the legislation should be passed or reformed.

Advantages of the CBO

There are many advantages to the CBO, including the following:

  • Unbiased information: The CBO isn’t affiliated with a political party so it provides unbiased, calculated information to Congress and the president.
  • Economic predictions: With the cost estimates provided by the CBO, Congress has a better idea of how legislation will affect the economy in the future.
  • Holds the president accountable: Unbiased analysis of the president’s proposed budget allows Congress to see what needs to be changed and how it will affect the economy.
  • Learns the impact of certain actions: After careful analysis, the CBO offers information on how policy changes affect the economy, such as if austerity measures are put into place or an additional federal program is funded. This is one aspect Congress members may analyze when deciding whether to vote for a bill.

Disadvantages of the CBO

While the CBO provides important economic information to Congress, the president, and the public, there are disadvantages of this government agency, including the following:

  • Not always accurate: While the CBO uses extensive data to analyze how legislation will affect the economy, its projections are not always accurate. The agency releases an error report each year that reviews how accurate its reporting was in the previous year’s budget estimates.
  • Legislation is changed and modified: While the CBO may provide accurate information on how legislation will affect the economy in coming years, it can’t predict everything. Legislation may be redefined or the budget may experience other unexpected changes that affect the estimates provided by the agency.
  • Congress continues to increase the federal deficit: Despite the CBO’s warnings about public debt and the increasing deficit, Congress continues to increase the deficit to support other programs. CBO reports and scores may sometimes fall on deaf ears if other positive impacts to the economy seem more important to lawmakers.

The CBO helps Congress and the president by providing illustrative estimates on how legislation and budget will affect the federal economy. By receiving this information from a bipartisan federal agency, lawmakers can trust these facts and figures and use them when deciding whether to vote for bills and budget changes.


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