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1 The Accuracy of CBO's Budget Projections for Fiscal Year 2020 1 (December 14, 2020)

handle is hein.congrec/aryocobt0001 and id is 1 raw text is: DECEMBERO 20 The Accuracy of CBO's Budget Projections for Fiscal Year 2020 After each fiscal year has ended, the Congressional Budget Office reviews its projections of federal revenues, outlays, and deficits and compares them with actual budgetary outcomes for that year.1 By assessing the quality of its projections and identifying the factors that might have led to under- or overestimates of particular categories of federal revenues and outlays, CBO seeks to improve the accuracy of its work. To review its projections for fiscal year 2020, CBO started with its May 2019 baseline projections and updated them to include the estimated effects of subsequently enacted legislation. The adjustments were particularly large for 2020 because of legislation enacted in response to the 2020 coronavirus pandemic.2 In total, those adjust- ments-which reflect the estimated budgetary effects reported in cost estimates that CBO and the staff of the Joint Committee on Taxation (JCT) prepared when the legislation was enacted-reduced CBO's projections of rev- enue by $0.6 trillion and increased its projections of outlays by $1.8 trillion.3 CBO also removed outlays for Fannie Mae 1. For last year's edition of this report, see Congressional Budget Office, The Accuracy of CBO's Baseline Estimates for Fiscal Year 2019 (December 2019), www.cbo.gov/publication/55927. 2. Those laws include the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act, and the Paycheck Protection Program and Health Care Enhancement Act. 3. In its September baseline, CBO adjusted its estimates of the effects of legislation on certain programs by increasing outlays in 2020 by $132 billion, on net. For more information on those revisions, see Congressional Budget Office, An Update and Freddie Mac from both its projections and the actual outcomes because CBO and the Administration account for the transactions of those housing entities differently.4 With those adjustments, the overall differences were as follows (see Table 1): Revenues. CBO's projection of $3.11 trillion for federal revenues in 2020 was too low-by $312 billion, or 9 percent. That difference was larger than the mean absolute error of about 5 percent in revenue projections made for the years from 1983 to 2019.5 to the Budget Outlook: 2020 to 2030 (September 2020), www.cbo.gov/publication/56517. The estimated effects on outlays for 2020 may be further revised when CBO updates its evaluation of outlay projections. For an earlier report, see Congressional Budget Office, An Evaluation of CBO's Past Outlay Projections (November 2017), www.cbo.gov/publication/53328. 4. For more information about the differences, see Congressional Budget Office, Accounting for Fannie Mae and Freddie Mac in the Federal Budget (September 2018), www.cbo.gov/ publication/5 4475. 5. The mean absolute error is the arithmetic average of the projection errors without regard to whether they are positive or negative, so errors in different directions do not offset one another. CBO calculated projection errors by subtracting the actual amount of outlays or revenues from the projection and dividing that difference by the actual outlay or revenue amount. The mean absolute error in the deficit projections was expressed as a percentage of gross domestic product rather than as a percentage calculated from dollar values in order to account for years in which the actual deficit or surplus was small, causing relatively small projection errors (in dollar terms) to result in large percentage errors. Notes: Unless this report indicates otherwise, all years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Numbers in the text and tables may not add up to totals because of rounding.

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