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1 The Accuracy of CBO's Baseline Estimates for Fiscal Year 2018 1 (December 2018)

handle is hein.congrec/cboacbe0001 and id is 1 raw text is: DEC EMBER 201 8 The Accuracy of CBO's Baseline Estimates for Fiscal Year 2018 After each fiscal year has ended, the Congressional Budget Office reviews its baseline estimates of federal spending, revenues, and deficits and compares that information with actual budgetary results for that year. By assessing the quality of its projections and identifying the factors that might have led to under- or overestimates of federal revenues and spending in particular categories, CBO seeks to improve the accuracy of its work.1 This report reviews CBO's June 2017 projections for fis- cal year 2018 and compares them with actual outcomes. To make the comparison, CBO adjusted its projections to account for legislation that was enacted after the projections were completed. With those adjustments, the overall differences were as follows (see Table 1): Outlays: CBO projected that federal outlays in 2018 would total $4.19 trillion-$69 billion, or 1.7 percent, more than actual spending. That difference is smaller than the mean absolute error of 2.3 percent, on average, that was typical of projections made for 1993 to 2017.2 Revenues: CBO's projection of $3.37 trillion for federal revenues in 2018 also was too high-by $40 billion, or 1.2 percent. The average mean 1. For a detailed discussion of the quality of CBO's outlay projections for 2017, see Congressional Budget Office, The Accuracy of CBO' Outlay Projections for Fiscal Year 2017 (June 2018), www.cbo.gov/publication/53923. 2. 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 amounts of outlays or revenues from the projections and dividing that difference by the actual outlay or revenue amounts. absolute error for revenue projections made for 1983 to 2017 was larger-5.0 percent. E Deficit: The outlay and revenue differences were partially offsetting. As a result, the projected federal budget deficit for 2018 was just $29 billion, or 3.7 percent, more than the actual amount: $817 billion compared with $789 billion. How CBO Conducted This Analysis CBO regularly publishes baseline projections of federal outlays, revenues, and deficits for the current fiscal year and the ensuing decade. Those projections reflect the assumption that current laws governing taxes and spend- ing will generally remain unchanged over the period. This analysis focuses on projections for 2018 from CBO's June 2017 baseline, primarily because the budgetary effects of legislation that the Congress has considered over the past year typically were measured against that baseline.3 It also compares estimates in CBO's adjusted April 2018 baseline with actual 2018 outcomes.4 Any comparison of CBO's projections with actual results is complicated by legislation that is enacted after the pro- jections are completed. CBO does not attempt to predict future legislative changes or their effects on revenues and outlays when it prepares its baseline budget projections, but actual revenues and outlays invariably differ from CBO's estimates as a result of changes in federal law. 3. See Congressional Budget Office, An Update to the Budget and Economic Outlook: 2017 to 2027 (June 2017), www.cbo.gov/ publication/52801. 4. See Congressional Budget Office, An Analysis of the Presidents 2019 Budget (May 2018), www.cbo.gov/publication/53884, and The Budget and Economic Outlook: 2018 to 2028 (April 2018), www.cbo.gov/publication/5365 1. Note: 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 may not sum to totals because of rounding.

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