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1 The Accuracy of CBO's Outlay Projects for Fiscal Year 2017 1 (June 2018)

handle is hein.congrec/cboactlt0001 and id is 1 raw text is: . / ... JUNE 2018 The Accuracy of CBO's Outlay Projections for Fiscal Year 2017 The Congressional Budget Office regularly publishes baseline projections of federal revenues and outlays for the current fiscal year and the ensuing decade. Those projections, which reflect the assumption that cur- rent laws governing taxes and spending will generally remain unchanged over the period, typically underlie the budget resolutions prepared by the House and Senate Budget Committees and CBO's cost estimates for proposed legislation. After each fiscal year has ended, CBO undertakes a detailed review of actual spending, as reported by the Administration, to assess the quality of the agency's outlay projections. Such an evaluation helps CBO to improve the accuracy of its projections over time by identifying the factors that might have led to under- or overestimates of federal spending in particular categories. I In March 2016, CBO projected that federal outlays for fiscal year 2017 would total $4.1 trillion-about $65 billion, or 1.6 percent, more than the actual amount reported by the Administration's Office of Management and Budget for 2017. (That $65 billion difference reflects an adjustment to take into account the estimated effects of legislation enacted after CBO's baseline was com- pleted, and it excludes spending related to Fannie Mae and Freddie Mac; see Table 1.) That difference is smaller 1. CBO also regularly reviews the differences between its revenue projections and the actual amounts collected in a fiscal year, comparing total receipts with its baseline projections and considering additional details on tax liabilities that are available only after some time has passed. CBO is planning to describe the accuracy of its revenue projections in a future report. than the mean absolute error of 2.3 percent for projec- tions made for 1993 to 2016.2 How CBO Conducted This Analysis This analysis focuses on projections for 2017 from CBO's March 2016 baseline primarily because the budgetary effects of legislation considered by the Congress in that year typically were measured against that baseline. The report also briefly compares 2017 spending estimated in CBO's June 2017 baseline with actual 2017 outlays.3 Any comparison of CBO's projections with actual spend- ing is complicated by legislation enacted after CBO com- pletes its projections. CBO does not attempt to predict future legislative changes or their effects on outlays when it prepares its baseline budget projections; actual outlays invariably differ from CBO's projections as a result of changes in federal law. For this retrospective analysis, therefore, CBO adjusted its projections to incorporate the estimated budgetary effects of subsequently enacted legislation. In addition, the agency removed outlays for the housing entities Fannie Mae and Freddie Mac from its projections and 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. 3. For more on CBO's baseline process, see How CBO Prepares Baseline Budget Projections (February 2018), www.cbo.gov/ publication/53532. Note: Unless otherwise indicated, 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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