Congressional Budget Office: The Accuracy of CBO’s Budget Projections for 2023

December 15, 2023

The Congressional Budget reports that its May 2022 projections for fiscal year 2023, CBO overestimated revenues by 11 percent and underestimated outlays by 9 percent. CBO’s projection of the federal deficit for 2023 was less than the actual amount by 3.9 percent of GDP.

SUMMARY:

After each fiscal year ends, the Congressional Budget Office reviews its projections of federal revenues and outlays and the government’s budget deficit and compares them with actual budgetary outcomes for that year. 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 2023, CBO focused on its May 2022 budget projections and updated them to include the estimated effects of subsequently enacted legislation as reported in cost estimates prepared by CBO and the staff of the Joint Committee on Taxation (JCT), typically when the legislation was enacted. Those adjustments increased CBO’s projections of revenues by $26 billion (or 0.5 percent) and increased its projections of outlays by $40 billion (or 0.7 percent).

In addition to incorporating the effects of subsequently enacted legislation, CBO made two further adjustments. Because of their unusual size and nature, the estimated budgetary effects of the Supreme Court’s June 2023 decision prohibiting the Administration’s planned cancellation of outstanding student loans for many borrowers were excluded from this analysis. CBO also removed outlays for Fannie Mae and Freddie Mac from its projections and from estimates of actual outcomes because it accounts for the transactions of those entities differently from how the Administration accounts for them. After those adjustments, the overall differences between CBO’s budgetary projections and actual outcomes were as follows:

• Revenues. CBO’s projection of $4.9 trillion for federal revenues in 2023 was too high—by $0.5 trillion, or 11 percent. That difference was roughly twice the average absolute error of about 6 percent in CBO’s revenue projections for 1983 to 2022.
• Outlays. CBO’s projection of $5.9 trillion for federal outlays in 2023 was too low—by $0.6 trillion, or 9 percent. That difference was more than four times the average absolute error of 2 percent in outlay projections for 1993 to 2022.
• Deficit. Because of the differences between projected and actual revenues and outlays, CBO’s deficit projection of $1.0 trillion for 2023 was $1.0 trillion less than the actual amount. That difference was equal to 3.9 percent of gross domestic product (GDP)—more than three-and-a-half times the average absolute error of 1.1 percent of GDP in the agency’s deficit projections for 1985 to 2022.

The three categories of revenues and outlays with the largest misestimates accounted for nearly three-fourths of the difference between the projected and actual deficit. An overestimate of receipts from individual income taxes contributed the most to the deficit difference (accounting for 38 percent of that total), followed by underestimates of net interest outlays (21 percent) and spending for higher education (14 percent).

COMPLETE REPORT.

RELATED PUBLICATIONS:

• An Update to the Budget Outlook: 2023 to 2033
  May 12, 2023
• An Evaluation of CBO’s Projections of Outlays From 1984 to 2021
  April 26, 2023
• CBO’s Projections of Realized Capital Gains Subject to the Individual Income Tax
  February 15, 2023
• Recent Changes to CBO’s Projections of Remittances From the Federal Reserve
  February 15, 2023
• The Accuracy of CBO’s Budget Projections for Fiscal Year 2022
  January 9, 2023
• The Budget and Economic Outlook: 2022 to 2032
  May 25, 2022
• An Evaluation of CBO’s Past Revenue Projections
  August 19, 2020
• An Evaluation of CBO’s Past Deficit and Debt Projections
  September 11, 2019

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  Established in 1974, The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government.  It is charged with providing  members of Congress  objective  analysis of budgeting and economic issues to support the congressional budget process. Each year, CBO economists and budget analysts produce dozens of reports and hundreds of cost estimates for proposed legislation.