Congressional Budget Office (CBO)

The Congressional Budget Office (CBO) provides nonpartisan analysis to the US Congress on federal economic and budgetary matters.

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History of the Congressional Budget Office (CBO)

The Congressional Budget Office (CBO) was established in 1974 as part of the Congressional Budget and Impoundment Control Act of 1974.

The Congressional Budget and Impoundment Control Act was enacted in response to long-standing budgetary conflict between Congress and the executive branch. The conflict escalated under President Nixon, who used impoundment to withhold funding Congress had appropriated and pushed Congress to enact ceilings on overall spending levels.

The law reestablished congressional authority over the federal budget, which had been weakening since the early 1920s. Creating the CBO was part of that effort, as it provided Congress with expert staff like the President’s Office of Management and Budget (OMB) who could analyze the cost of legislative proposals. The CBO officially began operation on February 24, 1975.

What Reports Does the CBO Produce?

The CBO produces a variety of budgetary and economic data and information, including regular forecasts of federal spending, revenues, and major economic variables. For tax legislation, the CBO relies on estimates from the nonpartisan Joint Committee on Taxation (JCT).

CBO’s cost estimates typically reflect behavioral changes anticipated from a given proposal, but do not generally reflect dynamic analysis to incorporate macroeconomic feedback from changes in fiscal policy. Congress can pass rules to require dynamic scoring; for example, in the 118^th Congress, lawmakers required dynamic analysis for 10-year cost estimates of “major” legislation approved by authorizing committees. Major legislation was defined as having a gross budgetary effect of 0.25 percent of gross domestic product or more, or could be designated by the House Budget Chairman or JCT Vice Chairman. Dynamic analysis is particularly useful for evaluating the effects of major changes in tax policy, because changing tax policy can have significant budgetary consequences by changing peoples’ choices about work, saving, and investment.

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