the annual analysis of the President’s budget, including its reestimation using the CBO's economic and technical
assumptions. Further tasks include cost estimates of bills reported by congressional committees and estimates of
unfunded federal mandates, which impose costs on state or local governments. During the dozen years that the
Budget Enforcement Act was in effect, the CBO also reported to Congress on the status of spending limits and
any required offsets.
As an important input into its advice on the budget, the CBO produces two macroeconomic forecasts each year.
They cover GDP, unemployment, inflation, and interest rates for the next two calendar years. In preparing the
economic projections, the CBO is guided by a panel of economic advisors. The CBO also produces 10-year
baseline projections of macroeconomic trends and federal revenues and expenditures.
The baseline projections serve as the starting point for measuring the impact of policy changes on future
budgets (“scoring”). The baseline report is updated each summer to reflect fresh estimates of economic
conditions and recent policy changes. In explaining variations from the previous baseline projection, the CBO
classifies changes into three categories: policy changes, such as new legislation; economic changes, such as
higher or lower GDP growth; and technical changes due to reestimates of future receipts or expenditures. The
“scoring” task of the CBO has tended to be one of the more important roles. This role gained prominence in the
90s because of the rules existing then requiring mandatory spending increases and revenue reductions to be
offset. The amount of the offset depended on the CBO score. If, for example, the CBO scored tax legislation as
a $0 billion reduction in revenue, Congress had to compensate for that estimated loss by raising other revenues
or reducing mandatory spending by an equivalent amount. The CBO has a reputation of independence. Its
director is appointed jointly by the House of Representatives and the Senate and can be removed by either house
of Congress. However, the Budget Act provides that the director and staff are to be appointed “without regard to
political affiliation and solely on the basis of their fitness to perform their duties” and the operational
independence of the CBO, while not enshrined in law, appears to have been generally respected. As Schick
(2004) notes, the “CBO has never openly asserted its independence from Congress, for doing so would undercut
its legitimacy and alienate it from its patrons. Yet it has behaved in ways that manifest its independence on the
political scene. For the CBO, independence is more a matter of organizational culture than of legal status.” The
CBO’s staff numbers about 230, about one- third of which is assigned to the largest division, budget analysis.
Most of the remaining staff work in the program divisions that deal with macroeconomics, taxation,
microeconomics and finance, long-term models, health and human resources, and national security.(1)
(1) For further information, see the CBO’s website (www.cbo.gov) and, for example, Schick (2004) and
Blöndal, Kraan, and Ruffner (2003).Korea’s National Assembly Budget Office^24 advises parliament on fiscal policy issues. It analyzes budget
and economic policies, evaluates general fiscal policies and national programs, and conducts research.
The budget office also produces cost estimates for bills and forecasts of fiscal and macroeconomic trends.
The head of the budget office is advised by the Budget Policy Advisory Committee, which includes members
from the financial sector, universities, and the media.
Mexico’s Center for the Study of Public Finances,^25 modeled on the U.S. CBO, is attached to the
congress. It reviews the periodical government reports on the economic situation, the public finances and
public debt, as well as the budget proposal and fiscal laws. It also provides independent analyses
requested by the congress or upon its own initiative.
A number of other countries have fiscal advisory bodies attached to the legislature. In addition to Korea,
Mexico, and the United States, Canada, Chile, Indonesia, Japan, Jordan, the Netherlands, and Sweden
have “specialized budget research organization(s) attached to the legislature (or the audit office) that
conduct analyses of the budget” (OECD and World Bank, 2003). They have generally less than ten
professionals that are part of the legislature’s general support staff.
(^24) Website: http://www.nabo.go.kr/english/index.html.
(^25) Website: http://www.cefp.gob.mx.