Source: US Congressional Budget Office
After each fiscal year has ended, the Congressional Budget Office reviews its projections of federal revenues, outlays, and deficits 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 2020, CBO started with its May 2019 baseline projections and updated them to include the estimated effects of subsequently enacted legislation. The adjustments were particularly large for 2020 because of legislation enacted in response to the 2020 coronavirus pandemic. In total, those adjustments—which reflect the estimated budgetary effects reported in cost estimates that CBO and the staff of the Joint Committee on Taxation (JCT) prepared when the legislation was enacted—reduced CBO’s projections of revenue by $0.6 trillion and increased its projections of outlays by $1.8 trillion. CBO also removed outlays for Fannie Mae and Freddie Mac from both its projections and the actual outcomes because CBO and the Administration account for the transactions of those housing entities differently.
With those adjustments, the overall differences were as follows:
- Revenues. CBO’s projection of $3.11 trillion for federal revenues in 2020 was too low—by $312 billion, or 9 percent. That difference was larger than the mean absolute error of about 5 percent in revenue projections made for the years from 1983 to 2019.
- Outlays. CBO’s projection of $6.35 trillion for federal outlays in 2020 was too low—by $202 billion, or 3 percent. That difference was likewise larger than the mean absolute error of about 2 percent in outlay projections made for the years from 1993 to 2019.
- Deficit. Those differences in revenue and outlay projections resulted in a deficit projection for 2020 that was $110 billion more than the actual amount: $3.25 trillion rather than $3.14 trillion. That difference was equal to 0.5 percent of gross domestic product (GDP). By comparison, the mean absolute error in deficit projections reported for 1985 to 2019 equaled 1.0 percent of GDP.