Congressional Budget Office
Director's Blog

I am delighted to announce that, for the second year in a row, CBO has been recognized by the Partnership for Public Service as one of the "Best Places to Work in the Federal Government."  We were ranked third among 34 agencies in the small agency category.

The Partnership says that its goal is "to ensure our government has the right talent with the right skills to meet the extraordinary challenges it faces."  To do this, it uses survey results to gauge employee satisfaction in a variety of categories.  You can see the results for all participating federal agencies at www.bestplacestowork.org.

I think these ratings are a collective accomplishment of everyone at CBO:  It is the way that we work together, treat each other as colleagues, and care about each other as people, that creates the special environment at CBO.  I feel very lucky to be here, and I am glad that so many other people at CBO seem to feel that way too.
 

CBO’s greatest asset is its staff, committed not only to its important work supporting the Congress, but also to significant causes outside the office.

For a fifth consecutive year, members of CBO’s staff formed a Susan G. Komen Race for the Cure team to support the fight against breast cancer. Captained by CBO Webmaster and breast cancer survivor Simone Thomas, this year’s 18-member team raised $4,754, far exceeding its goal of $3,000. That sum put the CBO team in second place for fundraising in the Congressional category.

The team was active in fundraising, holding a two-day bake sale and soliciting additional donations from friends, family, and other staff members. The team’s fundraising effort lasted for about a month, culminating in a 5K run/walk along the National Mall with 40,000 others on June 5.  Thanks to Simone’s leadership, and the time and generosity of many other staff members, we were able to make an impact in the effort to cure breast cancer. That’s something of which we can all be proud.
 

Lenny Skutnik is a household name belonging to an unassuming Congressional Budget Office employee who insists he “wasn’t a hero” when one winter day in 1982 he jumped from the shore into the icy Potomac River to save a drowning woman after an Air Florida flight crashed on takeoff.  “I was just someone who helped another human being,” Lenny said later. While his rescue of Priscilla Tirado that day was extraordinary, Lenny has been helping the employees at CBO for more than 30 years.

Martin Leonard “Lenny” Skutnik came to work here in 1980 after a stint at the Social Security Administration. A hard-working employee, Lenny was hired to support the staff of the relatively new (1975) office created by the Congress to produce budget and economic analysis. Lenny did whatever needed doing, mostly handling the mail and supplies needed to support the staff and, later, conducting the agency’s printing and providing IT support.

Lenny had been at CBO less than two years when he happened upon the Air Florida crash on his way home from work one night. He said his actions were amplified because they were captured on film and transmitted around the world. Public reaction was huge, and President Ronald Reagan, in his State of the Union address two weeks later, singled Lenny out in the House gallery, giving birth to the tradition of presidents using the annual speech to recognize ordinary people who have accomplished extraordinary things. The Presidential gallery in the House now is sometimes referred to as “The Heroes’ Gallery.” Search on the internet, and you’ll find much written about our Lenny. He’s been called   “the Potomac rescue guy” and “The Icy Swimming Rescue Dude.” Folks have written about talking to their children about heroism, using Lenny as their role model.

One woman wrote, “I was seated at the dinner table last night with my 12- and 13-year-olds and friend’s 8- and 10-year-olds, and they asked us about heroism. I mentioned Lenny Skutnik and what he did, and my friend and I started crying, thinking about that footage we still had in our heads all these years later. The kids were mesmerized. Thank you, Lenny Skutnik. We still remember.” “Lenny Skutnik is in my Top 5 Unforgettable People,” wrote another.

Lenny received many honors for his heroic act, including the United States Coast Guard’s Gold Lifesaving Medal and the Carnegie Hero’s Fund Medal, as well as public tributes that include two “Lenny Skutnik Days” in Mississippi a month after the crash in 1982.  The General Assembly of the Commonwealth of Virginia unanimously passed a resolution in praise of Skutnik’s “unselfish act of bravery.”

There are still many at CBO who are unaware there is a hero among us. Lenny continued to work, conscientiously doing his job as if nothing unusual had happened, personally producing thousands of copies of hundreds of CBO reports during his 30 years of service to the U.S. Congress. “I’ve learned a lot here. I’m not a Ph.D. type,” he said, referring to the many highly educated analysts on CBO’s staff. “It’s been very rewarding for me to work for this institution that has some clout. I’m real proud to have been part of it.”

We’re proud to have had you as part of CBO, Lenny. We hope you enjoy your retirement. You’ve earned it!
 

CBO has a panel of economic advisers that includes many distinguished economists (some of whom are former CBO directors). We host periodic meetings of the advisers at our office and solicit the advisers’ views between meetings via email exchanges and phone calls. Through these interactions, we benefit from the advisers’ understanding of cutting-edge research, current economic conditions and the economic outlook, and economic policy. As a result of the advisers’ comments, the quality of CBO’s economic analysis is greatly enhanced. The advisers for 2010 are:

Henry J. Aaron, Ph.D.
Senior Fellow, Economic Studies
The Bruce and Virginia MacLaury Chair
Brookings Institution

Richard Berner, Ph.D.
Managing Director
Chief U.S. Economist
Morgan Stanley

Dan L. Crippen, Ph.D.
Economic Consultant

Steven J. Davis, Ph.D.
William H. Abbott Professor of International Business and Economics
Booth School of Business
University of Chicago

Janice C. Eberly, Ph.D.
John L. and Helen Kellogg Professor of Finance
Kellogg School of Management
Northwestern University

Kristin J. Forbes, Ph.D.
Jerome and Dorothy Lemelson Professor of Management and Global Economics
Sloan School of Management
Massachusetts Institute of Technology

Robert E. Hall, Ph.D.
Robert and Carole McNeil Joint Professor of Economics and Senior Fellow
Hoover Institution
Stanford University

Jan Hatzius, Ph.D.
Chief U.S. Economist
Goldman Sachs & Co.

Douglas Holtz-Eakin, Ph.D.
President
American Action Forum

Simon Johnson, Ph.D.
Robert A. Kurtz Professor of Entrepreneurship
Sloan School of Management, MIT
Senior Fellow
Peterson Institute for International Economics

Lawrence Katz, Ph.D.
Elisabeth Allison Professor of Economics
Harvard University

Anil Kashyap, Ph.D.
Edward Eagle Brown Professor of Economics and Finance
Booth School of Business
University of Chicago

N. Gregory Mankiw, Ph.D.
Robert M. Beren Professor of Economics
Harvard University

Laurence H. Meyer, Ph.D.
Distinguished Scholar
Center for Strategic and International Studies
Vice Chairman
Macroeconomic Advisers

Rudolph G. Penner, Ph.D.
Senior Fellow
Arjay and Frances Miller Chair in Public Policy
Urban Institute

Adam S. Posen, Ph.D.
Senior Fellow
Peterson Institute for International Economics
Member
Monetary Policy Committee of the Bank of England

James Poterba, Ph.D.
Mitsui Professor of Economics
Massachusetts Institute of Technology
President and CEO
National Bureau of Economic Research

Carmen M. Reinhart, Ph.D.
Professor of Economics and Director of the Center for International Economics
University of Maryland

Alice Rivlin, Ph.D.
Senior Fellow
Brookings Institution

Stephen P. Zeldes, Ph.D.
Benjamin M. Rosen Professor of Finance and Economics
Graduate School of Business
Columbia University

Last week CBO joined other Congressional offices to kick off the annual Global Race for the Cure in DC to raise funds for and awareness about the worldwide movement dedicated to the treatment and prevention of breast cancer.  At the “State of Pink” Rally on Capitol Hill, CBO webmaster and breast cancer survivor Simone Thomas joined Ambassador Nancy Brinker, the founder of Susan G. Komen for the Cure, and several Members of Congress, including fellow survivors Debbie Wasserman Schultz (D-FL) and Sue Myrick (R-NC), to talk about the importance of breast cancer education and detection.  Simone described the emotions she experienced when she participated in the Race for the Cure just weeks after completing chemotherapy, expressed her appreciation for the support of friends, family and colleagues in her struggle, and reminded attendees that volunteering is a great way to get involved and offer support.  Last year, led by Simone, CBO’s Race for the Cure team was the top Congressional fundraising team, and Simone is looking forward to captaining the CBO team again this year.

This afternoon CBO released a report presenting its analysis of the budgetary proposals contained in the President’s budget request for fiscal year 2011.  This report provides more detail than the preliminary analysis that CBO released on March 5, which was discussed in a blog entry that same day. Our latest report differs slightly from the earlier one because it incorporates the impact of some legislation that has recently been enacted. It reflects the revenue and spending estimates that the President included in his budget for major health care legislation, but it does not incorporate the specific effects of the health care bill that was signed into law yesterday. It also includes an analysis of the potential effects on the economy of the President’s budgetary proposals and the impact of those economic effects on the federal budget.

As a reminder, this analysis presents CBO’s assessment of the budgetary outlook for the 2010-2020 period assuming enactment of the President’s policy proposals and reflecting CBO’s economic forecast and technical estimating procedures. The analysis compares that outlook with CBO’s baseline projections, which—unlike the President’s budget—assume that current laws and policies that affect federal spending and revenues remain unchanged

CBO’s analysis indicates that if the President’s proposals were enacted:

• The federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011. Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. (The deficit in 2009 totaled 9.9 percent of GDP.) Compared with CBO’s current-law baseline projections, deficits under the President’s proposals would be about 2 percentage points of GDP higher in fiscal years 2011 and 2012, 1.3 percentage points greater in 2013, and above baseline levels by growing amounts thereafter. By 2020, the deficit would reach 5.6 percent of GDP, compared with 3.0 percent under CBO’s baseline projections.
• Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020, about $5 trillion more than under the assumptions underlying the baseline. Net interest would more than quadruple from 1.4 percent of GDP in 2010 to 4.1 percent in 2020 in nominal dollars (without an adjustment for inflation).
• Revenues under the President’s proposals would be $1.4 trillion (or 4 percent) below CBO’s baseline projections from 2011 to 2020, largely because of the President’s proposals to index the thresholds for the alternative minimum tax for inflation starting at their 2009 levels and to extend many of the tax reductions enacted in 2001 and 2003 that are scheduled to expire at the end of 2010. Other proposals in the President’s budget—including those associated with significant changes in the nation’s health insurance system—would, on net, increase revenues.
• Mandatory outlays under the President’s proposals would be above CBO’s baseline projections by $1.9 trillion (or 8 percent) over the 2011–2020 period, about one-third of which would stem from net additional spending related to proposed changes to the health insurance system and health care programs. Discretionary spending under the President’s budget would be about $0.3 trillion (or 2 percent) lower than the cumulative amount between 2011 and 2020 in CBO’s baseline, reflecting reduced funding for the wars in Iraq and Afghanistan.

The President’s budgetary proposals would have effects on the economy, which would in turn influence the budget through changes in such factors as taxable income (which affects the amount of revenues collected), employment (which determines outlays for programs like unemployment compensation), and interest rates (which affect the government’s borrowing costs). Estimates of economic effects depend on many specific assumptions, and there are several approaches to estimating those effects, so CBO used a number of different models to project the impact on the economy of enacting the President’s proposals. There is, however, a high degree of uncertainty about the economic effects of government policies, so the ranges of possible budget effects are quite wide.

In sum, CBO’s analysis of the interactions between the budget and the economy indicates the following:

• For 2011 to 2015, CBO estimates that the President’s proposals would raise real (inflation-adjusted) output relative to that under the assumptions in CBO’s baseline by between 0.9 percent and 1.2 percent, on average. Those estimates incorporate both supply-side effects (influences on the economy’s potential output) and demand-side effects (temporary movements of actual output relative to potential output).
• For 2016 to 2020, CBO estimates that the President’s proposals would lower real output relative to CBO’s baseline assumptions by between 0.4 percent and 1.4 percent, on average. Those estimates incorporate only supply-side effects because the magnitude of demand-side effects depends on the state of the economy, which is difficult to predict over longer horizons. In addition, the Federal Reserve might offset the effect of policies that are foreseen well in advance in order to maintain economic stability.
• CBO estimates that the economic feedback from the President’s proposals would reduce their cumulative cost over the period from 2011 through 2015—estimated to be about $1.4 trillion excluding any aggregate economic effects—by between 2 percent and 14 percent. From 2016 to 2020, the effects of the proposals on the economy would increase their cumulative cost (estimated to be about $2.3 trillion, excluding any aggregate economic effects) by as much as 6 percent or reduce it by as much as 2 percent.

CBO has not modified its economic forecast since January, but the agency updated its baseline budget projections early in March to take into account some legislation that has been enacted since the completion of the previous baseline in January 2010 as well as new information obtained about various aspects of the budget since then. The resulting changes, relative to CBO’s January projections, are modest, adding $20 billion to the projected deficit in 2010 and reducing projected deficits over the 2011–2020 period by a total of $57 billion.

CBO is celebrating its 35th birthday! The agency was created by the Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344) and officially opened for business on February 24, 1975, when Alice Rivlin became its first director. Since then, under eight different directors, the agency has provided the Congress with objective, non-partisan budget and economic information on a wide variety of issues. I am delighted to have the privilege of leading such a superb organization and the opportunity to work with such a skilled and dedicated staff. CBO looks forward to many more years of serving the Congress as it grapples with the important issues facing the nation.

From time to time, you may hear in the news about a CBO cost estimate, log on to our Web site to check it out, and discover that it’s not there. That raises the question: When are CBO’s cost estimates made public, and when are they not? 

Answer:  CBO does not provide confidential estimates for any proposals that have been made public.  However, it honors requests for confidentiality if a proposal is not public, and maintains that confidentiality even if information about the estimate becomes public, as long as the proposal itself is not public.

Explanation: By law, CBO is responsible for providing cost estimates for bills (other than appropriation bills) when they are approved by a full committee of the House or Senate. Those estimates, which constitute the majority of CBO’s formal estimates, are sent to both the Chairman and the Ranking Minority Member of the committee that approved it and are promptly posted on CBO’s Web site.

CBO sometimes prepares cost estimates at other stages of the legislative process. For example, the agency is sometimes asked to estimate the budget impact of various alternatives during the developmental stages of the legislative process before lawmakers have decided exactly what legislation they want to propose. Thus, CBO may prepare preliminary estimates for alternative proposals to be considered by a committee, subcommittee, or the full House or Senate, including draft bills not yet introduced, or for amendments to be considered at committee markups. Estimates provided at these stages in the legislative process are often informal and convey preliminary indications of budgetary effects. They are generally used by Members or committees as they work through the decisionmaking process of formulating legislation.

CBO’s long-standing policy regarding the distribution of estimates is stated on the agency’s Web site: “CBO seeks to ensure that key parties in the Congress who are involved in any particular issue have equal access to its analytic work. Insofar as possible, CBO delivers its cost estimates and analyses to all interested parties simultaneously. Requests for confidentiality are honored only for cost estimates for legislative proposals that have not been made public.”

Under that policy, CBO shares with Members of both parties (and, for formal estimates, makes public via its Web site) any cost estimates for legislation or proposals that have been made public—for example, introduced bills, amendments printed in the Congressional Record, legislation (or specifications for legislation) posted on a committee’s Web site. But when a committee or Member is in the process of developing legislation and has not made the proposal public, and if that committee or Member asks CBO to keep the estimate confidential, the agency will do so. This procedure enables lawmakers to take budgetary considerations into account when considering various policy options in the process of crafting  legislation. 

Today CBO released an evaluation of the accuracy of its economic forecasts by comparing those forecasts with the economy’s actual performance and with the projections of other forecasters. The study examines the two-year ahead forecast accuracy and the five-year ahead forecast accuracy for a variety of macroeconomic variables, such as real GDP, inflation, and interest rates. Thirty-two CBO forecasts, those made early each year from 1976 to 2007, are included in the study.  Such evaluations help guide CBO’s efforts to improve the quality of its forecasts and also assist Members of Congress in their use of CBO’s estimates.

Since publishing its first macroeconomic forecast in 1976, CBO has compiled a forecasting track record that is comparable in quality with that of the Administration and that of the Blue Chip consensus. In particular, the accuracy of CBO’s two-year forecasts between 1982 and 2007 paralleled that of the forecasts published by the Blue Chip consensus and the Administration over the same period. The accuracy of CBO’s five-year projections also generally corresponded to that of other forecasters, although the Administration’s projections of types of income (such as wages and salaries, and profits) as a share of national output had slightly smaller errors. Comparing CBO’s forecasts with those of the Blue Chip consensus suggests that when the agency’s predictions of the economy’s performance missed by the largest margin, those errors probably reflected problems shared by other forecasters in predicting turning points in the business cycle.

CBO’s forecasting record provides a measure of the uncertainty underlying forecasts under normal circumstances. However, the current degree of economic dislocation exceeds that of any previous period in the past half-century, so the uncertainty inherent in current forecasts exceeds the historical average.

In the past few days, I’ve received many calls and e-mail messages from people around the country commenting on my participation in a meeting this past Monday at the White House.  Most of these people expressed their concern about CBO’s ability to carry out its responsibilities with its traditional independence and nonpartisanship.  I appreciate the interest in CBO’s work, so let me try to allay those fears.

The President asked me, and other experts in the room, for our insights into possible ways to reduce the nation’s health care spending.  The very capable staff at CBO has thought a lot about this subject, and I shared those thoughts with the President.  Although the audience was unique, my comments were no different from what we have said publicly on numerous other occasions.  The CBO staff and I have offered our thoughts on this subject to the Congress and the public in published reports and letters, and we have discussed them in many meetings with Members of Congress and their staffs of both political parties.  Across the range of topics we study, we deliberately spend a lot of time explaining our thinking to policymakers, because we believe that such openness is a responsibility of our agency and can help policymakers to reach better-informed policy decisions.  But we never adjust our analysis or conclusions to please our audience (as the reaction to various CBO reports amply demonstrates).

CBO will continue to do what it has always done—provide independent, nonpartisan analysis for the Congress, communicate that information as clearly as possible, and provide as much transparency as possible about our methodology and assumptions.  A visit to the White House won’t change that a bit!