As part of its mission “to inspire, educate, and connect young adults with the economic, ethical, and legal principles of a free society,” the Foundation for Economic Education started a new YouTube channel, “Words & Numbers.” The second video in the series focused on the Congressional Budget Office (CBO): "The CBO Can’t Count.”
In the video Dr. Antony Davies, Professor of Economics of Duquesne University, and Dr. James R. Harrigan, Senior Research Fellow at Strata, discussed CBO’s history of producing inaccurate debt projections. Periodically throughout the year, CBO reports on the level of spending and revenues for the current year along with a projection for the next ten-year budget window. They note that CBO typically over-projects revenues by 25 percent, which Harrigan calls "a math error of epic proportions," and by default they end up under-reporting the debt. According to Davies, over the past 25-odd years, CBO had made 170 projections of what the debt would be 10 years out, and every single time they under-projected the actual level of the federal debt.
CBO’s most recent budget outlook forecasts that the total federal debt will reach $30 trillion in FY 2027. If those figures are based on a model that continues to over-estimate future revenues, and there are not significant reforms enacted, the actual debt could be much higher. The situation could be worsened if interest rates rise higher than expected.
Over at Slate, Jordan Weissmann called CBO “Washington’s last arbiter of consensus on economic matters.”
Even if that were true, with CBO's track record on economic forecasts, its history of inaccurate cost estimates, and the important role that the agency plays in the legislative process, now more than ever transparency and accountability are needed for budget scoring.