What is the CBO?: The Mandate of the Congressional Budget Office

The Congressional Budget Office had a busy day on March 18 with billion-dollar announcements involving relief programs and health care reform.

Budget analysts reported Thursday that over the next 10 years, a health care compromise by House and Senate Democrats would cost $940 billion and reduce the federal deficit by $138 billion. At the same time, the CBO said the Troubled Asset Relief Program (TARP) would cost the government $109 billion.

What is the CBO?

The Congressional Budget Office was created in 1974 as an independent, unbiased agency within the legislative branch of the United States government. It is made up of a director, a general counsel and 11 associate directors that analyze legislative affairs, micro-economic studies and national security.

The CBO prepares economic reports for House and Senate Budget Committees and gives cost estimates on spending and revenue to help Congress make budgetary decisions throughout the year.

The process of writing the annual Congressional budget begins with a resolution re current financial issues and regulating spending based on revenue predictions. The CBO broadly prioritizes spending for the next 3 or 4 fiscal years.

The budget resolution gets approved by the House and Senate and acts as a blueprint for fiscal measures on revenue and spending legislation for Congress.

Congressional Budget Estimates Throughout the Fiscal Year

In late January, the CBO estimated the next 10 years of spending and revenue in the economic and budget outlook. The standard set in the outlook does not predict future budget outcomes, but is used to measure the effects of Congress' proposed legislation on the budget.

In February or March of odd-numbered years, the CBO offers a wide range of budget options for spending and tax changes given the introduction of a new Congress. Long-term options are given annually in June to address budgetary pressures from the aging Baby Boom Generation.

Every March, the CBO reviews the President’s budget proposals, allowing Congress to compare figures with their economic estimates and assumptions. Other proposals are also analyzed and cost estimates are given for pending legislation to determine if they are within  the budget. Projection uncertainties are addressed in the spring and a new economic forecast is prepared in the fall.

Since 2008, the CBO has semi-annually reviewed the $700-billion government financing program TARP. It assesses TARP’s costs of assets, its methods of calculating costs, and its impact on the deficit and national debt.