US & World Economies Economic Terms Congressional Budget Office, What It Does, and Its Impact How the CBO Affects You By Kimberly Amadeo Kimberly Amadeo Kimberly Amadeo is an expert on U.S. and world economies and investing, with over 20 years of experience in economic analysis and business strategy. She is the President of the economic website World Money Watch. As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact. learn about our editorial policies Updated on May 13, 2021 Reviewed by Charles Potters Reviewed by Charles Potters Charles is a nationally recognized capital markets specialist and educator with over 30 years of experience developing in-depth training programs for burgeoning financial professionals. Charles has taught at a number of institutions including Goldman Sachs, Morgan Stanley, Societe Generale, and many more. learn about our financial review board Fact checked by Vikki Velasquez Fact checked by Vikki Velasquez Vikki Velasquez is a freelance copyeditor and researcher with a degree in Gender Studies. Previously, she conducted in-depth research on social and economic issues such as housing, education, wealth inequality, and the historical legacy of Richmond VA as well as their intersectionality while working for a community leadership nonprofit. Vikki leverages her nonprofit experience to enhance the quality and accuracy of Dotdash's content. learn about our editorial policies Share Tweet Pin Email The Congressional Budget Office is a bipartisan federal agency that analyzes the economy for the U.S. Congress. It also assists the House and Senate Budget Committees. It reviews the president's annual budget. It also reports on the deficit impact of every important piece of legislation. The CBO Director reports to the leaders of the House and Senate. He or she serves for four-year terms. The agency employs about 265 people, primarily economists, and public policy analysts. What the CBO Does Each year, the CBO produces 18 major recurring economic analyses. Most of them are related to the annual budget. In late January of each year, the CBO reports on the economic and budget outlook. That includes estimates of spending and revenue levels for a decade. This baseline gives Congress a neutral benchmark. It's used when comparing the budgetary effect of proposed legislation. A month after the president submits his budget, CBO delivers an independent re-estimate of it. The office creates a set of economic assumptions. Congress uses that to compare the president's budget to other proposals. The office reviews federal spending and revenues each month. It also evaluates the 30-year impact of the president's budget in the Long-Term Budget Outlook analysis. CBO examines options for reducing the budget deficits. It estimates the effects of the deficit reduction plans, and presents pros and cons. The agency projects how soon the government will hit the federal debt ceiling. CBO also compares the federal budget to the gross domestic product report. Net government spending is one of the four components of GDP. But the numbers don't agree because the methodology is different. The CBO report explains the difference. The office has several other recurring reports. It warns about the future insolvency of Social Security. It also provided policy options to avoid that fate. It examines the long-term effects of the Department of Defense budget, the Navy's Shipbuilding Plan, and maintaining U.S. nuclear forces. CBO provides annual analyses of the Troubled Asset Relief Program (TARP) and sequestration. Every other year, the office examines how federal tax rates affect different income levels. It also bravely reports on how accurate its forecasts have been. CBO provides a summarizes tor Congress all of its reports each year. It also analyzes U.S. spending on transportation and water infrastructure. Throughout the year, CBO provides the budget impact of all critical proposed legislation. For example, it reviewed the Tax Cuts and Jobs Act in 2018. It said that tax cuts would propel the annual deficit beyond $1 trillion a year. In March 2010, the CBO analyzed the budgetary effects of the Affordable Care Act. This controversial report said the ACA would lower the budget deficit by $143 billion by 2019. Republicans didn't believe a $940 billion initiative to expand health care could save money. The report showed how ACA taxes and fees more than offset the program's cost. The CBO's report on Obamacare remains the definitive authority on the ACA's budgetary impacts. CBO keeps an eye out for unfunded mandates. These are bills proposed by Congressional committees without funding sources. The CBO identifies any bills that either costs more than $82 million for an intergovernmental mandate, or $164 million for a private-sector mandate. An example is raising the U.S. minimum wage. Committees that proposed the bill must find funds for it. The CBO releases a report each year that estimates the costs of all unfunded mandates. How It Affects the U.S. Economy The CBO affects the economy by bringing a respected, informed viewpoint to public debate. Since it is bilateral, its policy options are taken seriously. It warns about the future impact of deficit spending. Government spending creates jobs both directly and through government contracts. It also adds to the U.S. debt. Although the CBO warns about the negative impact of deficit spending, Congress hasn't listened. That increases U.S. vulnerability to foreign countries who finance the debt. The CBO explains the impact of current decisions on the future of important government programs. The Budget Office played a critical role in resolving the 2008 financial crisis. It analyzed the impacts of TARP, American Recovery and Reinvestment Act (ARRA), and sequestration. These programs may never have gotten off the ground without CBO's respected analysis. How It Affects You The CBO affects you by monitoring the president’s budget. That provides a bit of a safeguard on government spending. But Congress ignores it, increasing the national debt through deficit spending. The CBO also provides you a wealth of information about the economy and the impact of the budget on the economy. If you are concerned about the ballooning U.S. debt, CBO reports will give you the analysis you need. History Before 1920, the president had little to do with the federal budget. In 1921, the Budget and Accounting Act required him to submit an annual budget proposal to Congress. It created the Office of Management and Budget, which supplied all economic and budget analysis. The Act deprived Congress of the power to establish or enforce budgetary priorities. In 1974, President Richard Nixon threatened to withhold Congressionally-approved funding for programs he opposed. In 1975, the Congressional Budget and Impoundment Control Act reasserted the legislative branch's control over the budget. It established a formal budget process. It created the House and Senate Budget Committees to oversee that process. It also created the Congressional Budget Office, which began operating on February 24, 1975. Alice Rivlin was its first Director. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Congressional Budget Office. "An Introduction to the Congressional Budget Office," Page 1-3, 7. U.S. Congressional Budget Office. "Major Recurring Reports." U.S. Congressional Budget Office. "Budget Options." U.S. Congressional Budget Office. "Report on the Troubled Asset Relief Program—March 2020." U.S. Congressional Budget Office. "The 2018 Long-Term Budget Outlook," Page 26. U.S. Congressional Budget Office. "The Budget and Economic Outlook: An Update, August 2010," Page 6. U.S. Congressional Budget Office. "How Increasing the Federal Minimum Wage Could Affect Employment and Family Income." U.S. Congressional Budget Office. "Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output as of September 2009." U.S. Congressional Budget Office. "S. 3689, Economic Recovery Act of 2008." U.S. Congressional Budget Office. "History."