[Congressional Record Volume 143, Number 62 (Tuesday, May 13, 1997)]
[House]
[Page H2493]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     CBO VERSUS OMB: WHO IS RIGHT?

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 21, 1997, the gentleman from Florida [Mr. Stearns] is 
recognized during morning hour debates for 5 minutes.
  Mr. STEARNS. Mr. Speaker, my point in coming to the well this morning 
is to talk about CBO and OMB. These are Beltway terms, I know. The 
Congressional Budget Office is the CBO; and the Office of Management 
and Budget Office is the OMB. OMB is used by the White House. That is 
their in-house accounting firm. The CBO is our in-house accounting firm 
here in Congress. We use it for out budget analysis.
  I wish every Member had an opportunity this afternoon to listen to 
what I have to say because it brings great bearing on our debate today 
on the budget and for the remaining 2 or 3 months. In March 1996, with 
only 6 months left in the fiscal year, OMB projected that the deficit 
for fiscal year 1996 would be $154 billion. They were wrong, 
overestimating by almost 44 percent.
  Now let us look at CBO. In May 1996, just 4 months remaining in the 
fiscal year, CBO anticipated the budget deficit for the year would be 
$144 billion. They too were wrong, overestimating by more than 34 
percent. We went from 6 months to 4 months. Now let us go to 1 month 
and see if these folks are accurate.
  With 1 month left in fiscal year 1996, both CBO and OMB estimated 
that the budget deficit for the year would be around $117 billion. The 
actual deficit for the year was $107 billion. Both agencies, despite 
the short period of anticipation, were off by 10 percent.
  Mr. Speaker, in other words, neither CBO nor OMB could estimate the 
budget deficit for the year just 30 days, 30 days, prior to the end of 
the fiscal year. Yet despite these seemingly inexactitudes, politicians 
from both sides of the aisle consistently place great credence on these 
agencies' predictions, often going so far as to base America's entire 
fiscal policy on their estimates. Sometimes policies are enacted by 
employing the assumptions from these agencies for as long as the next 5 
years in estimating budget data.
  Mr. Speaker, if they cannot estimate the budget in 30 days, in 4 
months, and in 6 months, how can we expect them to estimate over the 
next 5 years? CBO and OMB usually disagree sharply on their budget 
projections, and depending upon which side of an issue one is on, one 
side is either siding up with OMB or CBO.
  In general, CBO is more pessimistic, OMB is more optimistic. Thus, 
siding with the CBO makes balancing the budget a more daunting task. 
Despite all of this, both agencies, as I am going to show, are 
typically wrong altogether. That is, they both err on the same side of 
the budget. Recently, both agencies have been too pessimistic, 
consistently overestimating the actual deficit. In the 1980's and in 
the 1990's, both agencies consistently underestimated the deficit.
  Let us now go to the budget agreement that has been recently in the 
news. When viewed as part of the big picture, the two estimates are 
essentially identical. For fiscal year 2002, for example, the 
difference in deficit predictions was $52 billion. But given the odds 
that both will be off by about $300 billion, you know, it is really 
almost meaningless to talk about what they are projecting in 5 years.
  Furthermore, the agencies' forecasts for the size of the national 
economy in the year 2002 are almost identical at 10.00, a trillion, for 
CBO, 10.087 trillion for OMB. To be blunt, Mr. Speaker, any discussion 
about who is right and who is wrong just does not make any sense given 
the magnitude of these figures especially when we are talking about a 
budget projection 5 years from now.
  More interestingly than who is closer to right is often the fact that 
both of them have been essentially wrong and cannot even predict the 
budget within 30 days. It must be noted that a study of the two 
agencies' predictions over the last 20 years shows CBO to be closer to 
right more than OMB. So, perhaps CBO is the one we should follow, 
although I question that. Fortunately, CBO conducted a large majority 
of the study, so they had a higher percentage of opportunities to prove 
they were right.
  So, Mr. Speaker, what is the point of all this, what is the lesson to 
be learned when we look at CBO and OMB and ask them to project out over 
5 years? Well, both agencies are quick to point out that the 
differences between themselves are insignificant and are not good 
indication of future performance. And I do not know if past performance 
is a good indication of future performance.
  The only certainty that we have this afternoon is that neither one 
will be absolutely right, and we as Members of Congress should not put 
a great deal of emphasis on these individual agencies because they both 
have been wrong. Let me conclude by saying economics is not an exact 
science and we have to rely on all of us to work together continually 
to reach a balanced budget and that is the only way we know to reduce 
the deficit.

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