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This assignment is less about you doing budgetary forecasting and more about understanding how it is
done by the Congressional Budget Office (CBO) and how that forecasting is used to analyze the federal
budget and, additional, how analysts outside the CBO examine the work of the CBO. The CBO
budgetary projections have a tremendous impact on how we look future government spending. What
you want to do is actually several different things within the paper you are writing.
GUIDELINES FOR THIS ASSIGNMENT
1) minimum of five to six pages
2) FIRST, take a close look at the data sheet I prepared which shows you how the CBO projected the
federal budget deficit (or surplus) for ten years and what it actually was. From this develop an
understanding of how you begin to analyze what the CBO projects for a ten-year period. NOTICE, that
in that data I address the following: UNIFIED BUDGET, OFF BUDGET, ON BUDGET (terms you
should develop an understanding about). So, what do you think about the degree of accuracy of CBO
forecasting? I always wonder why when you see CBO projections discussed on a TV news show, there
never is a discussion of the difficulties associated with the accuracy of budgetary forecasting.
3) Address BASELINE or BUDGET BASELINE. Make sure you can explain this and its relationship
to budgetary forecasting. I have given you a variety of readings that examine BASELINE so you can
begin to notice that this is often the starting point for how outside analysts examine and critique CBO
budgetary forecasting. You will notice that in some of the readings CBO forecasting is shown in
relationship to–or contrast to–other forecasting that is being done. NOTICE, what types of factors go
into forecasting (for example, inflation rate as CPI, unemployment rate, economic growth rate as GDP,
revenue from income taxes, from withholding taxes, gas prices, health care spending, etc.). SO, the range
of factors that are needed to be eventually proven to be accurate that, cumulatively, contribute to the
degree of accuracy in budgetary forecasting is incredibly complex. You can begin to imagine that good
forecasting requires that you constantly go back and examine all the parts that make up the whole.
4) Finally, there is a CBO publication in which they examine their forecasting. Go over this publication
carefully so you can see how they critique their own work