Overview Of CBO’s Long-Term Fiscal Modeling

The Congressional Budget Office (CBO) released a non-technical overview of its long-term fiscal model, called CBOLT.

CBOLT is a mathematical tool for analyzing and quantifying potential reforms to federal entitlement programs and the US's long-term fiscal challenges.

CBOLT is a microsimulation model of the US population, economy, and federal budget. A microsimulation model starts with individual-level data from a representative sample of the population and projects demographic and economic outcomes for that sample through time. For each individual in the sample, CBOLT simulates birth, death, immigration and emigration, marital pairings and transitions, fertility, labor force participation, hours worked, earnings, payroll taxes, Social Security benefit claiming, and Social Security benefit levels. A complex actuarial framework wraps around the microsimulation model to provide totals for demographic and economic variables as well as additional information in areas where the microsimulation model has not yet been developed. The model projects individual demographic and economic behavior of the population, the finances of the Social Security system, and the finances of the rest of the federal government more than 75 years into the future. In recent work, CBO has added detail on Medicare, Medicaid, and other health care spending to the actuarial framework. CBOLT also includes a macroeconomic model that analyzes the federal sector’s role in the larger economy and a repeated-simulation (Monte Carlo) mode that quantifies uncertainty about a variety of outcomes.

All mathematical models of the economy and US demographics have strengths and weaknesses. They also have more applicability in certain situations over others. The models also tend to do better in certain states of the economy than others. Unfortunately, CBOLT is a universal model meant to apply to all reforms to federal entitlement programs in all economic situations.

CBO did not provide data or links to studies that showed the degree of accuracy of CBOLT's projections against historical data or projections. Therefore, at this point, one does not know the biases inherent in the model and how those biases will affect long term US entitlement policy.
CBO Long Term Model