CBO Presentation On Use Of Dynamic Analysis

From CBO, "Dynamic Analysis at the U.S. Congressional Budget Office" May 5, 2022, Presentation by Theresa Gullo, CBO's Director of Budget Analysis, to the Organisation for Economic Co-operation and Development's Committee of Senior Budget Officials:

Summary

CBO's cost estimates focus on the budgetary consequences of proposed legislation, and they generally reflect likely behavioral responses to a proposal—for example, changes in the likelihood that people will claim a government benefit. "Dynamic analysis" refers to something different: instances in which CBO takes into account further behavioral changes that would affect total output in the economy. Those broad macroeconomic changes—which include changes in the labor supply or private investment—resulting from changes in fiscal policy can themselves have additional budgetary consequences. Most legislation does not have significant macroeconomic effects, and by long-standing convention, such consequences are not generally reflected in CBO's cost estimates. [Emphasis added.]

In certain analyses other than cost estimates, CBO studies how proposals that would significantly change federal spending and tax policies would affect the overall economy, as well as how such effects would feed back into the federal budget. Such analyses provide a more complete assessment of a policy's budgetary impact, but are more complex and take more time.

Dynamic Analysis at the U.S. Congressional Budget Office from Congressional Budget Office

PDF doccument of slide presentation availble here.