Five Things to Know About CBO Projections and Estimates

Yossi Gestetner
Regardless where you stand on the immigration bill, the following information as to how the CBO operates is healthy to have in mind any time the CBO releases a projection:

1) The CBO is a calculator. They simply add up the numbers that Congress gives them. The CBO does not vouch for the figures they were given; they simply do the math. So if Congress tells them that a new bill will add an X amount of workers over the next decade, the CBO consolidates other projections of the decade -- such as their expected GDP/Economic growth -- and they produce a bottom line. Hence, the CBO said the immigration bill will save the U.S. $197 billion over the next decade.

2) The CBO is always shortsighted on economic growth. For example, in their 2000-2010 budget projection they didn't foresee the 9/11 attacks; the war on terror and the revelation of corporate corruption. As a result, they predicted trillions of surpluses over the next decade which never materialized. Worse, in early 2008, the CBO projected a net surplus of $335 billion in the 2009-2018 decade and we all know how that worked out. In other words, if the economy over the next decade does slightly worse than the current estimate, the $197 billion immigration savings is out the window because less of those 10 million will actually be employed, and more will be dependent on government programs.

3) Along the line of the above point, consider the following: In January 2009, three months into the financial crisis and a year into a recession, the CBO estimated, that the U.S. will run up only $2.9 trillion in deficits from Fiscal Year 2009 through the end of FY2013. Well, FY2013 is almost over and the U.S. is on path to have run up $5.7 trillion deficits in those five years. That's a $2.8 trillion oops by the CBO over a five-year period. How confident are you now that the $197 billion immigration "savings" over the first ten years will hold?

4) The above CBO estimates were made in January 2009. That was before the Stimulus and Obamacare passed. The Stimulus according to the Democrats, made things better economically and Obamacare reduced the deficit according the CBO. Right? That's amazing because if not for those two "deficit-cutting, economic-saving" Obama laws the CBO's January 2009 estimate would have been off by more than $2.8 trillion. So again how can we add the CBO's immigration projection into the debate? The CBO is a joke.

5) One more stat about the lovely CBO: In the above 2009 estimate, they projected that the Unemployment Rate will be on average 6.4% from 2011 through 2014, but the average UR in this period as of now is 8.2%. Worse, even if (again, an impossible if) the UR from now through the end of 2014 is at 5% each month, the four-year average will be 7%. As we know, if not for millions giving up to find a job the last four years, the current UR would be even higher than it is. In terms of jobs the UR stats show that the CBO overestimated by millions (yes, millions) the number of people who will be employed and pay tax in each of those four years. Since the CBO overestimated the employment issue four years ago at such a disastrous level, rest assure they did it again now in the immigration bill. Hence they came up with $197 billion in savings which will never materialize.

The bottom line is the CBO works with -- but does not verify the accuracy of -- the numbers given to them by Congress. They added it up based on their economic projections which were repeatedly wrong over the last decade. Hence, the $197 billion in savings is a joke, as are all projected "savings" that the CBO produces every time

Regardless where you stand on the immigration bill, the following information as to how the CBO operates is healthy to have in mind any time the CBO releases a projection:

1) The CBO is a calculator. They simply add up the numbers that Congress gives them. The CBO does not vouch for the figures they were given; they simply do the math. So if Congress tells them that a new bill will add an X amount of workers over the next decade, the CBO consolidates other projections of the decade -- such as their expected GDP/Economic growth -- and they produce a bottom line. Hence, the CBO said the immigration bill will save the U.S. $197 billion over the next decade.

2) The CBO is always shortsighted on economic growth. For example, in their 2000-2010 budget projection they didn't foresee the 9/11 attacks; the war on terror and the revelation of corporate corruption. As a result, they predicted trillions of surpluses over the next decade which never materialized. Worse, in early 2008, the CBO projected a net surplus of $335 billion in the 2009-2018 decade and we all know how that worked out. In other words, if the economy over the next decade does slightly worse than the current estimate, the $197 billion immigration savings is out the window because less of those 10 million will actually be employed, and more will be dependent on government programs.

3) Along the line of the above point, consider the following: In January 2009, three months into the financial crisis and a year into a recession, the CBO estimated, that the U.S. will run up only $2.9 trillion in deficits from Fiscal Year 2009 through the end of FY2013. Well, FY2013 is almost over and the U.S. is on path to have run up $5.7 trillion deficits in those five years. That's a $2.8 trillion oops by the CBO over a five-year period. How confident are you now that the $197 billion immigration "savings" over the first ten years will hold?

4) The above CBO estimates were made in January 2009. That was before the Stimulus and Obamacare passed. The Stimulus according to the Democrats, made things better economically and Obamacare reduced the deficit according the CBO. Right? That's amazing because if not for those two "deficit-cutting, economic-saving" Obama laws the CBO's January 2009 estimate would have been off by more than $2.8 trillion. So again how can we add the CBO's immigration projection into the debate? The CBO is a joke.

5) One more stat about the lovely CBO: In the above 2009 estimate, they projected that the Unemployment Rate will be on average 6.4% from 2011 through 2014, but the average UR in this period as of now is 8.2%. Worse, even if (again, an impossible if) the UR from now through the end of 2014 is at 5% each month, the four-year average will be 7%. As we know, if not for millions giving up to find a job the last four years, the current UR would be even higher than it is. In terms of jobs the UR stats show that the CBO overestimated by millions (yes, millions) the number of people who will be employed and pay tax in each of those four years. Since the CBO overestimated the employment issue four years ago at such a disastrous level, rest assure they did it again now in the immigration bill. Hence they came up with $197 billion in savings which will never materialize.

The bottom line is the CBO works with -- but does not verify the accuracy of -- the numbers given to them by Congress. They added it up based on their economic projections which were repeatedly wrong over the last decade. Hence, the $197 billion in savings is a joke, as are all projected "savings" that the CBO produces every time