The federal government spent so much more than the Congressional Budget Office (CBO) had expected in Fiscal Year 2023 that the CBO’s projection set a record for inaccuracy, the agency reports in a new analysis.
In “The Accuracy of CBO’s Budget Projections for Fiscal Year 2023,” released on December 15, the CBO compares its May 2022 budget projections for FY2023 (updated them to include the estimated effects of influences like subsequently-enacted legislation) to the final results for the fiscal year, which ended on September 30.
Adjustments made since CBO’s May 2022 budget projections for FY2023 increased revenues by $26 billion (or 0.5 percent), but increased its projections of outlays even more (by $40 billion, or 0.7 percent).
The analysis finds that the Biden Administration spent far more, and took in much less, than the CBO had projected in FY2023:
- The Biden Administration spent $0.6 trillion more than the CBO’s FY2023 projection of $5.9 trillion.
- The 9 percent excess spending was more than four times the average absolute error of 2 percent in outlay projections for 1993 to 2022.
- Federal revenue was $0.5 trillion less than the CBO’s projection of $4.9 trillion for FY2023.
- The 11% revenue shortfall was roughly twice the average absolute error of CBO’s revenue projections for 1983 to 2022 (about six percent).
As a result of the underestimation of spending and the overestimation of revenue, “CBO’s deficit projection of $1.0 trillion for 2023 was $1.0 trillion less than the actual amount.”
That difference was equal to 3.9 percent of Gross Domestic Product (GDP)—more than three-and-a-half times the average absolute error of 1.1 percent of GDP in the agency’s deficit projections from 1985 through 2022.
Misestimates in three categories accounted for nearly three-fourths of the difference between the projected and actual deficit:
- Overestimation of receipts from individual income taxes (accounting for 38 percent of that total difference),
- Underestimation of net interest expenditures (21 percent), and
- Underestimation of spending for higher education (14 percent).
“The errors in CBO’s projections of revenues and outlays in 2023 were larger than the average absolute errors in the agency’s projections for previous years,” CBO reports.
However, the size of the errors wasn’t just “larger than the average” – some projections were so far off that they set records:
- CBO underestimated total outlays in 2023 by 9 percent—the largest error in a projection of total outlays that the agency has recorded.
- CBO underestimated mandatory outlays in 2023 by 10 percent – the second-largest error on record.
- CBO overestimated discretionary spending in 2023 by 4 percent—the largest error in a projection of such spending that the agency has recorded.
- The agency’s projection of receipts from all non-corporate income tax revenue sources exceeded the actual amount by 27 percent—an error larger than any of those in its projections of such receipts for 1983 to 2022.
- CBO overestimated individual income tax revenues in 2023 by 18 percent—a larger error than most of the errors in projections of such receipts for 1983 to 2022.
Effects of the Supreme Court’s June 2023 decision prohibiting the Biden Administration’s planned cancellation of outstanding student loans were excluded from the review analysis.
Nonetheless, the CBO does note that, by thwarting Biden’s unconstitutional loan-forgiveness scheme, the Supreme Court decision reduced the deficit by $333 billion in Fiscal Year 2023:
“In June 2023, the Supreme Court barred the Administration from implementing its forgiveness plan. Thus, in August 2023, the Administration recorded a $333 billion reduction in outlays for the student loan program. That action reduced the 2023 deficit.”
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