My Vision No.71
2024.4

Toward the Formulation of Long-Term Fiscal Projections
and the Realization of Appropriate Fiscal Management
As Japan’s population continues to decline and age, it may now be necessary for all citizens to share a longterm outlook for the nation’s finances. In this issue of My Vision, we discuss the need for long-term fiscal
projections.

About This Issue
Toward the Formulation of Long-Term Fiscal Projections and the Realization of Appropriate
Fiscal Management- Bequeathing Future Generations a Society and Economy that Offer Hope
Yuri Okina
Executive Vice President, NIRA / Chairperson, The Japan Research Institute, Limited

Japan's outstanding national debt has continued to increase cumulatively, and there is a great deal ofconcern among the public regarding the long-term sustainability of the nation's public finances. As Japan’s
population continues to decline and age, it is perhaps now time for the nation’s citizens to share a longterm outlook regarding public finances in order to ensure peace of mind for future generations. Other
countries have established independent fiscal institutions (IFIs) to play a specific role in ensuring thereliability of public finances. Does Japan need long-term fiscal projections? How could these projections beused to ensure fiscal sustainability? For this issue of My Vision, we discussed fiscal estimation with experts
in a variety of fields.
Keywords…Long-term fiscal projections, checking of fiscal status, mechanisms for policy formulation

Expert Opinions
Toward the Formulation of Long-Term Fiscal Projections and the Realization ofAppropriate Fiscal Management
Does Japan need to formulate long-term fiscal projections?
How could these projections be used to ensure fiscal sustainability?
Visualize the Future via Long-Term Fiscal
Improve the Accuracy of Projections and Provide theProjections; Commence Management of the National Public with Accurate Fiscal Information
Budget on the Basis of a Medium-Term Framework

Hiroko Ota

Kazumasa Oguro

President, National Graduate Institute for Policy
Studies

Professor, Faculty of Economics, Hosei University

Keywords…”Super-aging society,” visualization of the
future, elimination of arbitrariness

Keywords…Provision of accurate information, validity of
economic growth rate, objective estimation

Creation of a Non-Partisan Diet Members’ Caucus
toward the Establishment of an Independent
Institution to Conduct Fiscal Projections

The Roles of an Independent Fiscal Institution (IFI)
Would Be Medium- to Long-Term Forecasting andMonitoring of Fiscal Plans

Yoshihisa Furukawa

Kensuke Ueda

Member of the House of Representatives

Professor, Department of Law, Sophia University

Keywords…Fiscal discipline, independent institution to
conduct fiscal projections, non-partisan Diet members’caucusKeywords…Medium-term fiscal plan, independent fiscal
institution, guarantee of neutrality

Budgeting for the Future: The Critical Role of theCongressional Budget Office in Providing
Independent, Nonpartisan Fiscal Forecasts
Philip G. Joyce
Professor, Public Policy in the University of
Maryland's School of Public Policy

Interview period：February - March, 2024
Interviewer: Kozue Sekijima (Associate Senior Fellow),
Jonathan Webb (Research Coordinator & Research Fellow)

Keywords…Demographic trends, independent
alternative, provision of impartial information
Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

1My Vision No.71
2024.4
About This Issue

Toward the Formulation of Long-Term Fiscal Projections andthe Realization of Appropriate Fiscal Management- Bequeathing Future Generations a Society and Economy that Offer HopeIn January 2024, the Population Strategy Council, a groupcomposed of private-sector experts, released “Population Vision
2100.” The Council considers the accelerating decline in Japan’sbirthrate and population to be a crisis that limits the range ofoptions for both individuals and society, and calls for two strategies
to be advanced in unison: a “steady-state strategy” to reduce thespeed of population decline and ultimately stabilize the population,
and a “robustness strategy” to create a society with a small
Yuri Okina
Executive Vice President, NIRA
population size but rich in diversity and the potential for growth.
/ Chairperson, The JapanOne very important factor will be to consider the lives of the
Research Institute, Limited
children who live with the aging and decline of the population. Thismeans, as the responsibility of current generations, implementing prudent fiscal management that
increases the potential growth rate and conducts expenditures with a high social return, enablingthese children to live their future lives with peace of mind. As a precondition for this, it will benecessary for the public to share an economic and fiscal picture of the future of their children's
generation, against the background of a population that is aging and declining at an accelerating pace,
and to consider a variety of policies in response. With this in mind, this issue of My Vision asked
experts in this area to share their views regarding long-term fiscal projections and the measures thatwill be needed in order to make use of these projections to realize sustainable public finances andsocial security.

Long-Term Projections Can Offer an Image of the Fiscal Future Resulting from
Demographic Change
We first hear from Hiroko Ota, President of the National Graduate Institute for Policy Studies(GRIPS), who served as Minister of State for Economic and Fiscal Policy from 2006 to 2008. President
Ota is concerned that her sense of impending crisis regarding Japan’s demographic change is notshared by the entire nation, and that Japan’s medium- to long-term fiscal management lags far behindthat of Western nations. She points out that while we should be making efforts to visualize the futureof the nation’s public finances based on data and using these projections as a basis to enhance thefunctioning of fiscal operation and management within a medium-term fiscal framework, it will also
be necessary to establish a mechanism that offers an impartial view of public finances, independentof government departments, in order to weather the difficult phase of fiscal management over the
next 30 years. President Ota also believes that it will be important to conduct policy evaluation on a
program-by-program basis and to cease implementing policies that have no effect.
Professor Kazumasa Oguro of Hosei University points out that it is important to regularly
formulate long-term fiscal projections in order to predict the degree to which long-term government
debt might increase in the future, and to verify the validity of the figures for the economic growth rate

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

2My Vision No.71
2024.4
on which the fiscal projections currently being conducted are based. He stresses that this will require
the political will to provide the public with correct fiscal projections. We require a function enabling
continuous analysis of the causes of deviations between government forecasts and actual results; theaccuracy of growth rate forecasts must also be improved. In addition, Professor Oguro points out theimportance of long-term projections of not only the fiscal balance but also of social insurance premium
rates, which are a burden on the working-age population.
President Ota and Professor Oguro point out that in order for the aforementioned functions tobe adequately fulfilled, we should take as our reference systems such as those in effect in the United
Kingdom and the United States, where impartial institutions conduct long-term fiscal projections orcheck government projections and monitor the government’s fiscal management.

What Types of Fiscal Projection and Checking Mechanisms Have Other Countries
Established?
Professor Kensuke Ueda of Sophia University, who has extensively studied the Office for Budget
Responsibility (OBR) in the UK, here discusses the Office’s structure and functions. The OBR is under
the authority of the UK Treasury, and is responsible for formulating economic forecasts. Based on thedata that it provides, the government formulates five-year budget plans, and announces its fiscal
commitments in numerical terms. The OBR evaluates the extent to which the government meets its
commitments and functions as a “soft law,” so to speak, that monitors the administration. Based on
this example, in addition to pointing out the need for the Japanese government to be held accountable
after the fact for deviations from forecasts based on its projections, Professor Ueda also suggests thatfunctions such as those of the OBR should be strengthened in Japan, with the government obliged toformulate a medium-term fiscal plan and reflect it in the budget for each fiscal year, and monitored
to check compliance with the plan.
Taking an example from another country, the Congressional Budget Office (CBO) in the UnitedStates was established in the 1970s as a nonpartisan organization and, unlike the case of the United
Kingdom, is under the authority of Congress. Professor Philip G. Joyce of Public Policy in the
University of Maryland’s School of Public Policy tells us that the CBO conducts 30-year projections inorder to adequately consider public finances in light of demographic changes, in particular the agingof the population, which has a significant impact on public finances. The CBO does not have the roleof making recommendations to the government. Professor Joyce stresses that instead, the CBO hasgained trust, and consequently promotes sound government decision-making, through its long historyof producing impartial forecasts that present alternatives to the information issued by the Office ofManagement and Budget (OMB) within the Executive Branch, which is made up of civil servants andpolitical appointees who are susceptible to presidential influence.

Discussing the Mechanism and Type of Governance Suitable for Japan
In Japan, a non-partisan group of Diet members is working to establish an Independent
Institution to conduct Fiscal Projections. Yoshihisa Furukawa, a member of the House ofRepresentatives, recognizes that Japan's Diet does not adequately supervise the government's fiscal
management and believes that in order to restore fiscal discipline, it will be important to present
accurate reports on the status of and the outlook for public finances, enabling the public to stay awareof the government's fiscal management. He also believes that such an institution should be
Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

3My Vision No.71
2024.4
established under the authority of the Diet, the people's representative body. He believes that this in
itself would demonstrate to the market and to the world that the Japanese people are willing to work
toward the realization of fiscal soundness, and would be significant in the sense of fulfilling thepromise of fiscal democracy.
The Cabinet Office released its long-term fiscal projections to the year 2060 in early April of
this year. This can be seen as a step forward in policy discussions based on a long-term perspective.
Three scenarios are presented, combining assumptions regarding productivity, the labor participation
rate, and the fertility rate, with real growth rates ranging from 0.2% to 1.7%. It will be necessary in
the future to establish a mechanism allowing ongoing review of the validity of these assumptions andforecast results, and to determine how to use these economic projections to ensure fiscal sustainability
and appropriately manage the nation’s public finances. With a declining birthrate, an aging society,and a declining population, how should Japan devise a uniquely Japanese mechanism and type ofgovernance, taking into consideration a variety of examples from overseas, in order to bequeath asociety and economy that offer hope to our children? I look forward to discussion on these issues
gathering momentum in the future.
Dr. Okina is an Executive Vice President of the Nippon Institute for Research Advancement (NIRA) and Chairperson of theJapan Research Institute (JRI). She holds a Ph.D. in economics from Kyoto University. She is Chairperson of the Government
Tax Commission, the acting Chairperson of the Fiscal System Council of the Ministry of Finance, and a member of the Social
Security Council of the Ministry of Health, Labor and Welfare, among numerous other public positions.

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

4My Vision No.71
2024.4
Expert Opinions

Visualize the Future via Long-Term Fiscal Projections; Commence Management of
the National Budget on the Basis of a Medium-Term Framework
All members of Japan’s baby boom generation, born between 1947
and 1949, will reach their late seventies in 2025, but this is only the
beginning of a long and difficult phase. The peak will come in 30 years,
when a quarter of Japan’s population will be in the later stages of old age.
We are now on the cusp of becoming a “super-aging society,” and I feel asense of impending crisis, given that this problem is not being directly
addressed. How will Japan be able to manage its public finances during
this period? It is essential that we avoid further constraining the choicesof future generations. To this end, we must visualize the future based on
Hiroko Ota
data, share our understanding of this difficult situation with the public,
President, National Graduate
and create the ground for discussion. This is precisely the reason that I
Institute for Policy Studies
believe Japan needs long-term fiscal projections on a 30-year basis. The
first important step in changing the current situation is that everyone
shares the recognition that it is important to visualize the future state of the economy and public finances
using data. Projections of the nation’s fiscal status could initially be made by any organization.
Japan has no medium- or long-term fiscal management system. Currently, the only goal that exists
is to achieve a primary balance surplus by 2025. However, there are no fiscal rules regarding how tomanage policy toward this goal, and there is no medium-term fiscal planning framework. Although thenation briefly had a medium-term fiscal restructuring plan, there was significant resistance to theimposition of constraints on the formulation of budgets, and there were strong calls for the abolition of theplan immediately following its introduction. There was also an attempt to present a long-term outlook, but
no plan was implemented because of problems in the assumptions used in the projections, such as
consumption tax rates and public service expenditures. The social atmosphere in Japan makes it difficult
to achieve a shared recognition of the need for medium- to long-term projections.
Western countries have managed their public finances on the basis of fiscal rules and medium-term
frameworks for some time. Nevertheless, despite this, they have been unable to overcome major shocks
such as the global financial crisis; this has led to the establishment of independent fiscal agencies.
Compared to these countries, Japan has lagged far behind. Japan, too, must establish an independent
fiscal institution (IFI) that takes an impartial view of public finances. This is essential because government
sector projections are readily influenced by politics and policy agendas, and there are concerns that
arbitrariness cannot be eliminated. Designing a system to ensure the independence, transparency, andobjectivity of such an institution will be very difficult, but it is now time that we focus seriously on this goal.
At the same time, there is a risk that ineffective policies will continue to be implemented, and it will
also be necessary to reform policy evaluation. For example, in the case of policies in which multiple
ministries and agencies are involved, such as measures to address the declining birthrate and global
warming, we should adopt the concept of “program-specific” budgets, and policies should be evaluated ona program-by-program basis, rather than on the basis of the specific ministry or agency. Ideally, thesebudgets should be requested across ministries and agencies, but it would perhaps be more realistic to startwith ex-post-facto policy evaluation.
President Ota specializes in economic policy and public finance policy. While holding the position of Professor at the National
Graduate Institute for Policy Studies (GRIPS), in 2002 she was transferred to the Cabinet Office, where she was responsible
for economic and fiscal policy as Director of Policy Analysis, Deputy Director General for Economic Research, and Director
General for Economic Research. For two years from 2006, she served as Minister of State for Economic and Fiscal Policy in
the Abe and Fukuda Cabinets, where she led policy management and promoted reform based on private-sector perspectives
and ideas. She then returned to the National Graduate Institute for Policy Studies, where she served as Vice President andSenior Professor before assuming her current position in September 2022. She has held a number of public positions,
including Chairperson of the Cabinet Office's Regulatory Reform Promotion Council and member of the Government Tax
Commission (Cabinet Office). President Ota is the author of numerous books.
Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

5My Vision No.71
2024.4
Expert Opinions

Improve the Accuracy of Projections and Provide the Public withAccurate Fiscal Information
The Japanese government has been working to restore fiscal
soundness, with the goal of achieving a primary balance surplus in
FY2025. While the government’s efforts have achieved a certain levelof success, measures to increase the accuracy of fiscal projections,which will serve as the basis for discussion regarding reform, are stillin their early stages. As Japan’s population declines and ages, is thegovernment providing a sufficient amount of correct information to
encourage the public to be more aware of the state of public finances?
Pension reform in 2004 was prompted by the government's
announcement of future projections, including the necessary premium
Kazumasa Oguro
rates, to maintain pension finances despite the aging of the population.
Professor, Faculty of Economics,
This sparked a debate in the business community, and the reform was
Hosei University
achieved. The provision of accurate information can act as a trigger forreform. The political will to provide the public with correct fiscal information is needed now more than ever.
There are two main problems with regard to current fiscal projections: first, the Cabinet Office's
Economic and Fiscal Projections for Medium to Long Term Analysis cover only a 10-year period and do notprovide a clear picture of long-term trends in outstanding debt; unless we regularly formulate long-term
fiscal projections for 50 years, or at the very least 30 years into the future, and unless we face harsh fiscal
realities, real progress toward the realization of fiscal soundness will not be achieved.
Another issue is the validity of the economic growth rate on which fiscal projections are based. If ahigh and optimistic growth rate is assumed, the outlook for tax revenues will also be optimistic, and wewill not obtain accurate projections of the fiscal balance. The January 2024 Cabinet Office projections
assume a nominal growth rate of about 3% for the high-growth case and about 0.7% for the low-growthcase. However, given that the average growth rate from 1995 to 2023 was 0.54%, even the low-growthscenario is an optimistic figure. It is necessary to examine the causes of the divergence between previous
forecasts and actual results and to improve the accuracy of the growth rate on this basis.
The Cabinet Office's medium- and long-term projections reflect the policy objectives of theadministration and are therefore readily influenced by politics. It would be more desirable for a neutral
institution that maintains a distance from politics to make objective projections of public finances andprovide information to the public. To this end, such an institution should be independent of the government,
but still have access to the information necessary for estimation and verification. It would be important todevise methods of enhancing trust in such an institution by referring to mechanisms such as the Office for
Budget Responsibility (OBR) in the UK, in addition to utilizing academic expertise and projections fromprivate-sector think tanks.
In addition, the burden of social insurance premium rates should also be projected, allowing us toincorporate not only the fiscal balance but also the future outlook for social security. It is planned that thecurrent measures targeting the nation’s declining birthrate will be financed by raising premium rates for
medical insurance. There is no doubt that this will be a significant burden for the working-age population.
As the population ages and expenditure on medical benefits is expected to increase, to what extent will
premium rates have to be raised and insurance premiums increased? It will be essential to offer the public
objective and transparent information and seek their understanding.
Professor Oguro specializes in the area of public finance. His main areas of research are demographics, public finance andsocial security, and issues related to intergenerational equity. He has made numerous proposals notable for flexible ideas ina wide range of fields. After entering the Ministry of the Treasury (now the Ministry of Finance), he served in a variety ofpositions, including Assistant Judicial Examiner in the Documentation Division of the Minister's Secretariat, Assistant
Director of the Enforcement Division of the Customs and Tariff Bureau, and Senior Research Fellow in the Policy ResearchInstitute of the Ministry of Finance. He held the position of Associate Professor at Hitotsubashi University before taking his
current position in 2015. Professor Oguro has also served as a Special Investigator for the Board of Audit, and as a memberof the Fiscal System Subcommittee of the Ministry of Finance’s Fiscal System Council in addition to numerous othergovernment committees. He holds a Ph.D. in Economics from Hitotsubashi University.

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

6My Vision No.71
2024.4
Expert Opinions

Creation of a Non-Partisan Diet Members’ Caucus toward theEstablishment of an Independent Institution to Conduct Fiscal Projections
Despite the fact that Japan's public finances are markedly worse
than those of other advanced economies, political management without
fiscal discipline has become the norm even when the nation is notundergoing an emergency situation. If interest rates and prices rise in the
future, fiscal risk will increase dramatically. It is difficult to haveconfidence that the Diet is adequately supervising the government's fiscal
management. Furthermore, trust in party politics has been thoroughly
shaken by the "slush fund scandal.” Party politics lost the trust of thepeople before the Second World War, spurring the rise of the military. I
believe that Japan once again stands at a historical crossroads. Unless all
Yoshihisa Furukawa
Japan’s politicians grit their teeth, face the fiscal crisis together with theMember of the House ofpeople, and have the courage to take on the thankless task of addressing
Representatives
the issue, we will not be able to play the role of holding the reins ofgovernment finances. With a view to restoring fiscal discipline, a non-partisan Diet members’ caucus has
been launched to urge the establishment of an independent institution to conduct fiscal projections, andmomentum behind this initiative is gathering.
The establishment of such an institution, which would provide accurate current and projected
information regarding public finances, would be a powerful tool to enable the public to monitor thegovernment's profligate fiscal expenditure. Most developed countries have such institutions; Japan doesnot. The lack of an institution of this type can be seen to be related to the fact that Japan has lost fiscal
discipline. In order for such an institution to be effective, it will be important not only to establish a systemthat enables the formulation of trustworthy data and projections, but also to position it as an authoritative
body and ensure that its pronouncements have weight. Similar to the procedure for the appointment of theGovernor of the Bank of Japan and other officials, I would recommend that appointments to the institution
be made with the consent of the Diet, and that the term of office be guaranteed for a specific number ofyears.
The non-partisan Diet members’ caucus believes that an independent institution as describedabove should be established under the authority of the Diet, the body which represents the people. As such,it would demonstrate to the markets and to the world that the Japanese people have the will to work
towards the realization of fiscal soundness. It would also be desirable in the sense that it would fulfill therequirement of Japan’s constitution for "fiscal democracy," or in other words, that resolutions passed by theDiet are necessary to authorize the nation's fiscal activities. Demonstrating that the Diet has an importantrole to play in holding the reins of public finance will also make Diet members more aware of their role.
The non-partisan Diet members’ caucus is currently engaged in the process of formulating a
concrete proposal, and is still debating whether the independent institution under discussion should beplaced under the authority of the upper house or of both houses of the Diet. There was, in fact, a movetowards the establishment of such an institution about 10 years ago, but this did not come to fruition. It is
to be hoped that this time, we will be able to make it a reality as soon as possible.
Among his many positions in government, Mr. Furukawa has served as Minister of Justice, State Minister of Finance,
Chairperson of the House of Representatives’ Committee on Financial Affairs, and Parliamentary Secretary for Justice,giving him a thorough knowledge of a wide range of policies, including fiscal and judicial policy. Mr. Furukawa graduatedfrom the University of Tokyo with a bachelor's degree in law. After joining the Ministry of Construction (now the Ministry ofLand, Infrastructure, Transport, and Tourism), he worked as a Policy Secretary to a member of the House of Representatives
before being elected to the House for the first time in 2003. He is currently serving his seventh term. He serves as Secretary
General of the non-partisan Diet Members’ Caucus for the Establishment of an Independent Institution to conduct Fiscal
Projections, which was established in 2021 on a voluntary basis by Diet members from the ruling and opposition parties, andis working to establish an institution that will conduct projections of Japan’s fiscal situation independently of the government.
He is also currently serving as the Chairperson of the Liberal Democratic Party’s Headquarters for the Promotion of the
Fiscal Consolidation.

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

7

My Vision No.71
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Expert Opinions

The Roles of an Independent Fiscal Institution (IFI) Would Be Mediumto Long-Term Forecasting and Monitoring of Fiscal Plans
While it is not a direct violation of Japan’s Constitution to defer fiscal
burden onto future generations, policy discussions must consider thesustainability of public finances, taking into account future generations. Not
knowing at what level the outstanding debt will cause the nation’s economy
to collapse is itself a risk, and it is essential that information should beanalyzed and disclosed in an impartial manner.
As indicated by the fact that Japan today does not have an adequate
medium-term fiscal plan, there is a lack of government involvement andresponsibility in the area of public finances. The example of the United
Kingdom is instructive in this regard. In the UK, although the law does not
Kensuke Ueda
stipulate specific numerical fiscal targets, there is a mechanism that
Professor, Department ofLaw, Sophia University
requires the government to be involved with and responsible for publicfinances. The Office for Budget Responsibility (OBR), an institution with ahigh level of independence from the government, formulates an economic outlook, and on this basis, thegovernment announces numerical fiscal commitments and targets for a five-year period. The OBR, in turn,assesses the extent to which the government has met its pledged targets. While there are no penalties orother legal liabilities if the government does not meet its commitments, this process functions as a "softlaw" to ensure compliance with the standards that the government itself has imposed.
In Japan, the establishment of an IFI like the OBR would be desirable in order to provide
information regarding public finances to the Diet and the public from an impartial standpoint. One of its
roles would be to provide medium- to long-term economic and fiscal forecasts. The Cabinet Office currently
makes economic forecasts, but it is necessary to reflect these forecasts in the formulation of budgets forministries and agencies, in addition to ensuring ex post facto accountability for deviations between
forecasts and actual results. Another role of such an institution would be the monitoring and review offiscal planning. To change the current situation in Japan, the first step would be for the government toformulate a medium-term fiscal plan for a period of three to five years, to reflect this in the budget for eachfiscal year, and to establish a mechanism by means of which an IFI checks whether the plan is being
followed.
The question of which authority to place an IFI under is a significant issue. If such an institution
was placed under the authority of the government, there is a possibility that it would defer to thegovernment; if it was placed under the authority of the Diet, there is a possibility that it would be overly
influenced by the opposition. In the UK, the aforementioned OBR is under the authority of HM Treasury,
while in the U.S., the Congressional Budget Office (CBO), which serves as an IFI, is under the authorityof Congress. In these cases, the government (in the UK) or Congress (in the U.S.) utilize information fromtheir respective independent fiscal agencies when they formulate a budget. Because the Cabinet
formulates the budget in Japan, it may be best to place a fiscal institution under the authority of the
Cabinet if the information it produces is to be reflected in the formulation of the budget. However, if
economic and fiscal forecasts are to be presented independently of the government and the government's
forecasts are to be reviewed, it should certainly be possible to create a system allowing the information it
provides to be used in a nonpartisan manner through the establishment of an IFI under the authority of
the Diet.
Professor Ueda specializes in comparative constitutional law. He conducts historical legal research that compares Japan with
the UK, with a focus on the authority of the Prime Minister and Cabinet Office and their degree of control over policymaking.
He also researches fiscal systems, and is advancing an examination of the significance of and challenges for fiscal control andthe necessary direction for expenditure control, focusing on fiscal discipline in the UK. He has been a full-time lecturer in the
Faculty of Law of Nara Sangyo University (now Nara Gakuen University), a full-time lecturer and Associate Professor in
Kindai University’s Faculty of Law, a Professor in the Kindai University Graduate School of Law, and a Visiting Scholar at
the University of Glasgow. Professor Ueda holds a Ph.D. in Law from Kyoto University. He is the author of numerous papers.

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji. This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

8

My Vision No.71
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Expert Opinions

Budgeting for the Future: The Critical Role of the Congressional
Budget Office in Providing Independent, Nonpartisan Fiscal Forecasts
The growth in the federal budget and deficit of the UnitedStates in recent decades has been largely driven by the movement oflong-term demographic trends, most notably population aging. As thebaby boomer generation, one of America’s largest, has transitioned tobeing recipients of Social Security and Medicare, it has put immensepressure on the federal budget, highlighting the need for long-term
forecasts. Accounting for future demands on the federal budget falls

Philip G. Joyce

to the United States Congressional Budget Office (CBO), which

Professor, Public Policy in the
University of Maryland's School of
Public Policy

budgetary analysis. Although initially only issuing five-year forecasts,

provides long-term projections, legislative cost estimates, andthese were eventually expanded to 30-year projections to betteraccount for demographic changes. For budget enforcement purposes, CBO expanded from 5 to 10-year costestimates of legislation to deter attempts to conceal the long-term impact of policy proposals by frontloading
benefits and deferring expenses.
Established in 1974 as a nonpartisan institution within Congress, the CBO provides a reliable,
independent alternative to information from the Office of Management and Budget (OMB). This is criticalas the OMB’s structure, situated within the executive branch, subordinate to the president and composedof both civil servants and political appointees, limits its objectivity, and disincentivizes projections beyond
the four- to eight-year limit of a president’s time in office.
Over the course of its 50-year history, the CBO has grown into one of the most trusted institutionsin an increasingly divided America, in part due to a willingness to publish forecasts that challengepresidential ambitions, regardless of which political party controls the presidency or the Congress. The
mere threat of a CBO contradiction sometimes dissuade OMB political appointees from publishing overly
optimistic figures. The CBO’s focus on objective, nonpartisan analysis, is largely the result of the CBO's
first director, Alice Rivlin, who limited its role to providing impartial information without
recommendations, thus ensuring decisions were left to elected officials. While some may question thisapproach given the growing federal deficit, the CBO was never designed to force Congress's hand; policy
recommendations, even those based in fact, would be perceived as partisan, risking the CBO's credibility
and existence.
The CBO’s publishing of accessible forecasts, cost estimates, and long-term studies equips Congress,
the press, and the public with the analytical capacity to anticipate future budgetary demands, understandlong-term economic implications, and make informed decisions.
As countries worldwide grapple with political polarization and the fiscal challenges of aging
populations, the CBO serves as a model for how independent fiscal institutions can be vital neutral arbiters
promoting transparency, deterring dishonest accounting, and ultimately fostering sound decision-making
in government.
Philip Joyce is Professor of Public Policy in the University of Maryland’s School of Public Policy. He is the author of The
Congressional Budget Office: Honest Numbers, Power, and Policymaking (Georgetown University Press, 2011), two otherbooks, and more than 50 other publications focusing primarily on public budgeting. He is a Fellow of the National Academyof Public Administration, and received the Aaron Wildavsky Award for lifetime scholarship in public budgeting and financein 2012.

Editor: Reiko Kanda, Maiko Sakaki and Tatsuya Yamaji.
Copyright Ⓒ 2024 by Nippon Institute for Research Advancement

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