The Congress of the United States O Congressional Budget Office

CBO

CBO’s Economic Forecasting Record:

2007 Update

November 2007

A

REPORT
Note

All years are calendar years.

Numbers in the text and tables may not add to totals because of rounding.

Pub. No. 3042
Preface

The Congressional Budget Office (CBO) regularly publishes evaluations of the accuracy 

of its economic and budget forecasts. Those evaluations help guide CBO’s efforts to improve 

its forecasts and also assist Members of Congress in their use of CBO’s estimates.

This report was prepared by Christopher Williams and Kim Kowalewski of CBO’s Macroeconomic Analysis Division, with assistance from Adam Weber and Eric Miller and under the 

direction of John Peterson and Robert Dennis. Kate Kelly edited the report, and Christian 

Howlett proofread it. Maureen Costantino and Allan Keaton prepared the report for publication, Lenny Skutnik produced the printed copies, Linda Schimmel coordinated print distribution, and Simone Thomas created the electronic version for CBO’s Web site 

(www.cbo.gov). 

Peter R. Orszag

Director

November 2007

Contents

Choice of Forecasts for the Evaluation 1

Measuring the Quality of Forecasts 1

Bias 1

Accuracy 2

Alternative Measures of Forecast Quality 2

Limitations of Forecast Evaluations 2

The Effects of Business Cycles, Changes in the Trend Rate of Productivity 

Growth, and Oil Price Shocks 3

CBO’s Forecasting Record 4

Two-Year Forecasts 4

Five-Year Projections 9

Appendix: Historical and Forecast Data 37

Tables

1. Summary Measures of Performance for Two-Year Average

Forecasts 11

2. Summary Measures of Performance for Five-Year Average 

Projections 12

3. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Growth Rates for Real Output 14

4. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Growth Rates for Nominal Output 16

5. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Inflation in the Consumer Price Index 18

6. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Nominal Interest Rates on Three-Month 

Treasury Bills 20

7. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Averages for Nominal Long-Term Interest Rates 22

8. CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Real Interest Rates on Three-Month 

Treasury Bills 24
VI CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

9. CBO, Blue Chip, and Administration Forecasts of the

Difference Between Two-Year Average Inflation in the 

CPI and in the GNP or GDP Price Index 26

10. CBO and Administration Forecasts of the Two-Year 

Change in Wage and Salary Disbursements Plus

Corporate Book Profits as a Share of Output 28

11. CBO, Blue Chip, and Administration Projections of 

Five-Year Average Growth Rates for Real Output 30

12. CBO, Blue Chip, and Administration Projections of

Five-Year Average Growth Rates for Nominal Output 32

13. CBO, Blue Chip, and Administration Projections of the 

Difference Between Five-Year Average Inflation in the 

CPI and in the GNP or GDP Price Index 34

14. CBO and Administration Forecasts of the Five-Year 

Change in Wage and Salary Disbursements Plus 

Corporate Book Profits as a Share of Output 36

Figures

1. Statistical Discrepancy in the NIPAs 9

2. Fringe Benefits 9

Box

1. How Data Revisions May Affect the Interpretation of

Forecast Errors 5

Tables (Continued)
CBO’s Economic Forecasting Record:

2007 Update

Since publishing its first macroeconomic forecast 

in 1976, the Congressional Budget Office (CBO) has 

compiled a forecasting track record comparable to those 

of the Administration and the Blue Chip consensus (an 

average of private-sector forecasts published periodically 

as the Blue Chip Economic Indicators). In particular, 

CBO’s accuracy for two-year forecasts made between 

1982 and 2005 did not differ markedly either from that 

of the Blue Chip consensus or from that of the Administration over those years (see Table 1 on page 11). The 

accuracy of CBO’s five-year projections also was similar 

(see Table 2 on page 12), although the Administration 

has had slightly smaller errors in projecting types of 

income as a share of national output. Comparing CBO’s 

forecasts with those of the Blue Chip consensus suggests 

that when the agency’s economic predictions missed by 

the largest margin, those inaccuracies probably reflected 

problems that all forecasters had in predicting turning 

points in the business cycle. 

Choice of Forecasts for the Evaluation

The data used for this evaluation were compiled from 

forecasts published in the early months of the years from 

1976 through 2005. (Two-year average forecasts published in 2006 and in early 2007 could not be included in 

this evaluation because the latest full-year historical data 

are for 2006.) For all years except 1981, CBO’s forecasts 

were based on the calendar year forecasts published early 

each year (or from related files of unpublished forecasts 

for some variables in some years). The Administration’s 

forecasts were taken from the budget documents for all 

years except 1981.1

 Where possible, Blue Chip consensus 

forecasts were those published in the same month as 

CBO’s forecasts. Although the Blue Chip publishes forecasts every month, in only two months of the year—

March and October—do forecasts extend out more than 

two years, and those longer-term forecasts are published, 

on average, three months after CBO’s forecast is completed. Also limiting the analysis are the shorter history of 

the Blue Chip’s two-year forecasts, which began in 1982, 

and their narrower scope. (The Blue Chip’s forecasts 

exclude several important series, most notably wages and 

salaries, that are vital for budget projections.) The appendix to this report gives further details on the choice of historical time–series data and on the sources of forecast data 

for the comparisons. 

Measuring the Quality of Forecasts

Like earlier studies of economic forecasts, this evaluation 

focused on two aspects of the quality of CBO’s forecasts: 

statistical bias and accuracy. Other desirable characteristics—such as efficiency, which is discussed later—are 

harder to assess definitively and would require a larger 

sample than is available for CBO’s forecasts. 

Bias

The statistical bias of a forecast is its tendency to be pessimistic or optimistic. To measure statistical bias, CBO’s 

evaluation used the mean error (the arithmetic average of 

the forecast errors), which is the simplest and most widely 

used measure. Because it is a simple average, however, 

underestimates and overestimates offset each other in 

calculating it. As a result, the mean error imperfectly 

measures the quality of a forecast—a small mean error 

would result either if all of the errors were small or if all of 

the errors were large but the overestimates and underestimates happened to balance each other out.

1. The Administration’s forecast made in early 1981 came from 

the Reagan Administration’s revisions to President Carter’s last 

budget. 
2 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Accuracy

The accuracy of a forecast is the degree to which its values 

are narrowly dispersed around actual outcomes. Measures 

of accuracy more clearly reflect the usual meaning of 

forecast quality than does the mean error because overestimates and underestimates do not offset each other in 

these measures. CBO’s evaluation used two measures of 

accuracy. The mean absolute error (the average of the 

forecasts’ errors without regard to arithmetic sign) indicates the average difference between forecasts and actual 

values without regard to whether individual forecasts are 

overestimates or underestimates. The root mean square 

error (calculated by first squaring the errors, then taking 

the square root of the arithmetic average of the squared 

errors) also shows the size of the error without regard to 

sign, but it gives greater weight to larger errors. Because 

small errors typically are inconsequential, the root mean 

square error usually gives the best indication of accuracy.

Alternative Measures of Forecast Quality

Studies by analysts outside CBO have used measures that 

are somewhat more elaborate than the mean error to test 

for statistical bias in CBO’s forecasts. Those studies have 

generally concluded, as does this evaluation, that CBO’s 

short-term economic forecasts do not contain a statistically significant bias.2

Other methods have been developed to evaluate a forecast’s “efficiency,” or the extent to which a particular forecast could have been improved by using additional information that was available when the forecast was made.3

One simple method compares a forecast with the Blue 

Chip consensus forecast, which represents a variety of 

economic forecasts and thus reflects a broader blend of 

sources and methods than can be expected from any single forecaster. As such, the consensus forecast may produce better forecasts than any single forecaster.4

 In this 

evaluation, the Blue Chip predictions serve as a proxy for 

an efficient forecast. The fact that CBO’s forecasts are 

about as accurate as the Blue Chip’s is a rough indication 

of their efficiency. 

Some researchers contend that economic forecasters, in 

general, do not use all of the information available to 

them to forecast downturns in the business cycle and, as a 

result, make avoidable systematic errors in forecasting 

those business cycles.5

 Such critics point to the ability of 

certain leading indicators to predict recessions. Nevertheless, the information in such indicators cannot be readily 

translated into economic forecasts. 

Limitations of Forecast Evaluations

Elaborate measures and methods do not necessarily produce reliable indicators of a forecast’s quality when the 

sample of observations is small, as with CBO’s sample of 

only 30 two-year observations. Small samples present 

three main problems in evaluating forecasts. First, they 

reduce the reliability of statistical tests that are based on 

the assumption that the errors in the forecast follow a 

normal (bell-shaped) distribution. The more elaborate 

measures of forecast quality all make such an assumption 

about the hypothetical ideal forecast with which the 

2. Another approach to testing a forecast for bias is based on linear 

regression analysis of actual values against forecast values. For 

details of that method, see J. Mincer and V. Zarnowitz, “The 

Evaluation of Economic Forecasts,” in J. Mincer, ed., Economic 

Forecasts and Expectations (New York: National Bureau of 

Economic Research, 1969). That approach is not used here 

because of the small size of the sample. However, previous studies 

that have used it to evaluate the short-term forecasts by CBO and 

the Administration have not been able to reject the hypothesis 

that those forecasts are unbiased. See, for example, M.T. Belongia, 

“Are Economic Forecasts by Government Agencies Biased? 

Accurate?” Review, Federal Reserve Bank of St. Louis, vol. 70, 

no. 6 (November/December 1988), pp. 15–23. For a more recent 

and more elaborate study of forecast bias that included CBO’s 

forecasts among a sizable sample, see David Laster, Paul Bennett, 

and In Sun Geoum, Rational Bias in Macroeconomic Forecasts, Staff 

Report No. 21 (New York: Federal Reserve Bank of New York, 

March 1997).

3. For studies that have examined the relative efficiency of CBO’s 

economic forecasts, see Belongia, “Are Economic Forecasts by 

Government Agencies Biased?”; and S.M. Miller, “Forecasting 

Federal Budget Deficits: How Reliable Are U.S. Congressional 

Budget Office Projections?” Applied Economics, vol. 23 (December 

1991), pp. 1789–1799. Although both studies identify series that 

might have been used to make CBO’s forecasts more accurate, 

they rely on statistics that assume a larger sample than is available. 

Moreover, although statistical tests can identify sources of inefficiency in a forecast after the fact, they generally do not indicate 

how such information could be used to improve forecasts when 

the forecasts are being made.

4. See, for example, Andy Bauer and others, “Forecast Evaluation 

with Cross-Sectional Data: The Blue Chip Surveys,” Economic 

Review, Federal Reserve Bank of Atlanta (Spring 2003), pp. 17–

31; and Henry Townsend, “A Comparison of Several Consensus 

Forecasts,” Business Economics (January 1996).

5. See R. Fildes and H. Stekler, “The State of Macroeconomic Forecasting,” pp. 435–468, and K.D. West, “Comments on ‘The State 

of Macroeconomic Forecasting,’” pp. 495–497, both in Journal of 

Macroeconomics, vol. 24 (December 2002).
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 3

actual forecasts are being compared. Second, in small 

samples, individual errors in a forecast can have an 

unduly large influence on the measures. Third, the small 

sample means that CBO’s track record indicates only 

weakly the possible direction or size of forecasting inaccuracies in the future. 

Apart from the general caveat that should attend any conclusions based on statistical analysis, there are several reasons for viewing any evaluation of CBO’s forecasts with 

particular caution:

B The procedures and purposes of the economic forecasts produced by CBO, the Blue Chip, and the 

Administration differ and have changed over the past 

two decades, and they may change again. In the late 

1970s, CBO characterized its medium-term projections as a goal for the economy; it now considers them 

to be projections of what will prevail, on average, if the 

economy continues to reflect historical trends and fiscal policies do not change. In contrast, the underlying 

policy assumptions in the Blue Chip forecasts, either 

for the short run or for the medium term, are not 

clear. The Blue Chip is a survey, and the various forecasters often do not state their assumptions about fiscal policy. Last, the various Administration forecasts 

normally include the projected economic effects of 

their respective policy proposals, whereas CBO’s forecasts assume the continuation of current policies.6

B An institution’s track record in forecasting may not 

indicate its future abilities because of changes in 

personnel or methods.

B Inaccuracies in a forecast increase when the economy 

is more volatile and when economic trends change. All 

three groups of forecasters—CBO, the Blue Chip, and 

the Administration—made relatively large errors when 

forecasting for periods that included turning points in 

the business cycle and for the late 1990s, when the 

sustainable growth rate of the economy increased 

because of faster growth in productivity.

B The common practice of revising statistical data may 

mean that forecasters make predictions about one concept and the statistical agencies that compile those 

data ultimately report a materially different concept. A 

quantitatively important case in point was the addition of software expenditures to business fixed investment—and hence to gross domestic product 

(GDP)—in the comprehensive revision of the 

national income and product accounts (NIPAs) that 

occurred in October 1999. 

The Effects of Business Cycles, Changes 

in the Trend Rate of Productivity 

Growth, and Oil Price Shocks

Forecasters collectively have tended to err during periods 

that included either turning points in the business cycle 

or significant shifts in the trend rate of growth of labor 

productivity. The difficulty of forecasting business-cycle 

turning points explains why most forecasters overestimated the economy’s growth rate just before the two 

back-to-back recessions of the early 1980s. That pattern 

was repeated in the forecasts made just before the more 

moderate recession of the early 1990s. In addition, during the mid- to late 1970s, forecasters continued to 

assume that the productivity trend of the previous two 

decades would prevail. The productivity trend of the 

1970s and 1980s, however, turned out to be significantly 

lower than that of the 1950s and 1960s. Because forecasters in the 1970s expected the previous trend to 

return, their forecasts of real (inflation adjusted) output 

in the mid- to late 1970s turned out to be too optimistic. 

Partly for the same reason, forecasters repeatedly underestimated inflation in the late 1970s.

The late 1990s were a mirror image of the forecasting 

experience of the late 1970s. Partly because forecasters 

underestimated the trend rate of productivity growth 

beginning in 1996, they underpredicted the economy’s 

growth rate and overpredicted inflation for several consecutive years. As the economy continued to outperform 

expectations, analysts put more effort into investigating 

the possible causes of the increase in productivity growth. 

Those investigations focused on the possible contribution 

of the so-called new economy—especially the improved 

flow of information among producers and between producers and consumers, which improved productivity and 

reduced inventories. Given revised data on production 

and inputs to production, CBO now estimates that an 

increase in the amount of capital (buildings, equipment, 

and software) per worker—sometimes called “capital 

6. The role of current-policy or current-law assumptions in CBO’s 

economic forecasts is explored in Congressional Budget Office, 

What Is a Current-Law Economic Baseline? (June 2, 2005).
4 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

deepening”—was the primary source of the faster growth 

in productivity in the late 1990s.

To be sure, large forecast errors of economic growth can 

occur in the absence of recessions and changes in productivity trends. The two-year forecasts made in 2004 and 

2005 by CBO, the Blue Chip consensus, and the Administration all show notably larger forecast errors for real 

GDP (the causes of which are discussed in a subsequent 

section) than do the two-year forecasts made in 2002 and 

2003. The larger errors in the later forecasts did not result 

from a recession or from an unforeseen downshift in 

trend productivity.

The proximate cause of many sizable errors in forecasting 

price inflation has been large, unexpected movements in 

oil prices. From 1979 to 1980, oil prices roughly doubled; they doubled again between late 2003 and mid2006. Both CBO and the Administration substantially 

underpredicted consumer price index (CPI) inflation in 

the 1979–1980, 1980–1981, 2004–2005, and 2005–

2006 forecasts. By contrast, sharp and unexpected 

declines in oil prices in 1986, and again in 1997 and 

1998, led forecasters to overestimate the two-year rate of 

price inflation. 

CBO’s Forecasting Record

This analysis evaluates CBO’s macroeconomic forecasts, 

which cover two-year and five-year periods. Because the 

budget reports that CBO and the Administration publish 

every winter focus on projections for the fiscal year that 

begins in the following October, an economic forecast 

that is accurate not only for the months leading up to 

that year but also for the budget year itself will provide 

the basis for a more accurate projection of the budget’s 

bottom line (the annual deficit or surplus) on a currentlaw basis—hence the interest in the two-year period. The 

five-year period is used to examine the accuracy of longerterm projections of several variables that are important 

for CBO’s budget projections. Because there have been 

more turning points than shifts in the trend in productivity growth, the average errors in forecasting real gross 

national product and real GDP are greater over the twoyear forecasting horizon than over the five-year horizon.

In another publication, CBO analyzed the overall uncertainty of its budget projections, which depend in part on 

the accuracy of its economic projections.7

 In addition, 

“rules of thumb” for estimating the effects that alternative 

assumptions about various macroeconomic variables have 

on budget projections appear in Appendix B of CBO’s 

The Budget and Economic Outlook: Fiscal Years 2008 to 

2017 (January 2007). 

Two-Year Forecasts

Historically, the accuracy of CBO’s two-year forecasts, as 

measured by the root mean square error, has been very 

similar to the accuracy of the forecasts of the Blue Chip

consensus and the Administration.

Growth in Real Output. The accuracy of CBO’s forecasts 

closely matched that of the Blue Chip consensus for the 

two-year forecasts made between 1982 and 2005. CBO’s 

root mean square error was 1.2 percentage points, as was 

that for the Blue Chip consensus (see Table 3 on page 14). 

The two sets of errors were highly positively correlated; 

when CBO’s error was relatively large, the Blue Chip’s

error also was large and in the same direction. In addition, the two sets of forecast errors differed by more than 

0.1 percentage point in 11 of the 24 forecasts made during those years. CBO was closer to the actual value in six 

of those forecasts. (CBO’s forecasts, which were published in the same month as the Blue Chip forecasts with 

which they were compared, were normally completed 

nearly two months earlier to provide time for the budget 

projections to be prepared.) Overall, the Administration’s 

forecasts were about as accurate as those of CBO. 

As noted earlier, forecast errors tend to be larger at turning points in the business cycle and when shifts occur in 

major economic trends. That tendency can be clearly 

seen in the forecasts of real output growth by comparing 

the large errors for 1979 through 1983—when the economy went through its most turbulent recessionary period 

of the postwar era—with the smaller errors recorded for 

the mid-expansion years from 1985 to 1987. More 

recently, the recession of 2001 and slow recovery in 2002 

accounted for the overpredictions made by all three forecasters in 2000 and 2001.

All three forecasters underpredicted two-year real GDP 

growth in every year between 1992 and 1999, with very 

large errors for the two-year forecasts made between 1996 

and 1999. About one-fourth of that apparent pessimism 

resulted from subsequent revisions to the NIPAs, which 

included important definitional changes (see Box 1). Yet 

7. See also Congressional Budget Office, The Uncertainty of Budget 

Projections: A Discussion of Data and Methods (March 2006).
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 5

Box 1.

How Data Revisions May Affect the Interpretation of Forecast Errors

Data revisions account for some of the forecast error 

for several series examined in this analysis. If revisions 

change trends that are incorporated into history, 

forecasts based on prerevision trends can be 

inaccurate. The comprehensive revisions to the 

national income and product accounts (NIPAs) 

produced by the Bureau of Economic Analysis (BEA) 

in October 1999 increased two-year growth rates for 

real gross domestic product (GDP) over most of the 

historical period and raised rates by about 

0.4 percentage points, on average, for 1992 to 1998. 

That increase came largely from redefining software 

spending as investment and from adopting new price 

series for various categories of consumption. 

The upward revision to the growth of real output was 

accompanied by a downward revision to the growth 

of the GDP price index over the same period. In 

addition to making the mean forecast error less 

informative, those revisions distort the reliability of 

the statistical measures of accuracy. (Some of the 

series examined here—the consumer price index and 

nominal interest rates—are unaffected.) Not every 

GDP revision has consequences, however. BEA’s 

comprehensive NIPA revisions in December 2003 

and December 2006 did not significantly affect the 

historical pattern of any of the variables used in this 

analysis.

The three-year NIPA revisions released in July 2007 

changed the patterns of errors for forecasts of NIPA 

variables for 2004 through 2006. Growth of real 

GDP was revised downward, but because the price 

index for gross domestic purchases was revised 

upward, the downward revisions to nominal GDP 

were small. 

The two-year forecast for growth in real GDP for 

2004–2005 illustrates how data revisions change 

measures of forecast performance. Before the latest 

revision, CBO’s forecast error for real GDP growth 

was an overprediction of 0.9 percentage points; the 

Blue Chip consensus and the Administration overpredicted real GDP growth by 0.6 and 0.4 percentage 

points, respectively. After the July 2007 revision, all 

of those errors rose. The errors in the Blue Chip and 

Administration forecasts rose to 0.8 and 0.6 percentage points, respectively, and as currently measured, 

CBO’s overprediction increased to 1.1 percentage 

points. The same revision to the real GDP data 

essentially eliminated CBO’s forecast error for 2003 

to 2004, but the other forecasts, which had been on 

the mark, now show slight overpredictions.

Analysts’ understanding of trends in types of income 

as a share of output can change sharply with data 

revisions, thus changing the accuracy of forecasts. 

Consider the forecast for the change in the share of 

wages and profits for 2003 to 2004. In early 2003, 

CBO forecast a gain of 1.1 percentage points; the 

Administration forecast a gain of 1.6 percentage 

points. Before the July 2006 three-year revision of the 

NIPAs, the actual income share was reported as 

unchanged over 2003 to 2004, implying a CBO forecast error of 1.2 percentage points. But the July 2006 

revision implied that the income share of wages, salaries, and book profits increased by 0.9 percentage 

points over those years, so CBO’s error was reduced 

to 0.2 percentage points. 

The Administration’s error, previously 1.6 percentage 

points, fell to 0.7 percentage points. The July 2007 

revision to the NIPAs changed the story again. Now 

the combined income share is reported to have risen 

by 1.6 percentage points over that period. So the 

Administration’s forecast of the increase in that share 

is now seen to have been on target. The same revised 

data now imply that CBO's forecast error is an 

underprediction, not an overprediction. Not only did 

CBO’s error change sign, but at 0.4 percentage 

points, it is twice the absolute magnitude implied 

before the latest NIPA revision.
6 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

leaving those data revisions aside, the underpredictions 

made between 1996 and 1999 still reflect the failure to 

foresee important economic developments. 

What CBO and other forecasters missed was the investment boom of the late 1990s, which deepened the capital 

stock and thereby boosted labor productivity and real 

economic growth.

All three forecasters overpredicted the growth of real 

GDP in the two-year forecast made in early 2004. They 

foresaw strong expansion in domestic demand, which was 

subsequently reported by the Bureau of Economic Analysis (BEA), but wrongly expected that U.S. output would 

grow as fast as demand. Forecasters, including CBO, 

failed to see that labor force participation would stay low, 

that hours worked would not rebound quickly, and that, 

with the growth of domestic output lower than predicted, 

an increasing share of domestic demand would be met by 

foreign production. Instead of the narrowing of the trade 

deficit that was anticipated for 2005, the trade deficit 

widened further. Later revisions to the data indicated that 

domestic demand was somewhat weaker than initially 

reported, thereby increasing the measured forecast errors. 

CBO forecast somewhat stronger economic growth for 

the two-year period than the Administration and the Blue 

Chip consensus did, so its forecast error for real output 

was—and remains after revision—larger.

Early in 2005, all three forecasters lowered their two-year 

forecasts for the growth of real GDP, compared with 

those made a year before. Despite the change, they all 

overpredicted growth for 2005 and 2006. Because CBO’s 

forecast for real GDP growth had been slightly stronger 

than the other two forecasters’, its forecast errors were 

slightly larger. About half of CBO’s forecast error for 

2005–2006 resulted from overpredicting domestic final 

demand, and about half came from overpredicting the 

contribution from trade and inventories.

Growth in Nominal Output. The records of CBO and the 

Blue Chip in forecasting two-year growth in nominal 

output are also quite similar overall (see Table 4 on 

page 16). The accuracies for the entire period, as measured by the root mean square error, were almost identical 

at 1.3 percentage points for CBO and 1.2 percentage 

points for the Blue Chip. The two forecasts are positively 

correlated, and of the 24 forecasts made between 1982 

and 2005, the Blue Chip’s error was smaller (by more than 

0.1 percentage point) than CBO’s 8 times, CBO had the 

smaller error 3 times, and the two forecasters recorded 

virtually identical errors 13 times. 

The Administration’s projections of nominal output were 

about as accurate as those of CBO, both since 1982 and 

over the longer interval between 1976 and 2005.

In 2004 and again in 2005, all three forecasters overpredicted the two-year growth rate of real output but 

underpredicted inflation in the GDP price index by 

more. Hence, all three forecasters underpredicted the 

growth rate of nominal output. The forecast errors for the 

two-year projection of nominal GDP beginning in 2004 

made by CBO and the Blue Chip were almost identical. 

The Administration’s underprediction of nominal GDP 

was somewhat larger than that of CBO and the Blue Chip

for the forecast made in 2004 but identical to them for 

the forecast made in 2005.

CPI Inflation. CBO’s success matched that of the Blue 

Chip in forecasting two-year average growth in the consumer price index (see Table 5 on page 18). CBO was 

more than 0.1 percentage point closer to the actual value 

in 8 of the 24 periods, the Blue Chip was closer in 5 periods, and the errors of the two forecasters were essentially 

the same in 11 periods. 

The variability of oil prices caused CBO and the Blue 

Chip to err in forecasting inflation. Each forecaster overestimated future inflation for 1982–1986 and for 1997–

1998, partly because of the rapid drop in oil prices early 

in 1986 and in 1997–1998. Conversely, sharply increased 

in oil prices in 2000 and again in 2003 caused both to 

underestimate inflation in their two-year forecasts published in early 1999 and 2000 as well as those published 

in 2003. Further large unanticipated hikes in oil prices 

occurred in 2004, 2005, and 2006, and as a result, both 

forecasters recorded above-average errors for their twoyear forecasts for CPI inflation made in early 2004 and 

2005. (Two-year forecasts for inflation made in early 

2005 underestimated energy prices in both 2005 and 

2006, but forecast errors were larger still because housing 

rents rose significantly faster than anticipated in 2006.) 

In its 2005 forecast, CBO predicted a greater decline in 

two-year inflation than did the Blue Chip; when actual 

inflation was higher than the consensus, CBO’s forecast 

error was larger.
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 7

The accuracy of CBO’s forecasts of inflation was virtually 

the same as the Administration’s in the period since 1982 

and over the longer period since 1976. 

Nominal Short- and Long-Term Interest Rates. For the 

1982–2005 forecasts of nominal short-term interest rates, 

CBO’s record was almost the same as the Blue Chip’s as 

measured by the root mean square error (see Table 6 on 

page 20). Both CBO and the Blue Chip tended to slightly 

overestimate rates on three-month Treasury bills (their 

mean errors over that period were 0.5 percentage points). 

CBO was more than 0.1 percentage point closer to the 

actual value in 8 of the 24 periods, and the Blue Chip was 

closer 6 times. 

For long-term interest rates, the overall accuracy of 

CBO’s forecasts for 1984–2005 was very close to that of 

the Blue Chip (see Table 7 on page 22). CBO was more 

than 0.1 percentage point closer to the actual value in 6 

of the 22 periods, the Blue Chip was closer in 5 periods, 

and the two forecasters had essentially identical errors in 

11 periods. Since 1991, CBO has been closer for five 

forecasts and the Blue Chip for one.

CBO’s forecasts of long-term interest rates were slightly 

more accurate than those of the Administration, but there 

was no significant difference between the accuracy of the 

two government forecasters for nominal short-term rates.

Real Short-Term Interest Rates. CBO and the Blue Chip 

had similar accuracy, according to their root mean square 

errors, in estimating short-term interest rates adjusted for 

inflation in the 1982–2005 period (see Table 8 on 

page 24). CBO’s forecasts were closer to the actual value 

in 3 of the 24 periods, the Blue Chip’s were closer in 12, 

and the two registered similar errors in 9 periods. 

CBO’s forecast accuracy has been similar to that of the 

Administration since 1982; however, CBO was slightly 

more accurate than the Administration over the full 

1976–2005 period.

The Difference Between the Growth of the CPI and the 

GDP Price Index. The difference in the forecast growth 

rates of the two major price indexes, the CPI and the 

GDP price index, is important for budget projections. 

The growth of the GDP price index is a critical determinant in forecasting the growth of nominal GDP and, 

therefore, the growth of income subject to federal taxes. 

All else being equal, the faster the projected growth of the 

GDP price index, the faster the projected growth of revenues. For its part, the growth of the consumer price index 

affects forecasts of outlays because a number of federal 

programs are indexed to the CPI. The projection of the 

CPI, however, also affects projections of revenues because 

elements of the personal tax code, such as tax brackets, 

are indexed to the CPI. In general, the faster the growth 

of the CPI, the faster the growth of outlays and the slower 

the growth of revenues. Therefore, if the GDP price 

index is forecast to grow more rapidly than the CPI, all 

else equal, the projection of the deficit will be smaller 

than if the GDP price index is assumed to grow more 

slowly than the CPI. 

The accuracy of CBO’s forecast of the difference between 

the two growth rates two years ahead was the same as that 

of the Blue Chip consensus (see Table 9 on page 26). 

CBO was more accurate than the Blue Chip (by more 

than 0.1 percentage point) in 4 of the 24 periods, the 

Blue Chip was more accurate in 4 periods, and the two 

forecasters had essentially identical errors in 16 periods. 

The Administration was about as accurate as CBO was in 

each period, 1976–2005 and 1982–2005. 

The persistent apparent overprediction of the difference 

through 1999 for forecasters largely reflects a conceptual 

and methodological change to the NIPAs in 1999, when 

business spending on software was added to investment 

and therefore to GDP (previously, spending for business 

software was considered purchasing an intermediate 

good). Because the price index for software purchases has 

been growing much less rapidly than all other prices, on 

average, the change in classifying software spending 

caused a downward revision of the historical data for the 

growth of the GDP price index. Hence, the forecasts 

made before 2000 were based on a pattern of historical 

growth in the GDP price index that was higher than is 

currently reported. 

Since 2001, the actual difference between the growth of 

the CPI and the GDP price index has fallen relative to its 

history. That change in the relationship between the two 

price indexes reflects acceleration of the prices of some 

investment goods (mostly involved in business and residential structures) that are not included in the CPI. The 

acceleration in those investment prices was not generally 

foreseen, causing forecasters to overpredict the difference 

between the CPI and the GDP price index.
8 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Taxable Income. One important source of error in budget 

projections involves the forecasting of taxable income. 

The errors in the first step—predicting nominal GDP 

growth—were discussed above. The errors in the second 

step—forecasting the relationship of major components 

of taxable income to nominal GDP (particularly the 

“high-tax” income share of GDP)—are discussed in this 

section. The most important component of taxable 

income for revenue projections is wages and salaries, followed by the book profits of corporations.8

 Because the 

Blue Chip does not report wages and salaries, CBO’s forecast record cannot be compared with that of the privatesector survey in that respect.

The record of accuracy in CBO’s and the Administration’s forecasts of the two-year change in wages, salaries, 

and book profits as a combined share of GDP has been 

almost identical for the period since 1980 (see Table 10 

on page 28). The pattern of errors also has been similar: 

Both forecasters had a string of underpredictions of the 

change in income share in forecasts made between 1994 

and 1999, and both had large overpredictions in their 

2001 and 2002 forecasts. Recently revised data from 

BEA show that the combined income share actually rose 

for the two-year periods beginning in 2003 and 2004, 

and the forecasts made in 2003 and 2004 by CBO and 

the Administration are fairly close to those actual data. 

For the two-year forecasts beginning in 2005, CBO and 

the Administration made similar large errors: They both 

forecast smaller increases in the combined income share, 

but BEA’s data now show that the income share rose 

about twice as much as forecast. CBO had predicted a 

slightly smaller increase than the Administration had, so 

CBO’s forecast error was slightly larger.

Three factors contributed to that series of under- and 

overpredictions: First was the unusual behavior of the statistical discrepancy in the NIPAs—the difference between 

measures of total income and total product. In principle, 

the discrepancy should be zero, but in practice it is not, 

because BEA must use different primary sources to estimate income on the one hand and product on the other. 

The discrepancy is essentially impossible to forecast 

because it reflects errors in estimating. If those errors were 

predictable, BEA would try to correct them.

Between 1994 and 2000, total income grew faster than 

total product—that is, the statistical discrepancy fell and 

became negative, leading to underpredictions (see 

Figure 1). With the onset of recession, the statistical discrepancy then swung sharply back and, according to the 

latest BEA data, was positive again before the end of 

2002. That swing slowed income growth relative to output, leading to overpredictions. The latest revisions to 

BEA data show that the statistical discrepancy was quite 

different than had been estimated in 2004 and 2005: It is 

now estimated to have fallen sharply over the two-year 

periods beginning in both 2004 and 2005.

A second source of difficulty in forecasting taxable 

income is the recent variability in the part of labor 

income that is not subject to taxation. Throughout most 

of the post-World War II period, the nontaxable part of 

labor income rose as a share of total labor compensation 

because employers and employees preferred to substitute 

untaxed noncash, or fringe, benefits (such as employerpaid insurance premiums and pension contributions) for 

taxable wages and salaries. But between 1994 and 1999, 

that trend reversed (see Figure 2). The share of total labor 

compensation that is not taxed declined, while the share 

of compensation that is taxed increased. That turnaround 

stemmed from changes in the way health care is provided 

and from the rise in the stock market (which reduced the 

necessity for employers to contribute to defined-benefit 

pension plans). During 2001 and 2002, however, the 

nontaxable share of labor income rose sharply again. 

Since then, according to the latest data, the nontaxable 

share has been roughly constant, but during some of that 

time, legislative changes have temporarily reduced the 

payments that firms would otherwise have been required 

to make to fund defined-benefit pensions, further complicating forecasting.9

8. See Congressional Budget Office, How CBO Forecasts Income

(August 2006).

9. The implications for CBO’s baseline forecasts of subsequent legislative changes are discussed in Congressional Budget Office, What 

Is a Current-Law Economic Baseline? Further details about the 

treatment of contributions to defined-benefit pension plans are 

outlined in Box 2-2 of Congressional Budget Office, The Budget 

and Economic Outlook: An Update (August 2005).
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 9

Figure 1.

Statistical Discrepancy in the NIPAs

(Percentage of gross domestic product)

Sources: Congressional Budget Office; Department of Commerce, 

Bureau of Economic Analysis.

Notes: NIPAs = national income and product accounts.

The shaded vertical bars indicate periods of recession. (A 

recession extends from the peak of a business cycle to its 

trough.)

The statistical discrepancy is the measure of national 

product minus the measure of national income. When the 

discrepancy is positive, total income (as measured in the 

NIPAs) is less than the corresponding measure of the 

economy’s total product.

A third factor complicating the task of forecasting the 

growth of taxable income is changes in the law. Forecasts 

made in January 2001 and 2002 were affected by the 

change to tax rules for the depreciation of capital goods 

made in legislation enacted in 2002 and 2003. By allowing more depreciation than before, the changes caused 

corporate book profits to be lower relative to economic 

profits (because more depreciation could be written off as 

a business expense) than usual. Forecasters in 2001 did 

not incorporate that effect for 2002, so forecasts of book 

profits were too high for that year.

Even when they are anticipated, changes to tax law 

complicate forecasts of income shares because estimates 

of tax effects are themselves subject to error. The increase 

in book depreciation for tax years 2002 to 2004 was less 

than models of the legislative impact had suggested. Forecasters also anticipated that the built-in expiration of 

the provisions enacted in 2002 and 2003 carried the 

implication that book depreciation would fall sharply in 

2005 and hence that corporate tax liabilities would rise. 

Yet forecasts made in 2004 and 2005 still underestimated 

the rise in taxable corporate income.

Five-Year Projections

CBO’s five-year economic projections were about as 

accurate as those of the Blue Chip and the Administration 

for all the series examined except taxable income, for 

which the Administration displayed a slight edge. The 

Blue Chip’s five-year economic projections (published 

twice a year) are generally published about three months 

after the CBO forecasts with which they are compared. 

Although CBO’s projections are constrained to assume 

no change in fiscal policy and the Administration’s forecasts generally assume that the Administration’s proposals 

are enacted, the Blue Chip forecasters are free to make 

their best projections for future fiscal policy. That freedom and the additional months of data do not seem to 

translate into a forecasting edge, however.

Figure 2.

Fringe Benefits

(Percentage of total labor compensation)

Sources: Congressional Budget Office; Department of Commerce, 

Bureau of Economic Analysis.

Notes: The shaded vertical bars indicate periods of recession. (A 

recession extends from the peak of a business cycle to its 

trough.)

Fringe benefits are employers’ contributions for employees’ 

pension and insurance funds.

1950 1960 1970 1980 1990 2000

2.5

2.0

1.5

1.0

0.5

0

-0.5

-1.0

-1.5

1950 1960 1970 1980 1990 2000

14

12

10

8

6

4

2

0
10 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Real Output. CBO’s projections of medium-term growth 

in real output have been about as accurate as the 

Blue Chip’s in the period since 1979 (see Table 11 on 

page 30). As with the errors in the two-year forecasts, the 

errors in the five-year projections were highly positively 

correlated, with both forecasters posting similarly large 

errors for the same years (1979 as well as 1994 through 

1997). The mean errors for the 1979–2002 period indicate that both forecasters had an identical downward bias 

(they predicted slower growth, on average, than actually 

occurred) of 0.3 percentage points. In the five-year projections made between 1992 and 1999, both CBO and 

the Blue Chip mostly underpredicted medium-term 

growth because of the surprisingly strong economy of the 

late 1990s and, to a lesser extent, the upward revisions to 

BEA’s growth rate estimates previously discussed.

The accuracy of CBO’s five-year projections of real output also has been similar to that of the Administration. In 

the three years from 2000 to 2002, all three forecasters’ 

five-year projections of real economic growth were higher 

than they had been during the 1990s. The projections 

made in 2000 and 2001 now appear to have been overpredictions mainly because they did not anticipate the 

recession of 2001 and the weakness of the subsequent 

recovery in 2002; those forecasts actually underpredicted 

growth in 2004. The five-year projections made in 2002, 

which did not span a recession, also have proved to be 

overpredictions. Compared with projections made the 

previous year, they incorporated an upward revision to 

the forecasts of growth from 2003 onward. It turns out 

that the projection of real GDP growth in 2003 that was 

made in 2002 was too optimistic by more than a percentage point; recent downward revisions now leave real 

growth over the 2004–2006 period somewhat slower 

than in that projection.

Nominal Output. The accuracy of CBO’s and the Blue 

Chip’s forecasts of the growth of nominal output has been 

similar for the period since 1982 (see Table 12 on 

page 32). The accuracy has been better than that for the 

forecasts made since 1992 for the growth of real output; 

the forecasters’ errors in projecting inflation in the GDP 

price index offset their errors in forecasting real output.

Inflation Measures. The difference between the two 

major inflation measures is even more important for fiveyear budget projections than for two-year forecasts. The 

mean error statistics indicate a slightly larger downward 

bias than for the two-year forecasts. All three forecasters’ 

projections of the difference in the growth of the CPI and 

the GDP price index were too low in virtually every 

period before 2000 (see Table 13 on page 34). At least 

0.2 percentage points of the apparent forecast bias 

between 1985 and 1998 resulted from the downward 

revision in the growth of the GDP price index that 

occurred when the NIPAs were revised in 1999.

Even when the errors are adjusted for the effect of the 

revisions, a slight downward bias remains for all three 

forecasters. That bias indicates that projections of the 

relationship between those two inflation measures tend to 

contribute to optimistic budget projections. Although all 

of the projections showed a similar bias, CBO’s accuracy 

was about the same as that of the Blue Chip and slightly 

better than that of the Administration.

As noted above, the actual difference between the growth 

rates of the CPI and the GDP price index has been 

smaller since 2001 than it was previously. Five-year projections for this period were influenced by the longer historical record and so overestimated the difference 

between the price indexes.

Taxable Income. The final five-year projection record 

examined here is that of the change in the sum of wages 

and salaries and corporate book profits expressed as a 

share of output. (As with the two-year forecast, those are 

the most important income components for revenue projections.) CBO’s five-year projections of that share are less 

accurate than are the Administration’s (see Table 14 on 

page 36). Compared with the Administration’s projections, CBO’s were insufficiently pessimistic in the early 

1980s and too pessimistic in 1996 and 1997. As with 

some other variables, the errors of both forecasters show 

alternating periods of optimism and pessimism and are 

positively correlated. CBO’s five-year projections made 

between 1991 and 1997 indicated less growth in the tax 

base relative to GDP than actually occurred. The Administration made similar errors. Difficulties in forecasting 

the statistical discrepancy and the nontaxable component 

of labor income are major sources of errors in the fiveyear projections as well as in the two-year forecasts. 

(Three factors that contribute to errors in CBO’s forecasts 

of taxable income were discussed above in the context of 

the two-year horizon.) Moreover, as the errors for the 

five-year periods encompassing the 2001 recession indicate, the difficulty in forecasting business-cycle turning 

points also complicates forecasts of income shares.
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 11

Table 1.

Summary Measures of Performance for Two-Year Average Forecasts

(Percentage points)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: The values reported here are derived from Tables 3 through 10. Errors are projected values minus actual values; thus, a positive error 

is an overestimate.

CPI = consumer price index; GDP = gross domestic product; * = not applicable.

a. The Blue Chip consensus is the average of approximately 50 private-sector forecasts.

Mean error -0.4 -0.4 -0.3

Mean absolute error 1.0 1.0 1.0

Root mean square error 1.2 1.2 1.3

Mean error 0.0 0.1 0.2

Mean absolute error 1.0 0.9 1.1

Root mean square error 1.3 1.2 1.4

Mean error 0.3 0.3 0.2

Mean absolute error 0.7 0.7 0.7

Root mean square error 0.9 0.9 0.9

Nominal Interest Rate on Three-Month Treasury Bills (1982–2005)

Mean error 0.5 0.5 0.1

Mean absolute error 1.0 1.0 1.0

Root mean square error 1.3 1.2 1.3

Mean error 0.3 0.4 -0.1

Mean absolute error 0.7 0.6 0.8

Root mean square error 0.7 0.7 0.9

Real Interest Rate on Three-Month Treasury Bills (1982–2005)

Mean error 0.2 0.1 -0.1

Mean absolute error 0.9 0.9 0.9

Root mean square error 1.2 1.1 1.2

Mean error -0.1 -0.2 -0.2

Mean absolute error 0.4 0.4 0.4

Root mean square error 0.4 0.4 0.5

Change in Wage and Salary Disbursements Plus 

Corporate Book Profits as a Share of Output (1980–2005)

Mean error 0.1 * 0.2

Mean absolute error 1.0 * 0.9

Root mean square error 1.2 * 1.1

CBO Blue Chipa Administration

Growth Rate for Real Output (1982–2005)

Growth Rate for Nominal Output (1982–2005)

Inflation in the Consumer Price Index (1982–2005)

Nominal Long-Term Interest Rate (1984–2005)

Difference Between Inflation in the CPI and in the GDP Price Index (1982–2005)
12 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 2.

Summary Measures of Performance for Five-Year Average Projections

(Percentage points)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: The values reported here are derived from Tables 11 through 14. Errors are projected values minus actual values; thus, a positive error 

is an overestimate.

CPI = consumer price index; GDP = gross domestic product; * = not applicable.

a. The Blue Chip consensus is the average of approximately 50 private-sector forecasts.

Mean error -0.3 -0.3 0.0

Mean absolute error 0.6 0.6 0.8

Root mean square error 0.9 0.8 0.9

Mean error 0.4 0.5 0.5

Mean absolute error 0.8 0.8 0.8

Root mean square error 0.9 1.0 1.0

Mean error -0.2 -0.3 -0.4

Mean absolute error 0.4 0.4 0.5

Root mean square error 0.4 0.5 0.5

Corporate Book Profits as a Share of Output (1980–2002)

Mean error -0.3 * -0.1

Mean absolute error 1.8 * 1.5

Root mean square error 2.2 * 1.9

Growth Rate for Real Output (1979–2002) 

Growth Rate for Nominal Output (1982–2002) 

Difference Between Inflation in the CPI and in the GDP Price Index (1983–2002)

Change in Wage and Salary Disbursements Plus 

CBO Blue Chipa Administration

14 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 3.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Growth Rates for Real Output

(By calendar year, in percent)

Continued

1976–1977 6.7 4.8 4.8 5.1 6.2 1.1 * * 5.9 0.9

1977–1978 5.2 5.0 4.7 5.1 5.5 0.4 * * 5.1 0.1

1978–1979 3.9 3.9 3.8 4.5 4.7 0.3 * * 4.7 0.3

1979–1980 1.3 1.1 1.1 1.6 2.7 1.2 * * 2.9 1.3

1980–1981 1.1 0.9 0.5 1.0 0.5 -0.5 * * 0.5 -0.5

1981–1982 0.2 -0.3 -0.4 0.2 2.1 1.9 * * 2.6 2.4

1982–1983 0.7 0.5 0.7 1.2 2.1 0.9 2.0 0.8 2.7 1.4

1983–1984 5.2 5.2 4.9 5.7 3.4 -2.3 3.5 -2.2 2.6 -3.1

1984–1985 * 5.1 4.4 5.4 4.7 -0.7 4.3 -1.1 4.7 -0.7

1985–1986 * 3.0 2.8 3.5 3.3 -0.2 3.2 -0.3 3.9 0.4

1986–1987 * 3.1 2.9 3.3 3.1 -0.1 3.0 -0.3 3.7 0.4

1987–1988 * 3.9 3.5 3.8 2.9 -0.9 2.8 -0.9 3.3 -0.5

1988–1989 * 3.5 3.3 3.9 2.4 -1.4 2.1 -1.7 3.0 -0.9

1989–1990 * 1.7 2.0 2.8 2.5 -0.3 2.2 -0.6 3.2 0.4

1990–1991 * * 0.3 0.9 2.0 1.2 1.9 1.1 2.8 1.9

1991–1992 * * 0.7 1.5 1.6 0.1 1.2 -0.3 1.4 -0.1

1992–1993 * * 2.7 3.0 2.6 -0.4 2.3 -0.7 2.2 -0.8

1993–1994 * * 3.6 3.3 2.9 -0.4 3.0 -0.3 2.9 -0.4

1994–1995 * * * 3.3 2.8 -0.5 2.8 -0.4 2.9 -0.3

1995–1996 * * * 3.1 2.4 -0.7 2.6 -0.5 2.6 -0.5

1996–1997 * * * 4.1 1.9 -2.1 2.1 -2.0 2.2 -1.8

1997–1998 * * * 4.3 2.1 -2.2 2.2 -2.1 2.1 -2.2

1998–1999 * * * 4.3 2.3 -2.0 2.4 -1.9 2.2 -2.1

1999–2000 * * * 4.1 2.0 -2.1 2.3 -1.7 2.2 -1.9

2000–2001 * * * 2.2 3.2 1.0 3.3 1.1 3.0 0.8

2001–2002 * * * 1.2 2.9 1.7 3.0 1.8 3.2 2.1

2002–2003 * * * 2.1 2.4 0.4 2.2 0.1 2.2 0.2

2003–2004 * * * 3.1 3.0 0.0 3.2 0.1 3.2 0.2

2004–2005 * * * 3.4 4.5 1.1 4.1 0.8 4.0 0.6

2005–2006 * * * 3.0 3.7 0.8 3.5 0.5 3.5 0.6

Actual 

Chain-Type

Annual1972 1982 1987 Weighted CBO Blue Chipe Administration

Dollarsa Dollarsb Dollarsc Index Forecast Errord Forecast Errord Forecast Errord

Real GNP

Real GDPf
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 15

Table 3.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: Actual values are for the two-year growth rates for real gross national product (GNP) and real gross domestic product (GDP) last 

reported by the Bureau of Economic Analysis, not the first reported values. Forecast values are for the average annual growth of real 

GNP or GDP over the two-year period. The forecasts were issued in the first half of the initial year of the period or in December of the 

preceding year.

* = not applicable.

a. Data for 1972-dollar GNP and GDP are available only through the third quarter of 1985. 

b. Data for 1982-dollar GNP and GDP are available only through the third quarter of 1991.

c. Data for 1987-dollar GNP and GDP are available only through the second and third quarters, respectively, of 1995.

d. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate. The chain-type 

annual-weighted index of actual GNP or GDP was used to calculate the errors.

e. Two-year forecasts for the Blue Chip consensus were not available until 1982.

f. With the 1992 benchmark revision by the Bureau of Economic Analysis, GDP replaced GNP as the central measure of national output.

Statistics for 1976–2005 

Mean error * * * * * -0.2 * * * -0.1

Mean absolute error * * * * * 1.0 * * * 1.0

Root mean square error * * * * * 1.2 * * * 1.3

Statistics for 1982–2005

Mean error * * * * * -0.4 * -0.4 * -0.3

Mean absolute error * * * * * 1.0 * 1.0 * 1.0

Root mean square error * * * * * 1.2 * 1.2 * 1.3

Errord Forecast Errord

CBO Blue Chipe Administration

Dollarsa Dollarsb Dollarsc Index Forecast Errord Forecast

1972 1982 1987 Weighted

Actual 

Chain-Type

Annual-
16 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 4.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Growth Rates for Nominal Output

(By calendar year, in percent)

Continued

1976–1977 11.5 13.1 1.7 * * 12.3 0.8

1977–1978 12.1 10.8 -1.3 * * 11.2 -1.0

1978–1979 12.5 10.9 -1.6 * * 11.2 -1.3

1979–1980 10.4 11.0 0.5 * * 10.4 -0.1

1980–1981 10.4 9.7 -0.7 * * 9.5 -0.8

1981–1982 8.0 12.1 4.1 * * 11.9 4.0

1982–1983 6.3 9.7 3.4 9.5 3.2 9.8 3.5

1983–1984 9.8 8.2 -1.6 9.0 -0.9 8.0 -1.8

1984–1985 9.0 9.9 0.9 9.6 0.6 9.6 0.6

1985–1986 6.2 7.6 1.3 7.4 1.2 8.2 1.9

1986–1987 5.8 7.1 1.3 6.7 0.9 7.7 1.8

1987–1988 7.0 6.5 -0.5 6.4 -0.5 6.9 -0.1

1988–1989 7.6 6.3 -1.3 6.1 -1.5 6.8 -0.9

1989–1990 6.7 6.8 0.1 6.6 -0.1 7.1 0.4

1990–1991 4.6 6.1 1.5 6.0 1.4 7.1 2.5

1991–1992 4.4 5.7 1.3 5.2 0.8 5.6 1.2

1992–1993 5.4 5.7 0.3 5.5 0.2 5.4 0.0

1993–1994 5.6 5.3 -0.3 6.0 0.4 5.3 -0.3

1994–1995 5.4 5.6 0.2 5.6 0.2 5.7 0.3

1995–1996 5.1 5.2 0.1 5.7 0.6 5.6 0.4

1996–1997 6.0 4.7 -1.3 4.5 -1.4 5.1 -0.9

1997–1998 5.8 4.6 -1.2 4.6 -1.2 4.7 -1.0

1998–1999 5.6 4.5 -1.2 4.5 -1.1 4.2 -1.5

1999–2000 5.9 3.9 -2.0 4.1 -1.8 4.0 -1.9

2000–2001 4.5 4.9 0.3 5.1 0.6 4.9 0.4

2001–2002 3.3 5.2 1.9 5.1 1.8 5.4 2.1

2002–2003 4.0 4.2 0.2 4.0 0.0 4.2 0.2

2003–2004 5.6 4.8 -0.9 5.0 -0.7 4.7 -0.9

2004–2005 6.5 5.6 -0.9 5.7 -0.8 5.3 -1.2

2005–2006 6.3 5.5 -0.7 5.5 -0.7 5.6 -0.7

CBO Blue Chipb Administration

Actual Forecast Errora Forecast Errora Forecast Errora

GNP

GDPc
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 17

Table 4.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: Actual values are for the two-year growth rates for gross national product (GNP) and gross domestic product (GDP) last reported 

by the Bureau of Economic Analysis, not the first reported values. Forecast values are for the average annual growth of nominal GNP 

or GDP over the two-year period. The forecasts were issued in the first half of the initial year of the period or in December of the 

preceding year.

* = not applicable. 

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate.

b. Two-year forecasts for the Blue Chip consensus were not available until 1982.

c. With the 1992 benchmark revision by the Bureau of Economic Analysis, GDP replaced GNP as the central measure of national output.

Mean error * * 0.1 * * * 0.2

Mean absolute error * * 1.2 * * * 1.1

Root mean square error * * 1.5 * * * 1.5

Mean error * * 0.0 * 0.1 * 0.2

Mean absolute error * * 1.0 * 0.9 * 1.1

Root mean square error * * 1.3 * 1.2 * 1.4

Errora

CBO Blue Chipb

Statistics for 1976–2005

Statistics for 1982–2005

Administration

Actual Forecast Errora Forecast Errora Forecast
18 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 5.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Inflation in the Consumer Price Index

(By calendar year, in percent)

Continued

6.1 6.1 7.1 1.0 * * 6.1 0.0

7.0 7.0 4.9 -2.1 * * 5.2 -1.8

9.4 9.5 5.8 -3.7 * * 6.0 -3.5

12.4 12.5 8.1 -4.3 * * 7.4 -5.0

11.9 11.9 10.1 -1.8 * * 10.5 -1.4

8.2 8.1 10.4 2.1 * * 9.7 1.6

4.6 4.5 7.2 2.6 7.2 2.6 6.6 2.1

3.8 3.3 4.7 1.0 4.9 1.1 4.7 1.5

3.9 3.5 4.9 1.0 5.2 1.3 4.5 1.0

2.7 2.5 4.1 1.4 4.3 1.6 4.2 1.7

2.8 2.6 3.8 1.2 3.8 1.0 3.8 1.2

3.8 3.8 3.9 0.1 3.6 -0.2 3.3 -0.5

4.4 4.4 4.7 0.3 4.3 -0.1 4.2 -0.2

5.1 5.0 4.9 -0.1 4.7 -0.4 3.7 -1.3

4.8 4.6 4.1 -0.7 4.1 -0.7 3.9 -0.7

3.6 3.5 4.2 0.6 4.4 0.8 4.6 1.1

3.0 2.9 3.4 0.4 3.5 0.5 3.1 0.1

2.8 2.7 2.8 0.1 3.3 0.6 2.8 0.1

2.7 2.7 2.8 0.1 3.0 0.3 3.0 0.3

2.9 2.9 3.2 0.4 3.4 0.6 3.1 0.3

2.6 2.6 2.9 0.3 2.8 0.2 2.9 0.3

1.9 1.8 2.9 1.0 2.9 1.0 2.7 0.8

1.9 1.8 2.3 0.5 2.4 0.5 2.1 0.3

2.8 2.8 2.5 -0.2 2.2 -0.6 2.2 -0.5

3.1 3.1 2.4 -0.6 2.5 -0.6 2.5 -0.6

2.2 2.1 2.8 0.6 2.5 0.3 2.6 0.4

1.9 1.8 2.1 0.2 2.0 0.1 2.0 0.1

2003–2004 2.5 2.4 2.2 -0.2 2.2 -0.2 2.1 -0.3

2004–2005 3.0 3.1 1.6 -1.4 1.9 -1.1 1.4 -1.6

2005–2006 3.3 3.4 2.1 -1.2 2.4 -0.9 2.3 -1.0

2000–2001

2001–2002

2002–2003

1996–1997

1997–1998

1998–1999

1999–2000

1992–1993

1993–1994

1994–1995

1995–1996

1988–1989

1989–1990

1990–1991

1991–1992

1984–1985

1985–1986

1986–1987

1987–1988

1980–1981

1981–1982

1982–1983

1983–1984

1976–1977

1977–1978

1978–1979

1979–1980

Forecast Errora Forecast Errora CPI-U CPI-W Forecast Errora

Actual CBO Blue Chipb Administration
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 19

Table 5.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Labor, Bureau of Labor Statistics.

Notes: Values are for the average annual growth of the consumer price index (CPI) over the two-year period. Before 1978, the Bureau of 

Labor Statistics published only one consumer price index series, now known as the CPI-W (the price index for urban wage earners and 

clerical workers). In January 1978, the bureau began to publish a second, broader consumer price index series, the CPI-U (the price 

index for all urban consumers). For most years since 1979, CBO forecast the CPI-U; for 1986 through 1989, however, CBO forecast the 

CPI-W. The Administration forecast the CPI-W until 1992, when it switched to the CPI-U. The Blue Chip forecast the CPI-U for the 

entire period. The forecasts were issued in the first half of the initial year of the period or in December of the preceding year. 

* = not applicable.

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate.

b. Two-year forecasts for the Blue Chip consensus were not available until 1982.

Mean error * * * 0.0 * * * -0.2

Mean absolute error * * * 1.0 * * * 1.0

Root mean square error * * * 1.5 * * * 1.5

Mean error * * * 0.3 * 0.3 * 0.2

Mean absolute error * * * 0.7 * 0.7 * 0.7

Root mean square error * * * 0.9 * 0.9 * 0.9

Errora

Statistics for 1976–2005

Statistics for 1982–2005

CBO Blue Chipb Administration

CPI-U CPI-W Forecast Errora Forecast Errora Forecast

Actual
20 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 6.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Nominal Interest Rates on Three-Month Treasury Bills

(By calendar year, in percent)

Continued

5.1 5.1 6.2 1.1 * * 5.5 0.4

6.2 6.2 6.4 0.2 * * 4.4 -1.8

8.6 8.6 6.0 -2.6 * * 6.1 -2.5

10.8 10.7 8.3 -2.4 * * 8.2 -2.6

12.8 12.7 9.5 -3.2 * * 9.7 -3.1

12.4 12.3 13.2 0.9 * * 10.0 -2.4

9.7 9.6 12.6 3.0 11.3 1.6 11.1 1.4

9.1 9.1 7.1 -2.0 7.9 -1.2 7.9 -1.1

8.5 8.5 8.7 0.3 9.1 0.5 8.1 -0.4

6.7 6.7 8.5 1.8 8.5 1.8 8.0 1.3

5.9 5.9 6.7 0.9 7.1 1.2 6.9 1.0

6.2 6.2 5.6 -0.6 5.7 -0.5 5.5 -0.7

7.4 7.4 6.4 -0.9 6.1 -1.2 5.2 -2.1

7.8 7.8 7.5 -0.3 7.5 -0.3 5.9 -1.9

6.5 6.4 7.0 0.6 7.1 0.7 6.0 -0.4

4.4 4.4 6.8 2.4 6.4 2.0 6.2 1.8

3.2 3.2 4.7 1.5 4.6 1.4 4.5 1.3

3.6 3.6 3.4 -0.2 3.8 0.2 3.4 -0.2

4.9 4.9 3.9 -1.0 3.6 -1.3 3.6 -1.3

5.3 5.2 5.9 0.7 6.1 0.9 5.7 0.4

5.0 5.0 4.8 -0.2 5.0 0.0 4.7 -0.3

4.9 4.9 5.0 0.1 5.1 0.2 4.8 -0.1

4.7 4.7 5.2 0.5 5.1 0.4 4.9 0.2

5.2 5.2 4.5 -0.7 4.3 -0.9 4.2 -1.0

4.6 4.6 5.5 0.9 5.6 1.0 5.2 0.6

2.5 2.5 4.8 2.4 5.4 2.9 5.8 3.4

1.3 1.3 3.3 2.0 2.7 1.4 2.8 1.5

2003–2004 1.2 1.2 2.4 1.3 2.2 1.1 2.4 1.3

2004–2005 2.3 2.3 2.1 -0.1 1.9 -0.3 1.8 -0.4

2005–2006 3.9 3.9 3.4 -0.5 3.4 -0.5 3.1 -0.8

1999–2000

2000–2001

2001–2002

2002–2003

1995–1996

1996–1997

1997–1998

1998–1999

1991–1992

1992–1993

1993–1994

1994–1995

1987–1988

1988–1989

1989–1990

1990–1991

1983–1984

1984–1985

1985–1986

1986–1987

1979–1980

1980–1981

1981–1982

1982–1983

Errora

1976–1977

1977–1978

1978–1979

Errora Forecast Errora Forecast

Actual

New Secondary CBO Blue Chipb Administration

Issue Market Forecast
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 21

Table 6.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators; Federal 

Reserve Board.

Notes: Values are for the geometric averages of the three-month Treasury bill rates for the two-year period. The actual values are published 

by the Federal Reserve Board as the rate on new issues (reported on a bank-discount basis) and the secondary-market rate. CBO 

forecast the secondary-market rate; the Administration forecast the new-issue rate prior to 2001 but the secondary-market rate since 

then. The Blue Chip alternated between the two rates, forecasting the new-issue rate from 1982 to 1985, the secondary-market rate 

from 1986 to 1991, the new-issue rate again from 1992 to 1997, and the secondary-market rate since then. The forecasts were issued 

in the first half of the initial year of the period or in December of the preceding year.

* = not applicable.

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate.

b. Two-year forecasts for the Blue Chip consensus were not available until 1982.

Mean error * * * 0.2 * * * -0.3

Mean absolute error * * * 1.2 * * * 1.3

Root mean square error * * * 1.5 * * * 1.5

Mean error * * * 0.5 * 0.5 * 0.1

Mean absolute error * * * 1.0 * 1.0 * 1.0

Root mean square error * * * 1.3 * 1.2 * 1.3

Statistics for 1976–2005

Statistics for 1982–2005

Administration

Issue Market Forecast Errora Forecast Errora

Actual

Forecast Errora

New Secondary CBO Blue Chipb
22 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 7.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Averages for Nominal Long-Term Interest Rates

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators; Federal 

Reserve Board.

Notes: Actual values are for the geometric averages of the 10-year Treasury note rates or Moody’s corporate Aaa bond rates for the two-year 

period as reported by the Federal Reserve Board. CBO forecast the 10-year Treasury note rate in all years except 1984 and 1985, when 

it forecast the corporate Aaa bond rate. The Administration forecast the 10-year note rate, but the Blue Chip forecast the corporate 

Aaa bond rate through 1995 and then switched to the 10-year Treasury note rate. Data are only available beginning in 1984 because 

not all of the forecasters published long-term rate projections before then. The forecasts were issued in the first half of the initial year 

of the period or in December of the preceding year.

* = not applicable.

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate.

11.5 12.0 11.9 -0.1 12.2 0.2 9.7 -1.8

9.1 10.2 11.5 1.3 11.8 1.7 10.6 1.5

8.0 9.2 8.9 0.9 9.9 0.8 8.7 0.7

8.6 9.5 7.2 -1.4 8.7 -0.8 6.6 -2.0

8.7 9.5 9.4 0.7 9.8 0.3 7.7 -1.0

8.5 9.3 9.1 0.6 9.5 0.3 7.7 -0.8

8.2 9.0 7.7 -0.5 8.7 -0.3 7.2 -1.0

7.4 8.5 7.8 0.4 8.7 0.3 7.3 -0.1

6.4 7.7 7.1 0.7 8.4 0.7 6.9 0.5

6.5 7.6 6.6 0.2 8.2 0.6 6.6 0.2

6.8 7.8 5.9 -0.9 7.1 -0.7 5.8 -1.0

6.5 7.5 7.3 0.8 8.6 1.1 7.5 1.0

6.4 7.3 6.2 -0.2 6.2 -0.1 5.4 -0.9

5.8 6.9 6.2 0.4 6.4 0.6 6.0 0.2

5.5 6.8 6.0 0.6 5.9 0.5 5.8 0.4

5.8 7.3 5.2 -0.6 5.0 -0.8 4.9 -0.9

5.5 7.4 6.3 0.8 6.3 0.8 6.1 0.6

4.8 6.8 5.1 0.3 5.4 0.6 5.8 1.0

4.3 6.1 5.2 0.9 5.3 1.0 5.1 0.8

2003–2004 4.1 5.6 4.8 0.7 4.8 0.7 4.6 0.5

2004–2005 4.3 5.4 5.0 0.7 5.0 0.8 4.8 0.5

2005–2006 4.5 5.4 5.1 0.6 5.0 0.5 4.9 0.4

Mean error * * * 0.3 * 0.4 * -0.1

Mean absolute error * * * 0.7 * 0.6 * 0.8

Root mean square error * * * 0.7 * 0.7 * 0.9

Actual

10-Year Corporate CBO Blue Chip Administration

Note Aaa Bond Forecast Errora Forecast Errora Forecast Errora

1984–1985

1985–1986

1986–1987

1987–1988

1988–1989

1989–1990

1990–1991

1991–1992

1992–1993

1993–1994

1994–1995

1995–1996

1996–1997

1997–1998

1998–1999

1999–2000

2000–2001

2001–2002

2002–2003

Statistics for 1984–2005

24 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 8.

CBO, Blue Chip, and Administration Forecasts of Two-Year 

Average Real Interest Rates on Three-Month Treasury Bills

(By calendar year, in percent)

Continued

-0.9 -0.9 -0.9 -0.9 -0.8 0.1 * * -0.6 0.3

-0.8 -0.7 -0.8 -0.7 1.5 2.2 * * -0.8 -0.1

-0.7 -0.8 -0.7 -0.8 0.2 1.0 * * 0.1 0.9

-1.4 -1.5 -1.4 -1.5 0.2 1.7 * * 0.7 2.2

0.8 0.9 0.7 0.8 -0.5 -1.2 * * -0.7 -1.6

3.8 4.0 3.7 3.9 2.6 -1.2 * * 0.3 -3.7

4.8 4.9 4.7 4.9 5.0 0.3 3.8 -1.0 4.2 -0.8

5.1 5.7 5.1 5.6 2.2 -2.9 2.9 -2.3 3.1 -2.6

4.4 4.9 4.4 4.8 3.6 -0.8 3.6 -0.8 3.4 -1.4

3.9 4.1 3.9 4.1 4.2 0.3 4.0 0.1 3.6 -0.4

3.1 3.2 3.0 3.2 2.8 -0.4 3.2 0.1 3.0 -0.3

2.3 2.4 2.3 2.3 1.7 -0.7 2.0 -0.3 2.1 -0.2

2.8 2.9 2.8 2.9 1.7 -1.2 1.8 -1.0 1.0 -1.9

2.6 2.6 2.6 2.6 2.5 -0.1 2.7 0.2 2.1 -0.6

1.6 1.7 1.5 1.7 2.8 1.2 2.9 1.3 2.0 0.3

0.8 0.9 0.7 0.9 2.5 1.8 1.9 1.2 1.5 0.6

0.2 0.4 0.2 0.3 1.3 1.1 1.1 0.8 1.3 1.1

0.8 0.9 0.8 0.9 0.5 -0.3 0.5 -0.4 0.6 -0.3

2.1 2.2 2.1 2.1 1.0 -1.1 0.5 -1.6 0.6 -1.5

2.3 2.3 2.3 2.3 2.6 0.3 2.6 0.3 2.5 0.1

2.3 2.4 2.3 2.4 1.8 -0.5 2.1 -0.3 1.7 -0.6

2.9 3.1 2.9 3.1 2.0 -0.9 2.1 -0.8 2.1 -0.9

2.8 2.9 2.8 2.9 2.8 0.0 2.6 -0.1 2.7 -0.1

2.4 2.3 2.4 2.3 1.9 -0.5 2.1 -0.3 2.0 -0.4

1.5 1.5 1.5 1.5 3.0 1.5 3.0 1.6 2.6 1.1

0.3 0.5 0.3 0.4 2.0 1.7 2.8 2.5 3.1 2.8

-0.6 -0.5 -0.6 -0.5 1.2 1.8 0.7 1.3 0.8 1.4

2003–2004 -1.3 -1.2 -1.3 -1.2 0.2 1.4 0.0 1.3 0.3 1.5

2004–2005 -0.7 -0.8 -0.7 -0.8 0.5 1.2 0.0 0.8 0.4 1.1

2005–2006 0.6 0.5 0.6 0.5 1.2 0.6 1.0 0.4 0.7 0.1

Actual

New Secondary

Issue Market CBO Blue Chipb Administration

CPI-U CPI-W CPI-U CPI-W Forecast Errora Forecast Errora Forecast Errora

1976–1977

1977–1978

1978–1979

1979–1980

1980–1981

1981–1982

1982–1983

1983–1984

1984–1985

1985–1986

1986–1987

1987–1988

1988–1989

1989–1990

1990–1991

1991–1992

1992–1993

1993–1994

1994–1995

1995–1996

1996–1997

1997–1998

1998–1999

1999–2000

2000–2001

2001–2002

2002–2003
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 25

Table 8.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Labor, Bureau of Labor Statistics; Federal Reserve Board.

Notes: Values are fore the appropriate three-month Treasury bill rate discounted by the respective forecast for inflation as measured by the 

change in the consumer price index. CBO forecast the secondary-market rate; the Administration forecast the new-issue rate before 

2001, but since then, the secondary-market rate. The Blue Chip alternated between the two rates, forecasting the new-issue rate from 

1982 to 1985, the secondary-market rate from 1986 to 1991, the new-issue rate again from 1992 to 1997, and the secondary-market

rate since then. For most years since 1979, CBO has forecast the CPI-U (the consumer price index for all urban consumers); from 1986 

to 1989, however, it forecast the CPI-W (for urban wage earners and clerical workers). The Administration forecast the CPI-W until 

1992, when it switched to the CPI-U. The Blue Chip forecast the CPI-U for the entire period. All forecasts were issued in the first half 

of the initial year of the period or in December of the preceding year.

* = not applicable. 

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate. 

b. Two-year forecasts for the Blue Chip consensus were not available until 1982.

Mean error * * * * * 0.2 * * * -0.1

Mean absolute error * * * * * 1.0 * * * 1.0

Root mean square error * * * * * 1.2 * * * 1.4

Mean error * * * * * 0.2 * 0.1 * -0.1

Mean absolute error * * * * * 0.9 * 0.9 * 0.9

Root mean square error * * * * * 1.2 * 1.1 * 1.2

Actual

New Secondary

Issue Market CBO Blue Chipb Administration

CPI-U CPI-W CPI-U CPI-W Forecast Errora Forecast Errora Forecast Errora

Statistics for 1976–2005

Statistics for 1982–2005
26 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 9.

CBO, Blue Chip, and Administration Forecasts of the Difference Between 

Two-Year Average Inflation in the CPI and in the GNP or GDP Price Index

(By calendar year, in percentage points)

Continued

0.0 0.0 0.6 0.5 * * 0.2 0.1

0.4 0.3 -0.1 -0.5 * * -0.5 -0.8

1.8 1.8 -0.1 -1.9 * * -0.1 -1.9

3.7 3.8 0.1 -3.6 * * 0.2 -3.6

2.7 2.6 1.0 -1.7 * * 1.6 -1.1

0.5 0.4 0.7 0.1 * * 0.6 0.3

-0.4 -0.5 -0.2 0.2 -0.1 0.3 -0.3 0.2

-0.1 -0.6 0.1 0.2 -0.4 -0.3 -0.5 0.2

0.5 0.1 0.1 -0.5 0.1 -0.4 -0.2 -0.3

0.1 -0.1 0.0 -0.1 0.2 0.1 0.1 0.2

0.3 0.1 -0.1 -0.2 0.2 -0.1 0.0 -0.1

0.8 0.7 0.4 -0.3 0.2 -0.6 -0.1 -0.8

0.8 0.8 1.0 0.2 0.4 -0.4 0.5 -0.2

1.3 1.2 0.7 -0.5 0.4 -0.9 0.0 -1.2

1.1 1.0 0.2 -1.0 0.2 -1.0 -0.2 -1.2

0.7 0.6 0.2 -0.5 0.4 -0.3 0.4 -0.1

0.7 0.6 0.4 -0.3 0.4 -0.3 0.0 -0.7

0.6 0.5 0.5 -0.1 0.4 -0.1 0.5 -0.1

0.6 0.6 0.2 -0.5 0.3 -0.3 0.3 -0.3

0.9 0.9 0.5 -0.4 0.4 -0.5 0.3 -0.6

0.9 0.8 0.3 -0.6 0.5 -0.4 0.1 -0.7

0.6 0.4 0.5 0.0 0.6 0.0 0.1 -0.4

0.6 0.5 0.3 -0.3 0.3 -0.3 0.2 -0.4

1.0 1.0 0.6 -0.3 0.5 -0.5 0.4 -0.5

0.8 0.8 0.8 0.0 0.8 0.0 0.7 -0.1

0.1 0.0 0.6 0.5 0.5 0.4 0.6 0.4

0.0 -0.1 0.4 0.4 0.3 0.3 0.1 0.1

2003–2004 0.0 -0.1 0.6 0.6 0.5 0.5 0.7 0.8

2004–2005 0.0 0.0 0.6 0.6 0.4 0.4 0.2 0.2

2005–2006 0.1 0.2 0.5 0.3 0.4 0.3 0.4 0.3

Actual CBO Blue Chipb Administration

CPI-U CPI-W Forecast Errora Forecast Errora Forecast Errora

1976–1977

1977–1978

1978–1979

1979–1980

1980–1981

1981–1982

1982–1983

1983–1984

1984–1985

1985–1986

1986–1987

1987–1988

1988–1989

1989–1990

1990–1991

1991–1992

1992–1993

1993–1994

1994–1995

1995–1996

1996–1997

1997–1998

1998–1999

1999–2000

2000–2001

2001–2002

2002–2003
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 27

Table 9.

Continued

(By calendar year, in percentage points)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Labor, Bureau of Labor Statistics.

Notes: Values are for the difference between the average annual growth of the consumer price index (CPI) and average annual growth of the 

gross national product (GNP) or gross domestic product (GDP) price index over the two-year period. The GNP price index is used for 

data before 1992, and the GDP price index is used thereafter. Before 1978, the Bureau of Labor Statistics published only one consumer 

price index series, now known as the CPI-W (the price index for urban wage earners and clerical workers). In January 1978, the 

bureau began to publish a second, broader consumer price index series, the CPI-U (the price index for all urban consumers). For most 

years since 1979, CBO forecast the CPI-U; for 1986 through 1989, however, CBO forecast the CPI-W. The Administration forecast the 

CPI-W until 1992, when it switched to the CPI-U. The Blue Chip forecast the CPI-U for the entire period. The forecasts were issued in 

the first half of the initial year of the period or in December of the preceding year. 

* = not applicable.

a. Errors are forecast values minus actual values; thus, a positive error is an overestimate.

b. Two-year forecasts for the Blue Chip consensus were not available until 1982.

Mean error * * * -0.3 * * * -0.4

Mean absolute error * * * 0.6 * * * 0.6

Root mean square error * * * 0.9 * * * 0.9

Mean error * * * -0.1 * -0.2 * -0.2

Mean absolute error * * * 0.4 * 0.4 * 0.4

Root mean square error * * * 0.4 * 0.4 * 0.5

Actual CBO Blue Chipb Administration

CPI-U CPI-W Forecast Errora Forecast Errora Forecast Errora

Statistics for 1976–2005

Statistics for 1982–2005
28 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 10.

CBO and Administration Forecasts of the Two-Year Change in Wage and 

Salary Disbursements Plus Corporate Book Profits as a Share of Output

(By calendar year, as a percentage of GNP or GDP)

Sources: Congressional Budget Office; Office of Management and Budget; Department of Commerce, Bureau of Economic Analysis.

Notes: The forecasts were issued in the first half of the initial year of the period or in December of the preceding year. For the forecasts made 

between 1980 and 1991, gross national product (GNP) was used to calculate the shares; for the forecasts made in 1992 and later,

gross domestic product (GDP) was used. The Blue Chip does not include forecasts for wages or salaries.

* = not applicable.

a. Errors (which are in percentage points) are forecast values minus actual values; thus, a positive error is an overestimate.

-3.2 -0.6 2.5 -1.3 1.8

-3.3 -2.6 0.7 -1.2 2.1

-2.0 -1.8 0.3 -1.7 0.3

-1.0 0.0 0.9 -1.0 -0.1

-0.6 -0.2 0.4 -0.2 0.5

-0.8 -0.6 0.2 -0.8 0.0

1.4 1.0 -0.3 0.8 -0.5

2.7 0.9 -1.8 1.4 -1.3

-0.3 0.6 0.9 0.4 0.7

-1.2 0.4 1.6 0.7 1.9

-0.2 0.7 0.9 1.4 1.6

-0.1 0.1 0.2 -0.1 0.1

-0.1 1.0 1.1 1.4 1.4

-0.4 0.5 1.0 0.5 1.0

1.3 0.2 -1.1 0.4 -0.9

1.8 -0.3 -2.1 -0.6 -2.5

1.0 -0.4 -1.4 0.8 -0.2

0.4 -0.5 -0.9 0.0 -0.4

0.3 -0.2 -0.4 0.2 -0.1

1.0 -0.1 -1.2 0.0 -1.1

-0.8 -0.5 0.2 -0.8 0.0

-2.2 -0.4 1.7 -0.8 1.4

-0.9 0.1 1.0 0.6 1.4

2003–2004 1.6 1.1 -0.4 1.6 0.0

2004–2005 3.4 2.8 -0.5 3.0 -0.3

2005–2006 2.8 1.2 -1.6 1.5 -1.4

Mean error * * 0.1 * 0.2

Mean absolute error * * 1.0 * 0.9

Root mean square error * * 1.2 * 1.1

CBO Administration

Actual Forecast Errora Forecast Errora

1980–1981

1981–1982

1982–1983

1983–1984

1984–1985

1985–1986

1986–1987

1987–1988

1988–1989

1989–1990

1990–1991

1991–1992

1992–1993

1993–1994

1994–1995

1995–1996

1996–1997

1997–1998

1998–1999

1999–2000

Statistics for 1980–2005

2000–2001

2001–2002

2002–2003

30 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 11.

CBO, Blue Chip, and Administration Projections of Five-Year 

Average Growth Rates for Real Output

(By calendar year, in percent)

Continued

1976–1980 4.2 3.4 3.3 3.8 5.7 1.9 * * 6.2 2.4

1977–1981 3.1 2.8 2.6 3.1 5.3 2.2 * * 5.1 2.0

1978–1982 1.6 1.4 1.2 1.8 4.8 3.0 * * 4.8 3.0

1979–1983 1.3 1.0 1.1 1.6 3.8 2.2 3.1 1.5 3.8 2.2

1980–1984 2.1 1.9 1.7 2.3 2.4 0.1 2.5 0.2 3.0 0.7

1981–1985 * 2.6 2.4 3.1 2.8 -0.3 3.0 -0.1 3.8 0.7

1982–1986 * 2.7 2.6 3.3 3.0 -0.3 2.7 -0.5 3.9 0.6

1983–1987 * 4.0 3.7 4.4 3.6 -0.8 3.5 -0.9 3.5 -0.9

1984–1988 * 4.1 3.7 4.3 4.0 -0.3 3.5 -0.8 4.3 0.0

1985–1989 * 3.3 3.1 3.6 3.4 -0.3 3.4 -0.3 4.0 0.3

1986–1990 * 2.8 2.7 3.3 3.3 0.1 3.1 -0.1 3.8 0.5

1987–1991 * * 2.0 2.6 2.9 0.4 2.7 0.1 3.5 0.9

1988–1992 * * 1.9 2.5 2.6 0.0 2.5 0.0 3.2 0.7

1989–1993 * * 1.7 2.2 2.3 0.1 2.6 0.3 3.2 1.0

1990–1994 * * 1.9 2.3 2.3 0.0 2.4 0.1 3.0 0.7

1991–1995 * * * 2.4 2.3 -0.1 2.0 -0.4 2.5 0.1

1992–1996 * * * 3.2 2.6 -0.6 2.5 -0.8 2.7 -0.6

1993–1997 * * * 3.5 2.8 -0.7 2.8 -0.7 2.8 -0.7

1994–1998 * * * 3.8 2.7 -1.1 2.8 -1.0 2.8 -1.0

1995–1999 * * * 3.9 2.4 -1.5 2.5 -1.3 2.6 -1.3

1996–2000 * * * 4.1 2.0 -2.1 2.1 -2.0 2.3 -1.8

1997–2001 * * * 3.5 2.1 -1.4 2.3 -1.2 2.2 -1.3

1998–2002 * * * 2.9 2.1 -0.8 2.3 -0.6 2.2 -0.7

1999–2003 * * * 2.6 2.2 -0.4 2.6 0.0 2.2 -0.4

2000–2004 * * * 2.4 2.9 0.5 3.2 0.8 2.8 0.3

2001–2005 * * * 2.3 3.0 0.7 3.1 0.8 3.2 0.9

2002–2006 2.7 3.0 0.3 3.1 0.4 3.0 0.3

Actual

Chain-Type

1972 1982 1987

AnnualWeighted CBO Blue Chipe Administration

Dollarsa Dollarsb Dollarsc Forecast Errord Forecast Errord Forecast Errord

Real GNP

Index

Real GDPf
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 31

Table 11.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: Actual values are for the five-year growth rates for real gross national product (GNP) and real gross domestic product (GDP) last 

reported by the Bureau of Economic Analysis, not the first reported values. Projected values are for the average growth of real GNP or 

GDP over the five-year period. The majority of the projections were issued in the first quarter of the initial year of the period or in 

December of the preceding year.

* = not applicable.

a. Data for 1972-dollar GNP and GDP are available only through the third quarter of 1985.

b. Data for 1982-dollar GNP and GDP are available only through the third quarter of 1991. 

c. Data for 1987-dollar GNP and GDP are available only through the second and third quarters, respectively, of 1995.

d. Errors (which are in percentage points) are projected values minus actual values; thus, a positive error is an overestimate. The chain-type 

annual-weighted index of actual GNP or GDP was used to calculate the errors.

e. Five-year projections for the Blue Chip consensus were not available until 1979.

f. With the 1992 benchmark revision by the Bureau of Economic Analysis, GDP replaced GNP as the central measure of national output.

Mean error * * * * * 0.0 * * * 0.3

Mean absolute error * * * * * 0.8 * * * 1.0

Root mean square error * * * * * 1.1 * * * 1.2

Mean error * * * * * -0.3 * -0.3 * 0.0

Mean absolute error * * * * * 0.6 * 0.6 * 0.8

Root mean square error * * * * * 0.9 * 0.8 * 0.9

Statistics for 1979–2002

Errord Forecast Errord

Statistics for 1976–2002

Index

CBO Blue Chipe Administration

Dollarsa Dollarsb Dollarsc Forecast Errord Forecast

1972 1982 1987 Weighted

Actual

Chain-Type

Annual-
32 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 12.

CBO, Blue Chip, and Administration Projections of Five-Year 

Average Growth Rates for Nominal Output

(By calendar year, in percent)

Continued

1976–1980 11.3 12.3 1.0 * * 12.0 0.6

1977–1981 11.4 10.6 -0.8 * * 10.5 -0.9

1978–1982 9.9 10.7 0.8 * * 10.6 0.7

1979–1983 9.1 11.3 2.2 * * 9.6 0.6

1980–1984 8.9 11.3 2.5 * * 11.3 2.5

1981–1985 8.5 11.8 3.3 * * 11.3 2.8

1982–1986 7.2 9.8 2.6 9.7 2.4 9.7 2.5

1983–1987 7.6 8.2 0.6 9.0 1.4 8.5 0.9

1984–1988 7.5 9.0 1.5 9.1 1.6 8.9 1.4

1985–1989 6.8 7.7 0.9 7.8 1.0 8.1 1.3

1986–1990 6.6 7.5 0.9 7.0 0.4 7.4 0.8

1987–1991 6.1 6.9 0.8 6.6 0.5 6.9 0.8

1988–1992 6.0 6.6 0.6 6.6 0.6 6.7 0.7

1989–1993 5.5 6.6 1.1 6.9 1.5 6.5 1.0

1990–1994 5.2 6.3 1.2 6.4 1.2 6.9 1.7

1991–1995 5.0 6.1 1.2 5.9 1.0 6.4 1.4

1992–1996 5.4 5.8 0.4 5.9 0.4 6.0 0.5

1993–1997 5.6 5.1 -0.4 6.0 0.5 5.1 -0.4

1994–1998 5.6 5.4 -0.2 5.8 0.1 5.7 0.1

1995–1999 5.6 5.2 -0.4 5.6 0.0 5.5 0.0

1996–2000 5.8 4.8 -1.0 4.5 -1.3 5.1 -0.7

1997–2001 5.3 4.7 -0.6 4.9 -0.4 4.9 -0.4

1998–2002 4.7 4.4 -0.3 4.7 0.0 4.3 -0.4

1999–2003 4.6 4.3 -0.3 4.5 -0.2 4.2 -0.4

2000–2004 4.7 4.6 -0.2 5.2 0.5 4.8 0.0

2001–2005 4.8 5.1 0.3 5.3 0.4 5.4 0.5

2002–2006 5.4 4.9 -0.5 5.1 -0.4 4.9 -0.5

CBO Blue Chipb Administration

Actual Forecast Errora Forecast Errora Forecast Errora

GNP

GDPc
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 33

Table 12.

Continued

(By calendar year, in percent)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: Actual values are for the five-year growth rates for gross national product (GNP) and gross domestic product (GDP) last reported by 

the Bureau of Economic Analysis, not the first reported values. Projected values are for the average annual growth of nominal GNP 

or GDP over the five-year period. The projections were issued in the first half of the initial year of the period or in December of the 

preceding year.

* = not applicable.

a. Errors (which are in percentage points) are projected values minus actual values; thus, a positive error is an overestimate.

b. Five-year projections for the Blue Chip consensus were not available until 1982.

c. With the 1992 benchmark revision by the Bureau of Economic Analysis, GDP replaced GNP as the central measure of national output.

Mean error * * 0.6 * * * 0.6

Mean absolute error * * 1.0 * * * 0.9

Root mean square error * * 1.2 * * * 1.2

Mean error * * 0.4 * 0.5 * 0.5

Mean absolute error * * 0.8 * 0.8 * 0.8

Root mean square error * * 0.9 * 1.0 * 1.0

Errora

CBO Blue Chipb

Statistics for 1976–2002

Statistics for 1982–2002

Administration

Actual Forecast Errora Forecast Errora Forecast
34 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 13.

CBO, Blue Chip, and Administration Projections of the Difference Between 

Five-Year Average Inflation in the CPI and in the GNP or GDP Price Index

(By calendar year, in percentage points)

Continued

1.6 1.6 0.2 -1.4 * * 0.0 -1.6

1.8 1.8 0.0 -1.8 * * -0.3 -2.1

1.8 1.7 0.0 -1.7 * * -0.1 -1.8

1.5 1.4 0.0 -1.5 * * 0.1 -1.4

1.0 0.7 0.4 -0.6 * * 0.6 -0.1

0.3 0.0 0.4 0.2 * * -0.1 -0.1

0.0 -0.3 0.1 0.1 * * -0.2 0.1

0.2 -0.1 0.0 -0.2 -0.1 -0.3 -0.2 -0.1

0.5 0.2 0.0 -0.5 0.1 -0.4 -0.1 -0.3

0.5 0.5 0.0 -0.6 0.1 -0.5 0.1 -0.4

0.8 0.6 0.1 -0.5 -0.1 -0.8 0.0 -0.7

1.0 0.9 0.3 -0.6 0.2 -0.8 -0.1 -0.9

0.9 0.8 0.6 -0.2 0.3 -0.6 0.2 -0.6

0.9 0.8 0.5 -0.3 0.2 -0.7 0.0 -0.8

0.8 0.7 0.3 -0.5 0.2 -0.6 -0.1 -0.8

0.7 0.6 0.1 -0.5 0.4 -0.2 0.2 -0.4

0.7 0.7 0.4 -0.3 0.4 -0.4 0.0 -0.8

0.7 0.7 0.5 -0.3 0.4 -0.3 0.5 -0.3

0.7 0.6 0.4 -0.3 0.3 -0.3 0.4 -0.3

0.7 0.7 0.6 -0.2 0.4 -0.3 0.2 -0.5

0.8 0.8 0.2 -0.6 0.4 -0.4 0.1 -0.7

0.7 0.6 0.4 -0.3 0.5 -0.2 0.1 -0.6

0.5 0.4 0.3 -0.2 0.2 -0.3 0.1 -0.4

0.5 0.4 0.6 0.1 0.4 0.0 0.3 -0.2

2000–2004 0.3 0.2 0.8 0.6 0.6 0.3 0.6 0.3

2001–2005 0.1 0.0 0.6 0.5 0.5 0.4 0.6 0.5

2002–2006 0.0 0.0 0.5 0.5 0.5 0.5 0.4 0.3

 Actual CBO Blue Chipb Administration

CPI-U CPI-W Forecast Errora Forecast Errora Forecast Errora

1976–1980

1977–1981

1978–1982

1979–1983

1980–1984

1981–1985

1982–1986

1983–1987

1984–1988

1985–1989

1986–1990

1987–1991

1988–1992

1989–1993

1990–1994

1991–1995

1992–1996

1993–1997

1994–1998

1995–1999

1996–2000

1997–2001

1998–2002

1999–2003
CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE 35

Table 13.

Continued

(By calendar year, in percentage points)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Labor, Bureau of Labor Statistics.

Notes: Values are for the difference between the average annual growth of the consumer price index (CPI) and average annual growth of the 

gross national product (GNP) or gross domestic product (GDP) price index over the five-year period. The GNP price index is used for 

data before 1992, and the GDP price index is used thereafter. Before 1978, the Bureau of Labor Statistics published only one consumer 

price index series, now known as the CPI-W (the price index for urban wage earners and clerical workers). In January 1978, the 

bureau began to publish a second, broader consumer price index series, the CPI-U (the price index for all urban consumers). For most 

years since 1979, CBO forecast the CPI-U; for 1986 through 1989, however, CBO forecast the CPI-W. The Administration forecast the 

CPI-W until 1992, when it switched to the CPI-U. The Blue Chip forecast the CPI-U for the entire period. The forecasts were issued in 

the first half of the initial year of the period or in December of the preceding year.

* = not applicable.

a. Errors are projected values minus actual values; thus, a positive error is an overestimate.

b. Five-year projections for the Blue Chip consensus were not available until 1983.

Mean error * * * -0.4 * * * -0.5

Mean absolute error * * * 0.6 * * * 0.6

Root mean square error * * * 0.7 * * * 0.8

Mean error * * * -0.2 * -0.3 * -0.4

Mean absolute error * * * 0.4 * 0.4 * 0.5

Root mean square error * * * 0.4 * 0.5 * 0.5

Statistics for 1976–2002

Statistics for 1983–2002

Forecast Errora Forecast Errora CPI-U CPI-W Forecast Errora

 Actual CBO Blue Chipb Administration
36 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

Table 14.

CBO and Administration Forecasts of the Five-Year Change in Wage and 

Salary Disbursements Plus Corporate Book Profits as a Share of Output

(By calendar year, as a percentage of GNP or GDP)

Sources: Congressional Budget Office; Office of Management and Budget; Aspen Publishers, Inc., Blue Chip Economic Indicators;

Department of Commerce, Bureau of Economic Analysis.

Notes: The forecasts were issued in the first half of the initial year of the period or in December of the preceding year. For the forecasts made 

between 1980 and 1991, gross national product (GNP) was used to calculate the shares; for the forecasts made in 1992 and later,

gross domestic product (GDP) was used. The Blue Chip consensus does not include forecasts for wages or salaries.

* = not applicable.

a. Errors are projected values minus actual values; thus, a positive error is an overestimate.

-5.4 1.0 6.4 -1.1 4.3

-4.7 -2.6 2.2 -1.9 2.8

-3.0 -0.4 2.6 -3.3 -0.3

0.0 -0.6 -0.5 -0.3 -0.2

1.7 0.0 -1.7 0.3 -1.4

0.6 -1.1 -1.6 -0.1 -0.7

1.1 0.8 -0.3 0.6 -0.5

1.2 2.3 1.1 1.7 0.6

-0.4 0.7 1.1 1.1 1.5

-1.6 0.2 1.7 1.5 3.1

-0.4 0.5 0.9 1.9 2.3

0.9 -0.3 -1.2 0.8 -0.1

1.5 1.2 -0.4 1.6 0.0

2.0 0.7 -1.3 0.7 -1.3

2.0 -0.4 -2.3 0.1 -1.8

2.7 -0.9 -3.6 -1.0 -3.7

1.7 -1.6 -3.3 1.0 -0.7

0.1 -1.6 -1.7 -0.2 -0.3

-1.4 -0.9 0.5 -0.2 1.2

-1.1 -0.3 0.8 -0.5 0.6

-0.1 -1.2 -1.2 -1.9 -1.8

1.2 -0.8 -2.1 -1.1 -2.3

2002–2006 3.5 0.3 -3.2 1.0 -2.5

Mean error * * -0.3 * -0.1

Mean absolute error * * 1.8 * 1.5

Root mean square error * * 2.2 * 1.9

CBO Administration

Actual Forecast Errora Forecast Errora

1980–1984

1981–1985

1982–1986

1983–1987

1984–1988

1985–1989

1986–1990

1987–1991

1988–1992

1989–1993

1990–1994

1991–1995

1992–1996

1993–1997

1994–1998

1995–1999

1996–2000

1997–2001

1998–2002

1999–2003

2000–2004

2001–2005

Statistics for 1980–2002
Appendix: Historical and Forecast Data

Evaluating the Congressional Budget Office’s 

(CBO’s) forecasting record entails compiling the basic 

historical and forecast data for growth in real (inflation 

adjusted) and nominal output, inflation in the consumer 

price index (CPI), interest rates, and taxable income. 

Selection of Historical Data

The choice of historical data for the evaluation was determined by the availability of actual data and by the nature 

of the forecast variables examined. Although CBO, the 

Administration, and the Blue Chip consensus all published the same measure for real output growth, selecting 

a historical series was difficult because of periodic benchmark revisions to the actual data.1 By comparison, not all 

of the forecasters published the same measures for CPI 

inflation and interest rates, but the selection of historical 

data for those series was clear-cut. 

Growth in Real and Nominal Output 

Historical two-year averages of growth in real output 

were developed from calendar year averages of the quarterly chain-type annual weighted indexes of real gross 

national product (GNP) and real gross domestic product 

(GDP) published by the Bureau of Economic Analysis 

(BEA). The fact that several real GNP and GDP series 

were discontinued because of periodic benchmark revisions meant that they were unsuitable historical series. 

For example, during the 1976–1985 period, the three 

forecasters published estimates for a measure of growth in 

real GNP that was based on 1972 prices, which was the 

measure published by BEA at that time. In late 1985, 

however, BEA discontinued the 1972-dollar series and 

began to publish GNP on a 1982-dollar basis. As a result, 

an official series of values for GNP growth in 1972 dollars is not available for the years after 1984, and actual 

two-year average growth rates are not available to compare with the forecasts made in early 1984 and 1985. 

From 1986 to 1991, forecasters published estimates of 

growth in real GNP based on 1982 prices. BEA revised 

the benchmark again in the second half of 1991: It discontinued the 1982-dollar GNP series and began to publish GNP on a 1987-dollar basis. Today, the historical 

annual series for 1982-dollar GNP is available only 

through 1990, and actual two-year average growth rates 

are not available to compare with the forecasts made in 

early 1990 and 1991. The forecasters then published estimates of growth in real GDP on a 1987-dollar basis until 

1995, when BEA made another switch, late in the year, to 

a chain-weighted measure of GDP. Therefore, the historical annual series for 1987-dollar GDP ends with the 

1994 annual value, and actual two-year average growth 

rates are not available to compare with the forecasts made 

in early 1994 and 1995.

By periodically updating the series to reflect more recent 

prices, BEA’s benchmark revisions yield a measure of real 

output that is more relevant for analyzing contemporary 

movements in real growth. But the process of revision 

makes it difficult to evaluate forecasts of real growth produced over a period of years in series that are later discontinued. The comparison avoids the difficulties presented 

by periodic revisions of the data by using BEA’s chaintype annual-weighted index of real GNP or GDP 

throughout the data series.2

1. Before 1992, CBO, the Administration, and the Blue Chip

consensus survey used gross national product to measure output. 

Beginning in early 1992, however, all three forecasters began to 

publish forecasts and projections of gross domestic product 

instead.

2. For a discussion of that index, see Congressional Budget Office, 

The Economic and Budget Outlook: An Update (August 1995), 

Appendix B, pp. 71–73.
38 CBO’S ECONOMIC FORECASTING RECORD: 2007 UPDATE

In the case of nominal GNP and GDP, historical twoyear averages for growth were developed from calendar 

year averages of the quarterly values published by BEA. 

CPI Inflation 

CBO calculated two-year averages of inflation in the consumer price index from calendar year averages of monthly 

data published by the Bureau of Labor Statistics. Before 

1978, the bureau published only one consumer price 

index series, now known as the CPI-W (the price index 

for urban wage earners and clerical workers). In January 

1978, however, the bureau began to publish a second, 

broader consumer price index series, the CPI-U (the price 

index for all urban consumers), including its history. 

CBO’s comparison of forecasts uses both series. 

Until 1992, the Administration published its forecasts for 

the CPI-W, the measure used to index most of the federal 

government’s spending for entitlement programs. For all 

but four of its forecasts since 1979 (1986 through 1989), 

in contrast, CBO based its inflation forecast on the 

CPI-U, a more widely cited measure of inflation and the 

one now used to index federal income tax brackets. The 

Blue Chip consensus has always included forecasts for 

the CPI-U. Although annual fluctuations in the CPI-U 

and CPI-W are virtually indistinguishable, the indexes 

differ in some years. For that reason, CBO used historical 

data for both series to evaluate the alternative forecasting 

records. 

Interest Rates

CBO used monthly data published by the Board of Governors of the Federal Reserve System to calculate two-year 

averages of nominal short- and long-term interest rates.

The forecasts of short-term interest rates were compared 

with historical values for two measures of the interest rate 

on three-month Treasury bills: the new-issue rate and the 

secondary-market rate. Before 2001, the Administration 

forecast the new-issue rate, which corresponds to the 

price of three-month bills auctioned by the Department 

of the Treasury—that is, it reflects the interest actually 

paid on that debt. Since mid-2001, the Administration 

has forecast the secondary-market rate, which corresponds to the price of three-month bills traded outside 

Treasury auctions. Such transactions occur continually in 

markets that involve many more traders than do Treasury 

auctions. Thus, the secondary-market rate provides an 

updated evaluation of short-term federal debt by the 

wider financial community. 

CBO forecasts the secondary-market rate and, unlike the 

Administration, has never forecast the new-issue rate. 

The Blue Chip has alternated between those two rates: It 

published the new-issue rate from 1982 to 1985, 

switched to the secondary-market rate from 1986 to 

1991, and then returned to the new-issue rate from 1992 

to 1997. Since March 1997, the Blue Chip has forecast 

the secondary-market rate. Clearly, there is no reason to 

expect the rates to differ persistently; indeed, the differences between their calendar-year averages are minuscule. 

CBO likewise compared the various forecasts of longterm interest rates with historical values for two measures 

of long-term rates: the 10-year Treasury note rate and 

Moody’s Aaa corporate bond rate. A comparison of forecasts is not possible before 1984 because not all of the 

forecasters published projections of long-term interest 

rates before then. For forecasts made in early 1984 and 

1985, CBO projected the Aaa corporate bond rate. 

Beginning with its early 1986 forecast, however, CBO 

switched to the 10-year Treasury note rate. The Administration has always published projections for the 10-year 

Treasury note rate, but the Blue Chip forecast the Aaa corporate bond rate until January 1996, when it switched to 

the 10-year Treasury rate. 

CBO calculated separate historical values for real shortterm interest rates using the nominal short-term interest 

rate and the inflation rate appropriate for each forecaster. 

In each case, the two-year average nominal short-term 

interest rate was discounted by the two-year average rate 

of inflation. The resulting real short-term interest rates 

were similar among forecasts. 

Taxable Income

Through its direct influence on projections of federal revenues, the forecast for taxable income plays a critical role 

in determining the accuracy of budget projections under 

current law. The income measure examined here—wage 

and salary disbursements—focuses on the source of 

income to which tax receipts are most sensitive. In addition, because some other types of income are not taxed 

(income derived from assets held in nontaxable 

accounts), the effective tax rate on wages and salaries 

exceeds the corresponding rate on other income.

Historical estimates of taxable income are subject to substantial statistical revisions. However, those revisions do 

not have much implication for projections of revenues as 

long as the revisions are carried forward into the forecast. 
APPENDIX 39

The result is that the accuracy of projections of taxable 

income is measured by using the forecast change of taxable income as a share of GDP.

Sources of Forecast Data

For every measure except taxable income, this evaluation 

used the calendar year forecasts and projections that 

CBO has published early each year since 1976, roughly 

coinciding with the publication of the Administration’s 

annual budget proposals. The Administration’s forecasts 

were taken from its budget in all but one case: The forecast made in early 1981 came from the Reagan Administration’s revisions of President Carter’s last budget. 

The corresponding CBO forecast was taken from CBO’s 

published analysis of President Reagan’s budget proposals. 

That CBO baseline forecast did not include the economic effects of the new Administration’s fiscal policy 

proposals, but it did assume the continuation of the tax 

and spending policies of the Second Concurrent Resolution on the Budget for Fiscal Year 1981, including accelerated depreciation and a 10 percent cut in personal 

income taxes.

3

The average two-year forecasts in the Blue Chip consensus 

survey, which are published monthly, were taken from 

those published in the same month as CBO’s forecasts. 

Because the Blue Chip did not begin publishing its twoyear forecasts until the middle of 1981, the first such 

forecast available for this comparison was published in 

early 1982. Average five-year projections, however, are 

included in the Blue Chip only twice a year, on a schedule 

that does not correspond to the times at which forecasts 

are necessary for federal budgeting. All but one of its fiveyear projections used in this evaluation were published in 

March; the 1980–1984 projection of real output was 

published in May. The Blue Chip’s medium-term forecasts were prepared about three months after CBO made 

its medium-term projections.

Because CBO has regularly published forecasts for wages 

and salaries only since 1985, some of the CBO forecasts 

for wages and salaries that are used here were taken from 

CBO’s files of unpublished forecasts. 

3. Another exceptional case occurred in early 1993, when the 

Clinton Administration adopted CBO’s economic assumptions 

as the basis for its budget. As a result, the errors for the early 

1993 forecast are the same for CBO and the Administration.


INSIDE MAIL

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

WASHINGTON, DC 20515