The Congress of the United States O Congressional Budget Office

CBO

CBO’s Economic Forecasting Record

An evaluation of the economic forecasts

CBO made from January 1976 through January 2002

September 2004

A

REPORT

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 Tumi Coker and Adam Gordon, with the assistance of colleagues 

in the Macroeconomic Analysis Division, under the direction of Kim Kowalewski and Robert 

Dennis. Christine Bogusz edited the report, Maureen Costantino prepared it for publication, 

and Annette Kalicki produced the electronic versions for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Direc

September 2004

Sources and Choice of Data for the Evaluation 1

Measuring the Quality of Forecasts 1

Bias 1

Accuracy 1

Alternative Measures of Forecast Quality 2

Limitations of Forecast Evaluations 2

The Effects of Business Cycles and Changes in the Trend 

Rate of Productivity Growth 3

CBO’s Forecasting Record 3

Two-Year Forecasts 4

Five-Year Projections 6

Appendix: Choosing Sources of Historical and

Forecast Data 33

CONTENTS
vi CBO’S ECONOMIC FORECASTING RECORD

Tables

1A. Summary Measures of Forecast Performance for Two-Year Averages 9

1B. Summary Measures of Forecast Performance for Five-Year Averages 10

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

Growth Rates for Real Output 11

3. Comparison of CBO, Administration, and Blue Chip Forecasts of 

Two-Year Average Growth Rates for Nominal Output 13

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

Inflation in the Consumer Price Index 15

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

Nominal Interest Rates on Three-Month Treasury Bills 17

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

Nominal Long-Term Interest Rates 19

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

Real Interest Rates on Three-Month Treasury Bills 20

8. CBO, Administration, and Blue Chip Forecasts of the Difference 

Between Two-Year Average Inflation in the CPI and in the GNP 

or GDP Price Index 22

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

and Salary Disbursements plus Corporate Book Profits as a 

Share of Output 24

10. CBO, Administration, and Blue Chip Projections of Five-Year Average 

Growth Rates for Real Output 25

11. CBO, Administration, and Blue Chip Projections of Five-Year Average 

Growth Rates for Nominal Output 27

12. Comparison of CBO, Administration, and Blue Chip Projections of the 

Difference Between Five-Year Average Inflation in the CPI and in the 

GNP or GDP Price Index 29

13. CBO and Administration Projections of the Five-Year Change in Wage 

and Salary Disbursements plus Corporate Book Profits as a Share 

of Output 31

Figures

1. Statistical Discrepancy in the National Income and Product Accounts 6

2. Fringe Benefits 7
CBO’s Economic Forecasting Record

Since publishing its first macroeconomic forecast 

in 1976, the Congressional Budget Office (CBO) has 

compiled a forecasting track record comparable in quality with that of the Blue Chip consensus (an average of 

private-sector forecasters) as well as that of the incumbent 

Administrations during that time. In particular, CBO’s 

accuracy for two-year forecasts made between 1982 and 

2002 did not differ markedly either from that of the Blue 

Chip survey or from that of the Administration over those 

years (see Table 1A). The accuracy of CBO’s five-year 

projections also was similar to that of the Blue Chip consensus and of the various Administrations (see Table 1B). 

Comparing CBO’s forecasts with those of the Blue Chip 

consensus suggests that when CBO’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. 

Sources and Choice of Data for the 

Evaluation

The data employed in this evaluation were compiled using forecasts published early in the years from 1976 

through 2002. (Two-year average forecasts published in 

2003 and in early 2004 could not be included in this 

evaluation because the latest full-year historical data are 

for 2003.) 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 Administrations’ forecasts were taken from the budget documents for all years 

except 1981.1 Where possible, Blue Chip consensus forecasts were taken from 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, four 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 do 

not include a number of 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 as well as 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 the efficiency of a forecast, 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 the tendency of the 

forecast to be overly pessimistic or optimistic. CBO’s 

evaluation used the mean error (the arithmetic average of 

the forecast errors) to measure statistical bias. The mean 

error is the simplest and most widely used measure of 

forecast bias. 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 the errors were small or if all the errors 

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

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 fore1. The Administration’s forecast made in early 1981 came from the 

Reagan Administration’s revisions to President Carter’s last budget. The corresponding CBO forecast was taken from CBO’s published analysis of President Reagan’s budget proposals. That 

forecast did not include the economic effects of the new Administration’s fiscal policy proposals.
2 CBO’S ECONOMIC FORECASTING RECORD

cast 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

A number of 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

 A simple method is comparing a forecast to 

the Blue Chip consensus forecast, which represents a wide 

variety of economic forecasters and thus reflects a broader 

blend of sources and methods than can be expected from 

any single forecaster. As such, the consensus forecast generally produces 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 the economic forecasting 

profession, in general, does not use all the information 

available to it to forecast downturns in the business cycle 

and, as a result, makes avoidable systematic errors in forecasting those business cycles.5

 Such critics point to the 

ability of certain leading indicators to predict recessions. 

Nevertheless, it is unclear how the information in such 

indicators can be reliably 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 is the case with CBO’s 

sample of only 27 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 actual forecasts are being compared. Second, in small samples, individual errors in a forecast can have an unduly 

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 of 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 

they 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 3

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 CBO, Blue Chip, 

and Administration economic forecasts differ and have 

changed over the past two decades, and they may 

change again. For example, 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 

are unchanged. In contrast, the underlying policy assumptions in the Blue Chip forecasts are not clear, for 

either the short run or the medium term. The Blue 

Chip is a survey, and the various forecasters do not 

state their assumptions about fiscal policy. Last, the 

various Administration forecasts normally include

the projected economic effects of their respective policy proposals, which generally differ from CBO’s 

current-policy assumptions.

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 survey, 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 of the economy 

apparently increased.

The Effects of Business Cycles and 

Changes in the Trend Rate of 

Productivity Growth

As the track record shows, forecasters collectively tend to 

err during periods that include either turning points in 

the business cycle or significant shifts in the trend rate of 

productivity growth. For example, most forecasters overestimated the economy’s growth rate and underestimated 

inflation in forecasts they made just before and during 

the back-to-back recessions of the early 1980s. That pattern was repeated, albeit to a lesser degree, in the forecasts 

they 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. In retrospect, however, the productivity trend of the 1970s and 

1980s was significantly lower than that of the 1950s and 

1960s. Because forecasters in the 1970s expected the previous trend to return, their forecasts of real output in the 

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

The years from 1995 to 2000 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. 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 better flow of information 

among producers and between producers and consumers, 

which improved productivity and lowered inventories. 

Productivity growth has held up very well through the 

2001 recession and early recovery, suggesting that the 

strong performance of U.S. productivity in the late 1990s 

was not simply a transient feature of the economic boom. 

Nevertheless, great uncertainty about the trend rate of 

productivity growth remains. That uncertainty will continue to cause forecasting errors, particularly for projections made five years ahead. 

CBO’s Forecasting Record

This analysis evaluates CBO’s macroeconomic forecasts, 

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

budget reports that the Administration and CBO publish 

each winter focus on budget 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 budget year but also for the budget year itself will 

provide the basis for a more accurate forecast of the budget’s bottom line (the annual deficit or surplus)—hence 

the interest in the two-year period. The five-year period is 

used to examine the accuracy of longer-term projections 

of several variables that are important for CBO’s budget 

projections. 
4 CBO’S ECONOMIC FORECASTING RECORD

CBO has analyzed elsewhere the overall uncertainty of its 

budget projections, which depend on the accuracy of its 

economic projections. “Rules of thumb” for estimating 

the effects on budget projections of alternative assumptions about various macroeconomic variables appear in 

Appendix B of CBO’s The Budget and Economic Outlook: 

Fiscal Years 2005 to 2014 (January 2004).6

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 2002. CBO’s 

root mean square error was 1.3, while that for the Blue 

Chip consensus was 1.2 (see Table 2). In addition, 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 fact, the two sets 

of forecast errors differed by more than 0.1 percentage 

point in only nine of the 21 forecasts made during those 

years. CBO was closer to the actual value in seven of 

those forecasts, and the Blue Chip in two. (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 in order to 

provide time for the budget projections to be prepared.) 

Overall, CBO’s forecasts were about as accurate as those 

of the Administration. 

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

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 

later years. Most recently, the recession of 2001 and slow 

recovery in 2002 account for the overpredictions made by 

all three forecasters in 2000 and 2001.

All three forecasters underpredicted two-year real, or inflation-adjusted, gross domestic product (GDP) growth 

in every year between 1992 and 1999. Much of that apparent pessimism, however, resulted from revisions to the 

national income and product accounts (NIPAs). The Bureau of Economic Analysis’s (BEA’s) benchmark revisions 

published in November 2000 increased the two-year 

growth rates for real GDP over most of the historical period; in particular, rates went up by about 0.4 percentage 

points, on average, for the 1992-1998 period. That upward revision in growth rates stemmed largely from redefining software spending as investment in the accounts as 

well as adopting new price series for various categories of 

consumption. In addition to making the mean forecast 

error less informative, those revisions distort the reliability of the statistical measures of accuracy. Nevertheless, 

even after accounting for the latest revisions, the underpredictions of economic growth made between 1996 and 

1999 are significant. 

BEA’s recent revision to the NIPAs—in December 

2003—did not significantly affect the historical pattern 

of any of the variables used in this analysis of forecast accuracy. Real GDP growth from 1976 to 2002 (the period 

used in this analysis) was revised upward, on average, by 

about half a tenth of a percentage point, and the greatest 

revision for any two-year span was +0.3 percentage points 

for the 1991-1992 period. The revision also had small effects on the growth of the GDP price index and nominal 

GDP and, except for 2002, on the relationship of taxable 

income—book profits and wages and salaries—to GDP. 

(For 2002, income as a share of GDP was revised upward 

by 0.4 percentage points, but in general, CBO’s view of 

the history of income shares did not change, and the revisions do not have a significant effect on this evaluation of 

forecasts.) 

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 3). Again, the 

two forecasts are positively correlated. Of the 21 forecasts 

made between 1982 and 2002, the Blue Chip’s error was 

smaller (by more than 0.1 percentage point) than CBO’s 

six times; CBO had the smaller error three times; and the 

two forecasters recorded virtually identical errors 12 

times. The accuracies for the entire period are identical. 

BEA’s benchmark revisions of November 2000 (noted 

above) also had a significant effect on the bias measure, 

the mean error, for nominal output growth. 

CBO’s projections of nominal output were about as accurate as those of the Administration, both since 1982 and 

over the longer interval between 1976 and 2002.

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

Projections: A Discussion of Data and Methods (April 2004).
CBO’S ECONOMIC FORECASTING RECORD 5

CPI Inflation. CBO was about as successful as the Blue 

Chip in forecasting the two-year average growth in the 

consumer price index, or CPI (see Table 4). CBO was 

more than 0.1 percentage point closer to the actual value 

in nine of the 21 periods, the Blue Chip was closer in 

three periods, and the two forecasters had essentially 

matching errors in nine periods. 

The variability of oil prices caused both CBO and Blue 

Chip to err in forecasting inflation. They overestimated 

future inflation in the 1982-1986 period as well as in the 

1997-1998 period, partly because of the rapid drop in oil 

prices early in 1986 and in 1997 to 1998. Conversely, the 

sharp rise in oil prices in 2000 caused both forecasters to 

underestimate inflation in the two-year-ahead forecasts 

published in early 1999 and 2000. 

The accuracy of CBO’s forecasts of inflation was the same 

as the Administration’s in the period since 1982 and over 

the longer period since 1976. 

Nominal Interest Rates. For the 1982-2002 forecasts of 

nominal short-term interest rates, CBO’s record was 

slightly worse than the Blue Chip’s (see Table 5). Both 

CBO and the Blue Chip tended to overestimate rates 

slightly (the forecasters’ mean errors over that period were 

0.5 percentage points). CBO was more than 0.1 percentage point closer to the actual value in seven of the 21 periods, and the Blue Chip was closer five times. 

The overall accuracy of CBO’s forecasts of long-term interest rates for the 1984-2002 period was identical to that 

of the Blue Chip forecasts (see Table 6). CBO was more 

than 0.1 percentage point closer to the actual value in six 

of the 19 periods, the Blue Chip was closer in five periods, 

and the two forecasters had essentially identical errors in 

eight 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 more accurate than those of the Administration, but there was no 

significant difference between the accuracy of the two 

government forecasters for short-term rates.

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

about the same accuracy in estimating short-term interest 

rates adjusted for inflation in the 1982-2002 period (see 

Table 7). CBO’s forecasts were closer to the actual value 

in four of the 21 periods, the Blue Chip’s were closer in 

10, and the two registered similar errors in seven periods. 

For forecasts made between 1976 and 2002, CBO’s errors 

were slightly smaller than those of the Administration, although the difference has been inconsequential since 

1982.

The Difference Between the Growth of the CPI and the 

GDP Price Index. The difference in the forecasted 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 major determinant in forecasting the growth of nominal GDP and, 

therefore, the growth of income subject to federal tax. All 

else being equal, the faster the projected growth of the 

GDP price index, the faster the projected growth of revenues. The growth of the consumer price index affects 

forecasts of outlays because a number of programs are indexed to the CPI. The CPI projection, 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 growth of the GDP price index is forecast to be large relative to that of the CPI, the 

projection of the deficit will be smaller than if the GDP 

price index is assumed to grow much less rapidly than the 

CPI. 

The accuracy of CBO’s forecast of the difference between 

the two indexes two years ahead was the same as that of 

the Blue Chip consensus (see Table 8). CBO was more accurate than the Blue Chip (by more than 0.1 percentage 

point) in four of the 21 periods, the Blue Chip was more 

accurate in four periods, and the two forecasters had essentially identical errors in 13 periods. 

CBO was about as accurate as the Administration during 

both the 1976-2002 and 1982-2002 periods. 

Taxable Income. One of the greatest sources of error in 

budget projections is in forecasting taxable income. The 

errors in the first step of such forecasting, the forecast of 

nominal GDP growth, were discussed above. The errors 

in the second step—the forecast of the relationship of 

major components of taxable income to nominal GDP 

(particularly the “high-tax” income share of GDP)—are 

discussed here. The most important component of taxable income for revenue projections currently is wages 

and salaries. Because the Blue Chip does not forecast 

wages and salaries, CBO’s forecast record cannot be com-
6 CBO’S ECONOMIC FORECASTING RECORD

pared with that of the private-sector survey in this respect.

The accuracy of CBO’s and the Administration’s forecasts 

of the two-year change in the wage and salary share of 

GDP has been identical for the period since 1980 (see Table 9). Moreover, the pattern of errors has been similar: 

both forecasters experienced a string of underpredictions 

of income growth in the forecasts they made between 

1995 and 2000, and both forecasters made their largest 

errors by overpredicting growth in the forecasts they 

made in 2001 and 2002.

Two factors contributed to the string of underpredictions 

of taxable income growth in the mid- to late 1990s and to 

the overpredictions in the most recent forecasts. The first 

factor was the difference between measures of total income and total product in the national income and product accounts. In principle, those two aggregate measures 

of economic activity should be equal, but in practice they 

are not, because the Bureau of Economic Analysis must 

use different primary sources to estimate total income, on 

the one hand, and total product, on the other. The statistical discrepancy in the NIPAs measures the difference 

between the estimates of total product and total income; 

between 1994 and 2000, the excess of total income over 

total product grew—that is, the statistical discrepancy became more negative (see Figure 1). More recently, about 

half of that swing in the statistical discrepancy was reversed. The discrepancy is essentially impossible to forecast, since it reflects errors in estimating. If those errors 

were predictable, BEA would try to correct them. At this 

point, it is impossible to tell to what degree changes in 

the discrepancy have caused forecasters to err in their 

forecasts of income. 

A second source of difficulty in forecasting taxable income is the recent variability in the part of labor income 

that is not subject to tax. 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 (for example, employer-paid insurance premiums and pension contributions) for taxable wages and salaries. But between 1994 

and 1998, 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 

Figure 1.

Statistical Discrepancy in the National 

Income and Product Accounts

(Percentage of GDP)

Sources: Congressional Budget Office; Department of Commerce, 

Bureau of Economic Analysis.

Notes: The shaded vertical bars indicate periods of recession. 

The bars extend from the peak to the trough of each 

recession.

The statistical discrepancy is negative when the measure 

of national income exceeds the measure of national product.

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). Since 2001, however, the 

trend appears to have reversed again, with the nontaxable 

share of labor income rising sharply. 

Five-Year Projections

CBO’s economic projections were about as accurate as 

those of the Blue Chip and the Administration in all the 

series examined. The Blue Chip’s five-year economic projections (published twice a year) are generally prepared 

about four months after the CBO forecasts with which 

they are compared. While the CBO projections are constrained to assume no change in fiscal policy and the Administration’s forecasts generally assume the Administra-
CBO’S ECONOMIC FORECASTING RECORD 7

Figure 2.

Fringe Benefits

(Percentage of total labor compensation)

Sources: Congressional Budget Office; Department of Commerce, 

Bureau of Economic Analysis.

Note: The shaded vertical bars in this figure indicate periods of 

recession. The bars extend from the peak to the trough of 

each recession.

tion’s proposals are enacted, the Blue Chip forecasters are 

free to make their best projections for future fiscal policy. 

That freedom and additional months of data do not seem 

to translate into a forecasting edge, however.

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

in real output were about as accurate as the Blue Chip’s in 

the period since 1979 (see Table 10). As with the errors in 

the two-year forecasts, the errors in the five-year projections of the two forecasters 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 1979-1999 period indicate that 

both forecasters had an identical downward bias (they 

predicted lower growth, on average, than what actually 

occurred) of 0.4 percentage points. In the five-year-ahead 

projections made between 1992 and 1999, both CBO 

and the Blue Chip underpredicted long-term growth because of the surprisingly strong economy of the late 

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

BEA’s estimates of the rate of growth previously discussed.

The accuracy of CBO’s projections was also similar to 

that of the Administration’s.

Nominal Output. The accuracy of the CBO and the Blue 

Chip forecasts of the growth of nominal output has been 

identical for the period since 1982 (see Table 11). The accuracy was slightly less than that for the growth of real 

output because the forecasters’ errors in their projections 

of the inflation rate for the price index of output added to 

their errors in forecasting real output.

Inflation Measures. The difference between the two major inflation measures is even more important for 

five-year budget projections than for two-year forecasts. 

The mean error statistics indicate a downward bias—in 

fact, the projections of the difference in the growth of the 

CPI and the GDP price index over five-year horizons 

were too low in virtually all of the periods (see Table 12). 

However, at least 0.2 percentage points of the bias stems 

from revisions in the methods used to calculate the GDP 

price index. During the period examined here, BEA 

shifted from using a measure based on 1972 dollars to 

one based on 1982 dollars, then one based on 1987 dollars, and finally to one based on chained prices (see the 

appendix). Those successive revisions caused previously 

published estimates of the growth of the GDP price index 

to be revised downward. Therefore, forecasters at the 

time were projecting a GDP price index that had grown 

more quickly than the historical data now indicate. On 

the basis of current historical data, the CPI now appears 

to have grown more, relative to the GDP price index, 

than the growth indicated by the historical data at the 

time that the projections were made. 

Even after 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 price measures tend to 

contribute to optimistic budget projections. While all of 

the projections showed a similar bias, CBO’s forecast accuracy record is about the same as that of the Blue Chip

and slightly better than that of the Administration.

Taxable Income. The final five-year projection record examined here is that of the change in wages and salaries as 

a share of output. (As with the two-year forecast, this is 

the most important income component for revenue projections.) CBO’s accuracy is about the same as that of the 

Administration (see Table 13). As with some other variables, the errors of both forecasters show alternating 
8 CBO’S ECONOMIC FORECASTING RECORD

periods of optimism and pessimism and are positively 

correlated. The projections made early in 1994 through 

1999 indicated less growth in the tax base relative to 

GDP than actually occurred. Difficulties in forecasting 

the statistical discrepancy and the nontaxable component 

of labor income are clearly major causes of errors in 

five-year projections as well as in two-year forecasts.
CBO’S ECONOMIC FORECASTING RECORD 9

Table 1A.

Summary Measures of Forecast Performance for Two-Year Averages

(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 2 through 9. Errors are forecast values minus actual values; thus, a positive error is an 

overestimate.

* = not applicable.

a. Blue Chip is the average of approximately 50 private-sector forecasters.

Mean error -0.5 -0.6 -0.4

Mean absolute error 1.0 1.0 1.1

Root mean square error 1.3 1.2 1.4

Mean error 0.1 0.1 0.3

Mean absolute error 1.0 1.0 1.1

Root mean square error 1.3 1.2 1.4

Mean error 0.5 0.5 0.4

Mean absolute error 0.6 0.7 0.7

Root mean square error 0.9 0.9 0.9

Mean error 0.5 0.5 0.1

Mean absolute error 1.1 1.0 1.1

Root mean square error 1.4 1.2 1.3

Mean error 0.3 0.4 -0.1

Mean absolute error 0.7 0.6 0.9

Root mean square error 0.7 0.7 1.0

Mean error 0 0 -0.2

Mean absolute error 0.9 0.9 0.9

Root mean square error 1.2 1.1 1.2

Mean error -0.2 -0.3 -0.3

Mean absolute error 0.3 0.3 0.4

Root mean square error 0.4 0.4 0.5

Mean error 0.1 * -0.1

Mean absolute error 0.9 * 0.8

Root mean square error 1.0 * 1.0

Difference Between Inflation in the CPI and the GDP Price 

Index (1982-2002) 

Change in Wage and Salary Disbursements Plus Corporate 

Book Profits as a Share of Output (1980-2002)

Growth Rate for Nominal Output (1982-2002)

Nominal Interest Rate on Three-Month Treasury Bills 

(1982-2002)

Nominal Long-Term Interest Rate (1984-2002)

Real Interest Rate on Three-Month Treasury Bills (1982-

2002)

Inflation in the Consumer Price Index (1982-2002)

CBO Blue Chipa Administration

Growth Rate for Real Output (1982-2002)
10 CBO’S ECONOMIC FORECASTING RECORD

Table 1B.

Summary Measures of Forecast Performance for Five-Year Averages

(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 10 through 13. Errors are projected values minus actual values; thus, a positive error 

is an overestimate.

* = not applicable.

a. Blue Chip is the average of approximately 50 private-sector forecasters.

Mean error -0.4 -0.4 0

Mean absolute error 0.7 0.6 0.8

Root mean square error 0.9 0.8 1.0

Mean error 0.5 0.6 0.6

Mean absolute error 0.8 0.8 0.9

Root mean square error 1.0 1.0 1.1

Mean error -0.4 -0.4 -0.5

Mean absolute error 0.4 0.4 0.5

Root mean square error 0.4 0.5 0.6

Mean error -0.2 * -0.4

Mean absolute error 1.4 * 1.3

Root mean square error 1.7 * 1.6

Change in Wage and Salary Disbursements Plus 

Corporate Book Profits as a Share of Output (1980-

1999)

CBO Blue Chipa Administration

Difference Between Inflation in the CPI and the 

GDP Price Index (1983-1999)

Growth Rate for Real Output (1979-1999) 

Growth Rate for Nominal Output (1982-1999) 
CBO’S ECONOMIC FORECASTING RECORD 11

Table 2.

CBO, Administration, and Blue Chip 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 1.5 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 * 4.0 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 * * * 1.3 2.9 1.6 3.0 1.7 3.2 1.9

2002-2003 * * * 2.5 2.4 0 2.2 -0.3 2.2 -0.2

Forecast Errord

Administration

Chain-Type

AnnualWeighted

Actual 

CBO Blue Chipe 1982 1987

Dollarsc

1972

Forecast Errord

Real GNP

Real GDPf

Dollars Index a Forecast Errord Dollarsb
12 CBO’S ECONOMIC FORECASTING RECORD

Table 2.

Continued

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 BEA’s 1992 benchmark revision, GDP replaced GNP as the central measure of national output.

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

Mean absolute error * * * * * 1.0 * * * 1.1

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

Mean error * * * * * -0.5 * -0.6 * -0.4

Mean absolute error * * * * * 1.0 * 1.0 * 1.1

Root mean square error * * * * * 1.3 * 1.2 * 1.4

Errord

CBO Blue Chipe Administration

Forecast Errord Forecast Errord Dollars Forecast a Dollarsb Dollarsc Index

Statistics for 1976-2002 

Actual 

Chain-Type

Annual1972 1982 1987 Weighted

Statistics for 1982-2002
CBO’S ECONOMIC FORECASTING RECORD 13

Table 3.

Comparison of CBO, Administration, and Blue Chip 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

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 3.4 5.2 1.8 5.1 1.7 5.4 2.0

2002-2003 4.2 4.2 -0.1 4.0 -0.2 4.2 0

Administration

Errora Forecast

CBO

GNP

Forecast Errora

Blue Chipb

Forecast Errora

GDPc

Actual
14 CBO’S ECONOMIC FORECASTING RECORD

Table 3.

Continued

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 BEA’s 1992 benchmark revision, GDP replaced GNP as the central measure of national output.

Mean error * * 0.2 * * * 0.3

Mean absolute error * * 1.2 * * * 1.2

Root mean square error * * 1.5 * * * 1.5

Mean error * * 0.1 * 0.1 * 0.3

Mean absolute error * * 1.0 * 1.0 * 1.1

Root mean square error * * 1.3 * 1.2 * 1.4

Forecast Errora Forecast Errora

Blue Chipb CBO Administration

Actual Forecast Errora

Statistics for 1982-2002

Statistics for 1976-2002
CBO’S ECONOMIC FORECASTING RECORD 15

Table 4.

CBO, Administration, and Blue Chip 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

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 2.9 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 2.0 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

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

Administration

Forecast Errora Errora

CBO Blue Chipb

Forecast Errora

Actual

CPI-U CPI-W Forecast
16 CBO’S ECONOMIC FORECASTING RECORD

Table 4.

Continued

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; from 1986 through 1989, however, CBO forecast 

the CPI-W. The Administration forecast the CPI-W until 1992, when it switched to the CPI-U. 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 * * * -0.1

Mean absolute error * * * 1.1 * * * 1.0

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

Mean error * * * 0.5 * 0.5 * 0.4

Mean absolute error * * * 0.6 * 0.7 * 0.7

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

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

Actual CBO Blue Chipb Administration

Statistics for 1976-2002

Statistics for 1982-2002
CBO’S ECONOMIC FORECASTING RECORD 17

Table 5.

CBO, Administration, and Blue Chip 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 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

5.3 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 3.3

1.3 1.3 3.3 2.0 2.7 1.4 2.8 1.5

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

Administration

Forecast Errora

CBO

Forecast Errora

Blue Chipb

Forecast Errora

Actual

New

Issue

Secondary

Market
18 CBO’S ECONOMIC FORECASTING RECORD

Table 5.

Continued

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. Blue Chip alternated between the two rates, forecasting the new-issue rate from 1982 to 1985, the secondary-market rate from 1986 to 1991, and the new-issue rate again beginning in 

1992. 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 * * * 1.6

Mean error * * * 0.5 * 0.5 * 0.1

Mean absolute error * * * 1.1 * 1.0 * 1.1

Root mean square error * * * 1.4 * 1.2 * 1.3

Blue Chipb Administration

Issue Market Forecast Errora Forecast Errora Forecast Errora

Actual

New Secondary CBO

Statistics for 1982-2002

Statistics for 1976-2002
CBO’S ECONOMIC FORECASTING RECORD 19

Table 6.

CBO, Administration, and Blue Chip 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 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 -0.1 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

Mean error * * * 0.3 * 0.4 * -0.1

Mean absolute error * * * 0.7 * 0.6 * 0.9

Root mean square error * * * 0.7 * 0.7 * 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

Administration

Forecast Errora Errora

Blue Chip

Forecast Errora

CBO

Forecast

Statistics for 1984-2002

Actual

10-Year

Note

Corporate 

Aaa Bond

1984-1985

1985-1986

1986-1987

1987-1988
20 CBO’S ECONOMIC FORECASTING RECORD

Table 7.

CBO, Administration, and Blue Chip 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 2.6 -0.2 2.7 -0.1

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

1.5 1.5 1.5 1.5 3.0 1.5 3.0 1.5 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

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

1976-1977

1977-1978

1978-1979

1979-1980

1980-1981

1981-1982

1982-1983

CPI-W

Administration

Forecast Errora

CBO

Forecast Errora

Blue Chipb

Forecast Errora

Actual

Issue

New

CPI-U CPI-W

Secondary

Market

CPI-U
CBO’S ECONOMIC FORECASTING RECORD 21

Table 7.

Continued

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 for 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, whereas the Administration forecast the new-issue rate. 

Blue Chip alternated between the two rates, forecasting the new-issue rate from 1982 to 1985, the secondary-market rate from 1986 

to 1991, and the new-issue rate again beginning in 1992. Moreover, for most years since 1979, CBO forecast the CPI-U (the consumer 

price index for all urban consumers); from 1986 through 1989, however, CBO forecast the CPI-W (the consumer price index for urban 

wage earners and clerical workers). The Administration forecast the CPI-W until 1992, when it switched to the CPI-U. 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 * * * * * 0.1 * * * -0.2

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

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

Mean error * * * * * 0 * 0 * -0.2

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

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

Errora Forecast Errora

CBO Blue Chipb Administration

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

Actual

New Secondary

Issue Market

Statistics for 1982-2002

Statistics for 1976-2002
22 CBO’S ECONOMIC FORECASTING RECORD

Table 8.

CBO, Administration, and Blue Chip 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 0.6 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 -0.1 0.2 0.1 0.1 0.2

0.3 0.1 -0.1 -0.2 0.2 -0.1 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 -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 -0.7

0.6 0.2 0.5 -0.1 0.4 -0.1 0.5 -0.1

0.6 0.7 0.2 -0.5 0.3 -0.3 0.3 -0.3

0.9 1.0 0.5 -0.4 0.4 -0.5 0.3 -0.6

0.9 -0.1 0.3 -0.6 0.5 -0.4 0.1 -0.7

0.6 0.3 0.5 0 0.6 0 0.1 -0.4

0.6 0.6 0.3 -0.3 0.3 -0.3 0.2 -0.4

1.0 1.2 0.6 -0.3 0.5 -0.5 0.4 -0.5

0.8 2.6 0.8 0 0.8 0 0.7 -0.1

0.2 1.0 0.6 0.4 0.5 0.3 0.6 0.4

0.2 -1.1 0.4 0.3 0.3 0.1 0.1 -0.1

2001-2002

2002-2003

1997-1998

1998-1999

1999-2000

2000-2001

1993-1994

1994-1995

1995-1996

1996-1997

1989-1990

1990-1991

1991-1992

1992-1993

1976-1977

1977-1978

1978-1979

1979-1980

1980-1981

1981-1982

1982-1983

1983-1984

1984-1985

Administration

Forecast Errora

CBO

Forecast Errora

Blue Chipb

Forecast Errora

Actual

CPI-U CPI-W

1985-1986

1986-1987

1987-1988

1988-1989
CBO’S ECONOMIC FORECASTING RECORD 23

Table 8.

Continued

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 

GNP or GDP price index over the two-year period. The GNP price index is used for data before 1993, 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; from 1986 

through 1989, however, CBO forecast the CPI-W. The Administration forecast the CPI-W until 1992, when it switched to the CPI-U.

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 * * * -0.4 * * * -0.5

Mean absolute error * * * 0.6 * * * 0.6

Root mean square error * * * 0.9 * * * 1.0

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

Mean absolute error * * * 0.3 * 0.3 * 0.4

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

Errora

CBO Blue Chipb Administration

CPI-U CPI-W Forecast Errora Forecast Errora Forecast

Statistics for 1976-2002

Statistics for 1982-2002

Actual
24 CBO’S ECONOMIC FORECASTING RECORD

Table 9.

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 was used to calculate the shares; for the forecasts made in 1992 and later, gross

domestic product was used. The Blue Chip does not forecast wages and salaries.

* = not applicable.

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

-0.4 0.1 0.5 0.2 0.6

-0.4 -1.3 -0.9 -0.5 -0.1

-0.9 -1.2 -0.3 -1.2 -0.3

-1.7 -1.2 0.5 -1.1 0.6

-0.2 -1.0 -0.8 -1.3 -1.2

0.5 -0.8 -1.3 -1.1 -1.6

0.7 0 -0.8 -0.6 -1.3

0.6 0 -0.6 0 -0.6

-0.6 0.2 0.9 -0.4 0.2

-0.7 0.2 0.8 -0.2 0.5

-0.3 0.2 0.5 0.2 0.5

-0.4 -0.1 0.3 -0.1 0.3

-0.8 -0.1 0.7 0.2 1.0

-1.3 -0.1 1.2 -0.1 1.2

-0.1 0.6 0.7 0 0

0.6 0.2 -0.4 -0.5 -1.1

0.5 0.2 -0.3 0.3 -0.2

1.5 -0.2 -1.7 0 -1.5

1.5 0.5 -0.9 0.4 -1.1

1.4 0.9 -0.4 0.4 -1.0

0.6 0.4 -0.2 0.2 -0.4

-1.7 0.4 2.1 0.1 1.9

-2.4 0.1 2.5 -0.2 2.3

Mean error * * 0.1 * -0.1

Mean absolute error * * 0.9 * 0.8

Root mean square error * * 1.0 * 1.0

2002-2003

1998-1999

1999-2000

2000-2001

2001-2002

1994-1995

1995-1996

1996-1997

1997-1998

1990-1991

1991-1992

1992-1993

1993-1994

1986-1987

1987-1988

1988-1989

1989-1990

1982-1983

1983-1984

1984-1985

1985-1986

Forecast

Statistics for 1980-2002

Actual

CBO Administration

Errora Forecast Errora

1980-1981

1981-1982
CBO’S ECONOMIC FORECASTING RECORD 25

Table 10.

CBO, Administration, and Blue Chip 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

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 2.5 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 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 * * * 3.0 2.1 -0.8 2.3 -0.6 2.2 -0.8

1999-2003 * * * 2.7 2.2 -0.5 2.3 -0.4 2.2 -0.5

Real GNP

Real GDPf

Actual

1972

Dollarsa

1982

Dollarsb

1987

Dollarsc

Weighted

Index

AnnualChain-Type

CBO

Forecast Errord

Blue Chipe

Forecast Errord

Administration

Forecast Errord
26 CBO’S ECONOMIC FORECASTING RECORD

Table 10.

Continued

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 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 BEA’s 1992 benchmark revision, GDP replaced GNP as the central measure of national output.

Mean error * * * * * 0 * * * 0.3

Mean absolute error * * * * * 0.9 * * * 1.0

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

Mean error * * * * * -0.4 * -0.4 * 0

Mean absolute error * * * * * 0.7 * 0.6 * 0.8

Root mean square error * * * * * 0.9 * 0.8 * 1.0

Errord Forecast Errord

CBO Blue Chipe Administration

Forecast Errord Dollars Forecast a Dollarsb Dollarsc Index

Actual

Chain-Type

Annual1972 1982 1987 Weighted

Statistics for 1976-1999

Statistics for 1979-1999
CBO’S ECONOMIC FORECASTING RECORD 27

Table 11.

CBO, Administration, and Blue Chip 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 5.5 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 4.8 4.4 -0.3 4.7 -0.1 4.3 -0.4

1999-2003 4.7 4.3 -0.4 4.5 -0.2 4.2 -0.5

GNP

GDPc

Actual

CBO Blue Chipb Administration

Forecast Errora Forecast Errora Forecast Errora
28 CBO’S ECONOMIC FORECASTING RECORD

Table 11.

Continued

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 BEA’s 1992 benchmark revision, GDP replaced GNP as the central measure of national output.

Mean error * * 0.7 * * * 0.7

Mean absolute error * * 1.1 * * * 1.0

Root mean square error * * 1.3 * * * 1.2

Mean error * * 0.5 * 0.6 * 0.6

Mean absolute error * * 0.8 * 0.8 * 0.9

Root mean square error * * 1.0 * 1.0 * 1.1

CBO Blue Chipb Administration

Actual Forecast Errora Forecast Errora Forecast Errora

Statistics for 1976-1999

Statistics for 1982-1999
CBO’S ECONOMIC FORECASTING RECORD 29

Table 12.

Comparison of CBO, Administration, and Blue Chip Projections of the Difference Between Five-Year Average Inflation in the CPI and in the GNP or GDP Price 

Index

(By calendar year, in percent)

Continued

1.6 1.6 0.2 -1.4 * * 0 -1.6

1.8 1.8 0 -1.8 * * -0.3 -2.1

1.8 1.7 0 -1.7 * * -0.1 -1.8

1.5 1.4 0 -1.5 * * 0.1 -1.4

1.0 0.7 0.4 -0.6 * * 0.6 -0.1

0.3 0 0.4 0.2 * * -0.1 -0.1

0 -0.3 0.1 0.1 * * -0.2 0.1

0.2 -0.1 0 -0.2 -0.1 -0.3 -0.2 -0.1

0.5 0.2 0 -0.5 0.1 -0.4 -0.1 -0.3

0.5 0.5 0 -0.6 0.1 -0.5 0.1 -0.4

0.8 0.6 0.1 -0.5 -0.1 -0.8 0 -0.7

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 -0.8

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 -0.8

0.7 0.7 0.5 -0.3 0.4 -0.4 0.5 -0.3

0.7 0.6 0.4 -0.3 0.3 -0.4 0.4 -0.4

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

0.6 0.5 0.3 -0.2 0.2 -0.4 0.1 -0.4

0.5 0.5 0.6 0.1 0.4 -0.1 0.3 -0.2

1996-2000

1997-2001

1998-2002

1999-2003

1992-1996

1993-1997

1994-1998

1995-1999

1988-1992

1989-1993

1990-1994

1991-1995

1984-1988

1985-1989

1986-1990

1987-1991

1980-1984

1981-1985

1982-1986

1983-1987

1976-1980

1977-1981

1978-1982

1979-1983

Errora

 Actual 

CPI-U CPI-W

Administration

Forecast Errora

CBO

Forecast Errora

Blue Chipb

Forecast
30 CBO’S ECONOMIC FORECASTING RECORD

Table 12.

Continued

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 

GNP or GDP price index over the five-year period. The GNP price index is used for data before 1993, 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; from 1986 

through 1989, however, CBO forecast the CPI-W. The Administration forecast the CPI-W until 1992, when it switched to the CPI-U.

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 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 * * * -0.5 * * * -0.7

Mean absolute error * * * 0.6 * * * 0.7

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

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

Mean absolute error * * * 0.4 * 0.4 * 0.5

Root mean square error * * * 0.4 * 0.5 * 0.6

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

 Actual CBO Blue Chipb Administration

Statistics for 1983-1999

Statistics for 1976-1999
CBO’S ECONOMIC FORECASTING RECORD 31

Table 13.

CBO and Administration Projections 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 was used to calculate the shares; for the forecasts made in 1992 and later, gross

domestic product was used. The Blue Chip does not forecast wages and salaries.

* = not applicable.

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

-1.7 0.9 2.6 -0.1 1.6

-1.8 -1.3 0.5 -1.8 0

-0.8 -2.1 -1.3 -2.2 -1.4

-0.7 -1.9 -1.2 -1.4 -0.7

0.7 -1.5 -2.1 -0.9 -1.6

0.4 -1.2 -1.6 -0.7 -1.1

0.2 -0.3 -0.5 -1.1 -1.3

-0.4 0.4 0.7 -0.1 0.2

-0.9 0.4 1.3 -0.4 0.5

-1.8 0.3 2.1 0.2 2.0

-1.6 0.3 1.9 0.2 1.8

-1.2 0.3 1.6 0.3 1.5

-0.8 0.3 1.1 0.2 1.0

-0.3 0 0.3 0 0.3

1.5 0.5 -1.1 0.1 -1.4

2.5 -0.1 -2.6 -0.8 -3.2

3.0 0 -2.9 0.2 -2.7

2.5 -0.6 -3.1 -0.1 -2.6

0.8 0.6 -0.1 0.6 -0.2

-1.4 0.4 1.9 0 1.5

Mean error * * -0.2 * -0.4

Mean absolute error * * 1.4 * 1.3

Root mean square error * * 1.7 * 1.6

1998-2002

1999-2003

1994-1998

1995-1999

1996-2000

1997-2001

1990-1994

1991-1995

1992-1996

1993-1997

1986-1990

1987-1991

1988-1992

1989-1993

Administration

Forecast Errora

1980-1984

Statistics for 1980-1999

Actual

CBO

Forecast Errora

1981-1985

1982-1986

1983-1987

1984-1988

1985-1989

Appendix: Choosing Sources of

Historical and Forecast Data

Evaluating the Congressional Budget Office’s 

(CBO’s) forecasting record requires compiling the basic 

historical and forecast data for growth in real (inflationadjusted) and nominal output, inflation in the consumer 

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

Selection of Historical Data

Which historical data to use for the evaluation was limited by the availability of actual data and 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 and real gross domestic product 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 and began to publish 

GNP on a 1987-dollar basis. Consequently, the historical 

annual series for 1982-dollar GNP is available only 

through 1990, and actual two-year average growth rates 

are not available for 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 for 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 makes it difficult to evaluate forecasts of real growth produced over a 

period of years in series that are later discontinued. This 

comparison avoids the difficulties presented by periodic 

revisions of the data by using BEA’s chain-type annualweighted 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 (GNP) to measure output. Beginning in early 1992, however, all three forecasters began 

to publish forecasts and projections of gross domestic product 

(GDP) instead.

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

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

pp. 71-73.
34 CBO’S ECONOMIC FORECASTING RECORD

Historical two-year averages for growth of nominal GNP 

and GDP 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). 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. In contrast, for all but four of its forecasts since 1979 (1986 

through 1989), 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 published its forecast 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 twoyear averages of nominal short- and long-term interest 

rates. 

The forecasts of short-term interest rates were compared 

using historical values for two measures of the interest 

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

and the secondary-market rate. The Administration forecasts 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. CBO forecasts the secondary-market rate, 

which corresponds to the price of the three-month bills 

traded outside the Treasury auctions. Such transactions 

occur continually in markets that involve many more 

traders than do Treasury auctions. Thus, the secondarymarket rate provides an updated evaluation of short-term 

federal debt by the wider financial community. Blue Chip 

has alternated between those two rates; it published the 

new-issue rate from 1982 to 1985, switched to the secondary-market rate during the 1986-1991 period, and 

then returned to the new-issue rate beginning in 1992. 

Clearly, there is no reason to expect the two rates to differ 

persistently; indeed, the differences between their calendar year averages are minuscule. 

CBO likewise compared the various forecasts of 

long-term interest rates using 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 its projection for the 10-year 

Treasury note rate, but Blue Chip published 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. 

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. 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 a proportion of other types of income is not taxed (because, for 

instance, the income derives 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 that do not, however, have 

much of an implication for projections of revenues as 

long as the revisions are carried forward into the forecast. 

For that reason, the accuracy of taxable income projections is measured using the forecast change in the share of 

taxable income in GDP.
APPENDIX: CHOOSING SOURCES OF HISTORICAL AND FORECAST DATA 35

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, 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 forecast did not include the economic effects of the 

new Administration’s fiscal policy proposals.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 consensus did not begin publishing its two-year 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 published by Blue Chip only twice a year, and 

those publication dates do not correspond to the times 

that forecasts are necessary for budgeting. All but one of 

its five-year projections used in this evaluation were published in March; the 1980-1984 projection of real output 

was published in May. Therefore, the Blue Chip medium-term forecasts were prepared about four months after CBO made its medium-term projections.

Because CBO has published forecasts for wages and salaries regularly 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.