June 17, 2024 

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PEAK: The transition of a business cycle from an expansion and a contraction. The end of an expansions carries the descriptive term peak. At the peak, the economy has reached the highest level of production in recent times. The bad thing about a peak, however, is that it is a turning point, a turning point to a contraction. So even though a peak is the "highest" is not necessarily something we want. We would prefer never to reach the peak.

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A nonpartisan governmental support agency that provides Congress with analyses needed for economic and budget decisions and with the information and estimates required for the Congressional budget process. The Congressional Budget Office was created by the Congressional Budget and Impoundment Control Act of 1974. It began operating on February 24, 1975. The Congressional Budget Office is composed primarily of economists and public policy analysts. About 70 percent of its professional staff hold advanced degrees in either economics or public policy.
The Congressional Budget Office (CBO) does not make policy recommendations, it only prepares analyses and estimates relating to the budget and the economy and presents options and alternatives for the Congress to consider. However, considering the wide array of activities that the federal budget covers and the major role the budget plays in the U.S. economy, the work of the CBO constitutes an essential element in the decision making process at the Congressional level.

An important element of the CBO is the Panel of Economics Advisers. The panel is composed of previous CBO directors and eminent economists who serve two-year terms. They review and comment on preliminary forecasts of the economy made by the CBO and provide advice to further the reliability and professional quality of CBO's work.

Seven Divisions

The CBO is organized into seven divisions:
  • Macroeconomic Analysis: This division develops the economic projections that underlie the cost estimates, budget projections, and analyses prepared by the Budget Analysis Division.

  • Budget Analysis: This division prepares budget estimates relying on models and analyses developed by the program divisions.

  • Tax Analysis: This division estimates and projects future tax revenues and analyzes the structure of the U.S. tax system.

  • Management, Business, and Information Services: This division provides support services for other divisions of the CBO, including budget and finance, human resources, information resource management, facilities management, and library services.

  • Microeconomic and Financial Studies: This division analyzes a broad range of policy issues, with an emphasis on the microeconomic and financial foundations of the economy and on the federal government's role as a regulator, manager of resources, and provider of public goods.

  • Health and Human Resources: This division analyzes policies and programs in the areas of health, Social Security and pensions, labor markets, income assistance, education, housing, and social services.

  • National Security: This division analyzes budgetary issues related to national defense, international security, and veterans' affairs.

Four Categories

The CBO provides support to Congress in four areas, by helping Congress to:
  • Formulate a budget plan: While the House and Senate Budget Committees prepare the annual Congressional budget plan, the CBO prepares an annual report that provides economic and budget projections for the next 10 years. This is based of economic forecasts that the CBO itself produces. In fact, the CBO is the only part of the legislative branch whose mandate includes making economic forecasts and projections. The CBO draws the information for its forecasts from the major econometric models and commercial economic forecasting services.

    The purpose of CBO budget projections is to give the Congress a baseline for measuring the effects of proposed changes in tax and spending laws. Also, each year the CBO analyzes the President's budget to see how its revenue and spending proposals affect CBO baseline budget projections.

  • Stay within that plan: To help Congress enforce the provisions contained in the annual budget resolution, the CBO supplies estimates of the budgetary impact of bills reported by the different committees. The CBO also prepares a series of reports that advise the Congress and the Administration on two matters: (1) whether the appropriation limits on discretionary spending have been exceeded, and (2) whether the enactment of any legislation that affects direct spending or receipts has increased the projected deficit or reduced the projected surplus.

    Perhaps, one of the most important functions of the CBO is to keep track of all spending and revenue legislation considered each year by Congress so that it can know whether it is acting within the limits set by the annual budget resolution. The scorekeeping system keeps track of all bills that affect the budget from the time they are reported out of committee to the time they are enacted into law.

  • Assess the impact of federal mandates: To assess the impact of Congressional laws on state, local, and tribal governments and the private sector, the CBO is required to give authorizing committees a statement about whether or not reported bills contain any federal mandates. This statement also includes an assessment of what funding is authorized in the bill to cover the cost of the mandates and, for intergovernmental mandates, it provides an estimate of the appropriations needed to fund such authorizations for up to 10 years after the mandate is effective.

  • Consider issues related to the budget and economic policy: The CBO also performs analyses about specific programs and policy issues that affect the federal budget and the economy. The analyses cover a variety of federal activities, examining current policies, suggesting other approaches, and projecting how the alternatives would affect current programs, the federal budget, and the economy. In keeping with its nonpartisan mandate, CBO does not offer recommendations on policy in those reports.


Recommended Citation:

CONGRESSIONAL BUDGET OFFICE, AmosWEB Encyclonomic WEB*pedia,, AmosWEB LLC, 2000-2024. [Accessed: June 17, 2024].

Check Out These Related Terms...

     | Economic Report of the President | Brookings Institution | National Bureau of Economic Research | Conference Board, The | Bureau of Economic Analysis | Bureau of Labor Economics | Nobel Prize in Economic Sciences |

Or For A Little Background...

     | economist | political views | business cycles | positive economics | full employment | economic growth |

And For Further Study...

     | economic thinking | economic analysis | economic system | mixed economy | capitalism |

Related Websites (Will Open in New Window)...

     | Congressional Budget Office | Office of Management and Budget |

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