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1 Adding Debt-Service Effects to CBO's Cost Estimates 1 (June 13, 2024)

handle is hein.congrec/addtsceef0001 and id is 1 raw text is: In its report on the fiscal year 2024 appropriation bill for the legislative branch, the House Committee on Appropriations requested information from the Congressional Budget Office about the impacts of adding debt-service effects to CBO's cost estimates.1 This report, prepared in coordination with the staff of the Joint Committee on Taxation, provides that information. Background and Feasibility The Congressional Budget Act of 1974 directs CBO to estimate the costs of legislation at certain points in the legislative process. Those estimates are intended to ensure that when the House and Senate consider legislation, Members have the information they need to enforce budgetary rules or targets. CBO transmits about 900 cost estimates each year for authorizing legislation, including measures considered under suspension of the rules. By long-standing convention, CBO's cost estimates do not account for the cost of servicing the additional federal debt attributable to a piece of legislation. That is, esti- mates do not include any increases or decreases in interest payments on the federal debt that would arise from an estimated net increase or decrease in budget deficits or from a bill's other effects on federal borrowing. In many cases, adding debt-service effects to cost estimates would be feasible and would require CBO to expend few addi- tional resources. CBO provides a tool that the staff of the House and Senate Committees on the Budget use to calculate 1. U.S. House of Representatives, Legislative Branch Appropriations Bill, 2024, Report to Accompany HR. 4364, Together With Minority Views, House Report 118-120 (June 27, 2023), p. 17, https://tinyurl.com/3cdnn8ws. debt-service costs for proposed legislation. Since 2020, that calculator also has been available on CBO's website.2 CBO expects that if the Congress asked the agency to add debt-service information to cost estimates, the change would affect between 100 and 120 estimates each year. Most would be for bills that have been ordered reported by a Congressional committee-at which point CBO is statutorily required to provide an estimate. (Providing information on debt-service costs in the course of pro- ducing the thousands of preliminary estimates that are prepared while legislation is being developed probably would not be feasible, although Congressional staff could still use the debt-service calculator.) Most CBO cost estimates would not require debt-service calculations at all because they concern provisions of legislation that authorize discretionary funding to be pro- vided in subsequent appropriation acts. Those provisions, unlike those that affect mandatory spending or revenues, do not by themselves affect the budget deficit. Between 80 percent and 90 percent of CBO's estimates over the past four years have been for legislation that would affect mandatory spending or revenues by less than $500,000 over a 10-year period, or would not affect them at all. Calculating debt-service effects would be less straight- forward for some kinds of legislation, such as that affecting a credit program, than it would be for others. Under the Federal Credit Reform Act of 1990, the subsidy costs of the government's direct loans and loan guarantees, rather than the cash flows associated with those activities, are recorded in the federal budget for purposes of calculating 2. See, for example, Congressional Budget Office, How Changes in Revenues and Outlays Would Affect Debt-Service Costs, Deficits, and Debts (interactive workbook, February 2024), www.cbo.gov/ publication/59937.