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How CBO Uses Discount Rates to Estimate the Present Value of Future Costs or Savings

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  • Congressional Budget Office

Abstract

Many activities of the federal government have budgetary and other effects that can last far into the future. To produce estimates of those budgetary effects—and to help lawmakers compare different policies—CBO often has to translate a flow of future income or payments into an equivalent lump-sum value today. This report describes such present-value estimates, particularly how CBO selects and uses discount rates to calculate the value of future cash flows in its analyses.

Suggested Citation

  • Congressional Budget Office, 2024. "How CBO Uses Discount Rates to Estimate the Present Value of Future Costs or Savings," Reports 60284, Congressional Budget Office.
    • Handle: RePEc:cbo:report:60284
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    File URL: https://www.cbo.gov/system/files/2024-10/60284-Discount-Rates.pdf
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    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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