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Friday, May 13, 2011

CBO: Our 2001 Ten-Year Budget Projection Was Off by $11.8 Trillion

CBO The Congressional Budget Office yesterday released Changes in CBO’s Baseline Projections Since January 2001:

Each year, the CBO issues baseline projections of federal spending and revenues for the following 10 years. Those projections are not intended as a forecast of future outcomes; rather, they are estimates of spending and revenues under the laws that are in effect at that time and are designed to provide a benchmark against which to measure future policy changes.

In January 2001, CBO’s baseline projections showed a cumulative surplus of $5.6 trillion for the 2002-2011 period. The actual results have differed from those projections because of subsequent policy changes, economic developments that differed from CBO’s forecast, and other factors. As a result, the federal government actually ran deficits from 2002 through 2010 and will incur a deficit in 2011 as well. The cumulative deficit over the 10-year period will amount to $6.2 trillion, CBO estimates—a swing of $11.8 trillion from the January 2001 projections.

The table below summarizes the differences between CBO’s baseline projections in January 2001 and the actual or currently projected results for each of the years over the 2002-2011 period.

http://taxprof.typepad.com/taxprof_blog/2011/05/cbo-our-.html

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Comments

Impressive. For each year, they overestimated the revenues and underestimated the expenses. I wonder whether the estimates got better as they got closer to the given year. For example, was their 2002 estimate of spending in 2005 better than their 2001 estimate?

Posted by: asdf | May 13, 2011 9:19:54 AM

Is the editorializing necessary? Saying they were off connotes inaccuracy, when this was a function of their basing the projections on the law in effect at the time, coupled with the disastrous Bush economic policies. How about this for a headline: "We would have a <$5 trillion national debt if the Supreme Court hadn't handed Bush Florida on a silver platter"?

Posted by: Alec J. | May 13, 2011 12:05:36 PM

I wonder what result you would get if you apply the same magnitude of error to the CBO estimates of the deficit or of the cost of Health Care Reform over the next decade.....

Only the TV weather forecasters can be so wrong so often and still have a job.

Posted by: Doug | May 13, 2011 12:21:08 PM

The portion of the misestimation for which CBO may legitimately be blamed is actually relatively small. CBO overestimated the revenue pickup from the Bush tax cuts across 2002-2005 by $1.2 trillion (remember the "jobless recovery"?) and failed to predict the 2008 crash and its effects on revenues.

Congress then enacted tax law changes that cut $2.8 trillion in revenues, added "discretionary" spending -- much of which paid for wars in Iraq and Afghanistan -- totaling $2.9 trillion, and added "mandatory" spending totaling $1.4 trillion. Additional interest on the resulting additional national debt added another $1.4 trillion in spending.

Posted by: Theodore Seto | May 13, 2011 1:00:25 PM

CBO wasn't off with their forecast. All the numbers in the table except for those identified as "Economic and Technical" are from legislative changes that Congress and the President made from the baseline laws in place when CBO did the numbers in 2001. Doug and asdf, as well as the original post, seem clueless about what these numbers mean. The difference between actual and CBO projections done in 2001 are not the result of CBO being wrong.

Posted by: jmike | May 13, 2011 1:02:59 PM

Alec - quick question for you. If by your partisan hack definition of Bush economic policy being "disastrous", how would you then define the magnitude of acceleration of Obama economic policy?

Or are we still on the "Bush fault" narrative?

Posted by: Optimus Primed | May 13, 2011 1:40:44 PM

well worth peeking at clinton's projections...

http://www.cbo.gov/ftpdocs/3xx/doc387/pb03-98.pdf

(page 16 in the pdf).

despite the recession of the early 2000's and the events of 9/11, by the year 2006, bush moved past clinton's revenue projections, after being far behind.

that the sudden explosion of revenue coincided with the 2003 tax cuts...

our deficits were a product of overspending, and not from revenue collection rates.

most important 'BTW'?
clinton's outlay projection is well below 19%.

Posted by: mark l. | May 13, 2011 2:01:02 PM

Alec, when you idiotically and incorrectly reference the US SC 7-2 ruling that said Gore's proposed method was unconstitutional, did you also forget that Bush won every recount, including the 18-month one undertaken by the NYTimes, USA Today, WaPo?

'George W. Bush would have won even if the Supreme Court had allowed the statewide manual recount that the Florida court had ordered to go forward.'
~NYTimes.com

Posted by: horn | May 13, 2011 2:17:20 PM

i have always seen krugman ramble on about how the bush tax cuts cost us 1.8 trillion dollars...

it seems the cbo made an actual projection on the bush tax cuts COST.

egtrra=tax cuts of 2001
jgtrra=tax cuts of 2003...

i'm looking at jgtrra, largely because the 2001 tax cuts just moved the top marginal rate from 39% to 38.6%, and the 2003 tax act moved the top margin from 38.6% to 35%.

how much does the cbo say the 2003 tax cuts cost us?
333 billion from 2003 to 2010.

looking at the 2011 projections the cbo provided, the tax cuts which obama just continued is projected to deliver a 4 billion dollar surplus.

Posted by: mark l. | May 13, 2011 2:17:31 PM

Optimus,
Bush was so insidious, that even if we elected someone else we would not only have to follow in his footsteps, but double down on them in nearly every possible way in order to clean up mess he made.

Posted by: chris | May 13, 2011 2:17:56 PM

remember the "jobless recovery"?
**********************

as opposed to what we have going now, not really.
"recovery summer" is far more fresher in my mind.

Posted by: mark l. | May 13, 2011 2:38:20 PM

Actually, Alec, if you go and read what the CBO wrote, you'll find the following:

Total revenue changes: 6,220 billion (less than expected)
Of this, 3,328 occurs in 2009 or later.

Total outlay changes: 5,629 billion (more than expected)
Of this, 3,174 occurs in 2009 or later.

Amazingly enough, the mismatch between revenue and outlays starts getting larger after the Democrats assumed control of both houses in 2006, and balloons after Obama takes office.

As for the Bush-Gore comment, this is on the order of believing that Castro, the Nabisco company, the Mob, and Roy Orbison had Kennedy killed. The US Supreme Court simply stopped the Florida Supreme Court from creating a whole-state recount out of their asses. Every single recount ever done showed that Bush won. Sorry about the fact that Democrats in Palm Beach County were too dumb to fill out a butterfly ballot (designed by a Democrat, BTW).

Posted by: orthodoc | May 13, 2011 2:44:46 PM

"Saying they were off connotes inaccuracy, when this was a function of their basing the projections on the law in effect at the time,"

Which is a lesson in itself.

"coupled with the disastrous Bush economic policies."

What policies of Bush's were disastrous? You mean his running up the national debt, or his creation of a new healthcare entitlement in 2003, his unnecessary war of choice, or his corporatist bailouts, or his ignoring the social-engineers' meddling that led to the housing bubble?

"How about this for a headline: "We would have a <$5 trillion national debt if the Supreme Court hadn't handed Bush Florida on a silver platter"?"

It's a rare feat to be *that* wrong twice in the same sentence about two wildly diverging topics.

Posted by: hitnrun | May 13, 2011 4:12:28 PM

I remember Clinton's own budgets predicting deficits for as far as the eye could see. Then 1994's Republican revolution happened and, presto, "balanced" budget (minus a few trillion "off budget" line items.)

Then we did pretty well until Pelosi's Dems retook Congress in Jan 2007.

I most recently recall candidate Obama ripping GW Bush for his unacceptable deficits, which Obama/Pelosi/Reid have tripled, or worse, and with more, much more, to come.

Posted by: Koblog | May 13, 2011 4:55:01 PM

Why is it that Alec and the rest of the Quislingcrat crybaby circle still refuse to wrap their minds around the fact that if Gore had been able to carry HIS OWN HOME STATE, the Florida count would have been irrelevant?

Posted by: greybeard3 | May 13, 2011 6:31:17 PM