Are 10-year Budget Forecasts On The Way Out?
February 26, 2002
On Wednesday, the General Accounting Office will deliver a warning to a Senate committee about the risks of long-term budgeting. And President Bush's economic team wants to do away with the 10-year estimates -- calling them an experiment that has "run its course."
The experiment began in 1996, when Congress told the Congressional Budget Office to include a 10-year forecast in its annual projections. But since then, forecasts of surpluses have jumped around so often that they have earned such descriptions as "pure fantasy" and "plain worthless."
- In 1998, the CBO forecast the first-ever 10-year surplus -- at $660 billion.
- The following year, the outlook jumped to $2.5 trillion.
- In 2000, it rose again to $3.1 trillion.
- Then it jumped to $5.6 trillion -- only to fall back to the current $1 trillion.
"Forecast errors rise exponentially the farther one goes out," explains Bruce Bartlett, of the National Center for Policy Analysis. "Anyone's estimate of the budget one year out is likely to be more accurate than the best budget expert's projection for 10 years out," he explains. "At some point the numbers are just plain worthless."
Rather than dropping the forecasts completely, the White House seems to prefer going back to five-year forecasts -- which had been the policy from 1974 to 1997.
Source: Joseph Guinto, "Bad Government Budget Forecasts -- Why Do We Still Use Them?" Investor's Business Daily, February 26, 2002.
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