"Forecasting" Deficit Spending in the United States: A Look at Projections from the Congressional Budget Office
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Date
2017-10-01
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Publisher
Private Enterprise Research Center, Texas A&M University
Abstract
The Congressional Budget Office, or CBO, is the non-partisan government agency that provides projections of costs and revenues to Congress and the public. CBO projections are conditional forecasts of underlying economic drivers including GDP, potential GDP, and demographic variables. The CBO deficit projections, published semi-annually in the report, “The Budget and Economic Outlook� are then used by legislators to provide a framework for considering the future path of deficits without changes in current law, and subject to CBO projections of economic activity. However, when current law is constantly changing, the CBO deficit projections can be strikingly at variance with actual deficits. This article examines the 10-year deficit projections of the Congressional Budget Office from 2000 to 2017 and compares them to subsequent actual levels of deficit spending. Findings show that CBO projections have sometimes significantly underestimated the level and path of deficits, while they have not over this period significantly overestimated the level and path of deficits. Legislators and the public should take into account that CBO projections are, in this sense, an optimistic projection of future events.
Description
EconomicGrowth_Development_TechnicalChange
Keywords
Congressional Budget Office, economic outlook, deficits, EconomicGrowth_Development_TechnicalChange