Forecasts predict deficits in the trillions
TEXT OF STORY
Tess Vigeland: Today, the government’s budget forecasters predicted red ink will continue spilling all over Washington. In fact, the Congressional Budget Office and the White House Office of Management and Budget expect the federal government to add between $7 [trillion] and $9 trillion to the national debt over the next decade. But how accurate can those 10-year budget projections be? Not very, judging from the government’s crystal ball gazing over the past 20 years.
Marketplace’s John Dimsdale reports from Washington.
JOHN DIMSDALE: In 1999, the federal government was running a surplus. Back then, James Horney headed up the CBO’s projections unit.
JAMES HORNEY: Ten years ago, both the president’s Office of Management and Budget and the Congressional Budget Office projected that in fiscal year 2009 we would have a surplus of between $400 [billion] and $500 billion.
Go back another 10 years to 1989 and forecasters were also way off, says former CBO director Rudolph Penner.
RUDOLPH PENNER: We were projecting big deficits for the turn of the century. The surplus caught us completely by surprise.
So where did they go so wrong? Forecasters obviously can’t predict events like wars or recessions. But Alice Rivlin, President Bill Clinton’s first director of the Office of Management and Budget, says budget experts at the end of the l990s couldn’t foresee changes politicians would make.
ALICE RIVLIN: The rather massive tax cuts. But also big spending increases, notably the addition of prescription drugs to Medicare.
Despite their poor track record, Rivlin says long-term projections help warn the country that government policies are unsustainable.
RIVLIN: We don’t know exactly what’s going to happen, but we do know that if we don’t change course, either on the spending side or the tax side, we will have very massive deficits. And that is not particularly uncertain.
In Washington, I’m John Dimsdale for Marketplace.
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