Research Desk: How accurate were CBO projections of spending and revenue for the 2000s?
By Dylan Matthews
Since the CBO makes 10 year projections, I would like to see how much more spending over what was projected in 2000 happened, and how much less revenue under what was projected in 2000 happened.
As cummije5 says, the CBO's 2000 Budget and Economic Outlook, released in January of that year, provided predicted revenue (see table 3-2) and spending figures, both in nominal terms and as a percentage of GDP, from 2000 to 2010. Given as we now know, of course, what revenue and spending were for 2000 to 2009, it's useful to see how accurate the predictions were. Here's how the projected and real figures compare:
The discrepancy here does not prove that the CBO is wrong or bad at making these kinds of predictions. It just shows that they don't know what Congress is going to do over the course of the decade. For one thing, the outlays estimates assume that discretionary spending will grow at the rate of inflation, which they obviously did not.
But more important, the CBO in 2000 did not know that we were going to invade and occupy two foreign countries. They did not know two major tax cuts representing trillions in lost revenue would be passed. They did not know Medicare would start covering prescription drugs. They definitely did not know that the financial sector would collapse in upon itself, leading to a dramatic drop in revenues and necessitating trillions in spending to fuel a recovery. Policymaking is messy and unpredictable, and those sorts of thing just can't be factored in ahead of time.
Which is all to say that while CBO estimates are very useful, especially when discussing specific policies and trying to isolate their effects, Doug Elmendorf is not a precog. The next 10 years is a long time for Congress to pass new spending programs, cut old ones, raise some taxes, cut others and so forth, and while we have to operate off of something, it's likely in 10 years we'll look back at the budget discussions we're having now and find the budget outlook we're working with preposterous.
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