Wednesday, February 03, 2010

Follow-up to "The Folly of Long-Range Forecasts"

The NY Times put together a great chart that shows the actual budget deficits - the dark blue line - relative to the projected deficits 10 years out from each fiscal year - the light blue lines.

The one thing that jumps off the page is the obviously optimistic bias that the budget office always has regardless of who is in power, Republican or Democrat. Everyone of the "projected" deficit lines is sharply upward sloping" indicating a forecast that we will have smaller deficits, however, the actual Check Spellingdeficits have been large and growing slightly every year (with the obvious exceptions being 2000 and 2009.
To the White House's credit they were not overly optimistic in the out years of their forecast - in fact even 10 years down the road they are still predicting deficits that will be larger than the previous record deficit in 2008. The point is that these long-range forecasts are extremely volatile and one should put very little faith in their being accurate representations of our economic health 10 years from now.

1 comment:

Anonymous said...

You do a great job. I enjoy daily reading. What about commenting on pension funds, the pension reform act, lump sums, etc.?