Sunday, March 07, 2010

Budget Forecasts

The NYT recently had a good graphic on the budget deficits and Presidential forecasts. I've recreated it below. There are two striking facts. The first is how every, and I mean every 5 year budget forecasts calls for decreasing deficits if not in the first or second year, definitely by the third through fifth year, yet that is rarely the case. Forecasts are clearly not rational as the errors are biased, averaging almost 1% above actual. Notice the other striking thing, how much of a surprise the boom of the late 1990's was for the public coffer.

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