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How good are the government’s deficit and debt projections and should we care?

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  • Kevin L. Kliesen
  • Daniel L. Thornton

Abstract

Each year, the Congressional Budget Office (CBO) publishes its Budget and Economic Outlook. The CBO’s deficit projections for the current fiscal year (FY) and the next 10 FYs are widely followed because they provide an assessment of the medium-term budget outlook based on current law and a presumed path for the economy over the next decade. Admittedly, this task is more difficult because of the required assumption that the laws governing future outlays and revenues do not change. Nevertheless, given its nonpartisan nature and the CBO’s well-respected staff of professional economists and budget analysts, its projections are closely followed. In this article, the authors update their 2001 assessment of the accuracy of the CBO’s short- and medium-term budget projections by adding an additional 10 years of data. Such analysis is useful in light of the dramatic change in actual and expected fiscal policy, especially over the past few years. In addition, they investigate the extent to which the CBO’s projection errors are affected by errors in forecasting key economic variables and the extent to which the errors relate more to inaccurate projections of revenues or expenditures.

Suggested Citation

  • Kevin L. Kliesen & Daniel L. Thornton, 2012. "How good are the government’s deficit and debt projections and should we care?," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 21-39.
  • Handle: RePEc:fip:fedlrv:y:2012:i:jan:p:21-39:n:v.94no.1
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    File URL: https://files.stlouisfed.org/files/htdocs/publications/review/12/01/21-40Kliesen.pdf
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    References listed on IDEAS

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    1. William J. McDonough, 2000. "Fiscal policy in an era of surpluses: economic and financial implications - opening remarks," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 1-2.
    2. Congressional Budget Office, 2011. "Budget and Economic Outlook: An Update," Reports 41586, Congressional Budget Office.
    3. Congressional Budget Office, 2011. "Budget and Economic Outlook: An Update," Reports 41586, Congressional Budget Office.
    4. Richard Peach & Charles Steindel, 2000. "Fiscal policy in an era of surpluses: economic and financial implications - summary of observations and recommendations," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 3-5.
    5. repec:cbo:report:415867 is not listed on IDEAS
    6. repec:cbo:report:415866 is not listed on IDEAS
    7. Congressional Budget Office, 2011. "Budget and Economic Outlook: An Update," Reports 41586, Congressional Budget Office.
    8. Congressional Budget Office, 2011. "Budget and Economic Outlook: An Update," Reports 41586, Congressional Budget Office.
    9. repec:cbo:report:415865 is not listed on IDEAS
    10. anonymous, 2000. "Fiscal policy in an era of surpluses: economic and financial implications, proceedings of a conference sponsored by the Federal Reserve Bank of New York, December 3, 1999," Economic Policy Review, Federal Reserve Bank of New York, issue Apr.
    11. Congressional Budget Office, 2011. "Budget and Economic Outlook: An Update," Reports 41586, Congressional Budget Office.
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    Citations

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    Cited by:

    1. Simon van Norden, 2015. "Estimates of Québec’s Growth Uncertainty," CIRANO Project Reports 2015rp-01, CIRANO.
    2. Croushore, Dean & van Norden, Simon, 2014. "Fiscal policy: ex ante and ex post," Working Papers 14-22, Federal Reserve Bank of Philadelphia.
    3. Martinez, Andrew B., 2015. "How good are US government forecasts of the federal debt?," International Journal of Forecasting, Elsevier, vol. 31(2), pages 312-324.
    4. repec:oxf:wpaper:727 is not listed on IDEAS

    More about this item

    Keywords

    Budget deficits ; Debts; Public ; Fiscal policy;

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