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Whom do you trust? An analysis of executive and congressional economic forecasts

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  • Mark S. Kamlet
  • David C. Mowery
  • Tsai-Tsu Su

Abstract

Economic forecasts play an increasing role in U.S. budgetary and fiscal policies. This paper analyzes the accuracy and bias of economic forecasts prepared by the Executive Branch and Congress. Short-run forecasts by the Executive Branch for the forthcoming year do not appear biased. They are as accurate as private forecasts and the forecasts of the Congressional Budget Office (CBO); they are not sensitive to political factors such as the size of the deficit. At the same time, the accuracy of Executive branch's short-run economic forecasts has not improved over the period from 1962 to 1984, and the forecasts themselves can be well approximated by simple, single-equation models that use a small number of variables. In contrast to short-run forecasts, long-run economic forecasts of both the Executive branch and CBO are consistently optimistic. The degree of optimism increases with the length of the forecasting horizon and the degree of fiscal pressure the year in which they are issued. The Reagan Administration's long-run forecasts, while typically optimistic, have not been rosier than those issued under previous administrations.

Suggested Citation

  • Mark S. Kamlet & David C. Mowery & Tsai-Tsu Su, 1987. "Whom do you trust? An analysis of executive and congressional economic forecasts," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(3), pages 365-384.
    • Handle: RePEc:wly:jpamgt:v:6:y:1987:i:3:p:365-384
    DOI: 10.2307/3324850
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    Cited by:

    1. George A. Krause, 2006. "Beyond the Norm," Rationality and Society, , vol. 18(2), pages 157-191, May.
    2. Friedrich Heinemann, 2006. "Planning or Propaganda? An Evaluation of Germany's Medium-term Budgetary Planning," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(4), pages 551-578, December.
    3. Deschamps, Elaine, 2004. "The impact of institutional change on forecast accuracy: A case study of budget forecasting in Washington State," International Journal of Forecasting, Elsevier, vol. 20(4), pages 647-657.
    4. Tsuchiya, Yoichi, 2016. "Directional analysis of fiscal sustainability: Revisiting Domar's debt sustainability condition," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 189-201.
    5. Andrew B. Martinez, 2011. "Comparing Government Forecasts of the United States’ Gross Federal Debt," Working Papers 2011-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    6. Frank Bohn, 2018. "Political cycles: Beyond rational expectations," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-23, October.
    7. 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.
    8. Bryan Campbell & Eric Ghysels, 1997. "An Empirical Analysis of the Canadian Budget Process," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 553-576, August.
    9. Kuethe, Todd H. & Regmi, Hari, 2023. "An Evaluation of Congressional Budget Office’s Baseline Projections of USDA Mandatory Farm and Nutrition Programs," 2023 Annual Meeting, July 23-25, Washington D.C. 335690, Agricultural and Applied Economics Association.
    10. Richard Boylan, 2008. "Political distortions in state forecasts," Public Choice, Springer, vol. 136(3), pages 411-427, September.

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