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Don’t Trust the CBO’s Numbers

American_Jihad

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Yep, "Now" the dark state is everywhere and needs to be rooted out...

Don’t Trust the CBO’s Numbers
By Alan Reynolds
This article was first published in the Wall Street Journal, August 30, 2001.

The Congressional Budget Office is right where it likes to be — in the news.

First reports of its latest budget outlook came out of the same spin machine. The Washington Post headline was “Budget Will Tap Into Social Security,” and the New York Times’ was “Report Says Lower Surplus Will Affect Social Security.” The CBO report said no such thing, of course. What it said was, “the distinction between on- and off-budget surpluses is unimportant from an overall economic perspective” and “CBO is projecting small on-budget surpluses or deficits in 2001 through 2005.” The Social Security trust fund cannot possibly be “raided” or “tapped,” but has to grow by the amount that payroll taxes exceed benefits. The CBO thinks an already large surplus will grow to 3.7% of GDP by 2011, noting, “all debt available for redemption will be retired by 2010.” Dick Gephardt calls that a “fiscal crisis.”

The compelling part of CBO estimates has nothing to do with Social Security or the odd priority accorded to retiring debt. The real story is the way in which each forecast is treated as indisputable fact, despite the CBO’s record of exaggerating deficits and underestimating surpluses.

In 1993, the CBO predicted that the deficit would soar to $653 billion in 2003. This week, they said that same budget will be in surplus by $172 billion. Little of that $825 billion revision can be explained by legislation or luck. Nearly all of it reflects the magnitude of past forecasting blunders.

Errors are unavoidable, but perpetual bias is another matter. CBO errors always tilt in a specific direction. Aside from the first year of recessions, the CBO always exaggerates future budget deficits and underestimates surpluses.

...

Don't Trust the CBO's Numbers
 

OnePercenter

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Yep, "Now" the dark state is everywhere and needs to be rooted out...

Don’t Trust the CBO’s Numbers
By Alan Reynolds
This article was first published in the Wall Street Journal, August 30, 2001.

The Congressional Budget Office is right where it likes to be — in the news.

First reports of its latest budget outlook came out of the same spin machine. The Washington Post headline was “Budget Will Tap Into Social Security,” and the New York Times’ was “Report Says Lower Surplus Will Affect Social Security.” The CBO report said no such thing, of course. What it said was, “the distinction between on- and off-budget surpluses is unimportant from an overall economic perspective” and “CBO is projecting small on-budget surpluses or deficits in 2001 through 2005.” The Social Security trust fund cannot possibly be “raided” or “tapped,” but has to grow by the amount that payroll taxes exceed benefits. The CBO thinks an already large surplus will grow to 3.7% of GDP by 2011, noting, “all debt available for redemption will be retired by 2010.” Dick Gephardt calls that a “fiscal crisis.”

The compelling part of CBO estimates has nothing to do with Social Security or the odd priority accorded to retiring debt. The real story is the way in which each forecast is treated as indisputable fact, despite the CBO’s record of exaggerating deficits and underestimating surpluses.

In 1993, the CBO predicted that the deficit would soar to $653 billion in 2003. This week, they said that same budget will be in surplus by $172 billion. Little of that $825 billion revision can be explained by legislation or luck. Nearly all of it reflects the magnitude of past forecasting blunders.

Errors are unavoidable, but perpetual bias is another matter. CBO errors always tilt in a specific direction. Aside from the first year of recessions, the CBO always exaggerates future budget deficits and underestimates surpluses.

...

Don't Trust the CBO's Numbers

How Economic Changes Affect CBO’s Budget Projections

How Economic Changes Affect CBO’s Budget Projections
 

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