The federal budget deficit preoccupies a lot of decision-makers inside the Beltway. Last week, it was also central to a piece of legislation. The House of Representatives approved a provision in the Pentagon's spending bill that could permit lawmakers to increase the federal borrowing limit this year without actually taking a vote.
The last thing congressmen want to do in an election year is say "aye" to a measure that would allow the government to borrow more than the $7.4 trillion it already has the authority for, just as voters are heading to the polls. So they devised a way to hide their profligacy -- at least until after Election Day.
Congress may or may not resort to this budgetary hocus-pocus. One reason is that the Senate refused to go along with the sleight of hand. Another is that nobody knows for sure how large the deficit will be and, therefore, by how much the so-called debt ceiling will have to increase. No matter how hard they try, the government's finest analysts can never seem to guess right how much red ink will flow.
"Those forecasts are extremely inaccurate," says Rudolph Penner, and he should know. He's a former director of the Congressional Budget Office, which writes the Capitol's official deficit forecast, and he continues to study fiscal matters as a senior fellow at the Urban Institute.
"Medium-term projections are extremely uncertain and, in fact, if you go out much beyond five years they are just so fraught with error that I have advocated that we stop using them," Penner says. "They're just so misleading."
Even in the short term, deficit estimates can be dead wrong. Just last month, for instance, smaller-than-expected tax refunds and rising individual tax receipts led congressional staffers to proclaim that this year's expected deficit of $521 billion could be overstated by as much as $100 billion. A hundred billion here and a hundred billion there, and all of a sudden you're talking real money.
This is not to belittle the real problems that Medicare and Social Security eventually will face when baby boomers start to retire at the end of this decade. Even a forecast skeptic like Penner warned in a study published last week that unless Social Security and Medicare benefits are sliced or taxes raised, the national debt will exceed the gross domestic product in about two decades and America will face a financial meltdown.
In the meantime, however, worrying too much about how far into the hole the budget will fall is probably wasted effort. No one who was looking a few years out imagined that deficits would disappear at the end of the 1990s. Nor did these medium-term prognosticators foresee that deficits would reappear at record levels in the last couple of years.
Will the debt ceiling have to rise before November? And will Congress have to vote to do so? Your guess is as good as mine.