Well, there goes my afternoon. The Sunlight Foundation has a new tool that lets you compare every budget forecast since 1996 to the actual path of the federal budget. It shows, in other words, what we thought would happen against what actually happened. For my chart, I chose to include two forecasts from the Clinton-era (1996 and 2000), one from the end of the Bush presidency (2008), and every forecast from the Obama presidency (2009, 2010, and 2011). Here they are:
A few things worth noticing:
- Budget forecasts are pretty straight lines. But the budget itself does not tend to move in a straight line. So in general, when you see a budget forecast, think of it as, “this is what the budget will look like if nothing at all changes, and something, obviously, is going to change.” The trick is knowing the direction of the change.
- Part of what you’re seeing here are policy changes. The budget is different if policy is different. But the actual shape of the budget is determined by the performance of the economy. Deficits disappear when the economy improves, as happened in the 90s, and they return when it deteriorates, as we saw in 2001 and 2008. Hey Congress! Repeat after me: There is no balanced budget without growth. There is no balanced budget without growth. There is no balanced budget without growth.
- Forecasts aren’t always optimistic. The 1996 forecast, for instance, was much too pessimistic. But the unexpectedly good times didn’t last very long: the 2000 forecast was much too optimistic.
- The naivete of the 2008 forecast is almost touching. Remember when we weren’t buried beneath a massive financial crisis?
- Take a close look at the Obama forecasts. Every single one of them pretty much assumes an eventual V-shaped recovery. Over the last three years, the precise date of that recovery keeps moving back, but the shape of it hasn’t changed much. That assumption is not looking so good right now.