by Calculated Risk on 1/31/2005 10:41:00 PM

The following chart shows the accuracy of the CBO's projections from 1981 to 1997.

Misestimates in CBO's Projections Made from 1981 to 1997


Source: Congressional Budget Office. Notes: CY = current year; BY = budget year.
 

When the CBO makes an error (see '80s or 90's) they continue to make the same error for several years running. We are seeing the same phenomenon now. The CBO is consistently underestimating the tax revenues, specifically Corporate and Individual Income taxes. Social Security taxes (now 38% of all Federal revenue) have been reliable.

As an example, in Jan 2002 CBO projected a unified deficit of 21 Billion for fiscal 2002 (ends in Sept). The actual unified deficit was $158 Billion. The primary causes for this miss were Individual Income Taxes (short $89 Billion) and Corporate Income Taxes (short $31 Billion). This pattern is repeated for 2003 and 2004.

Just a reminder: On January 29, 2002, George W. Bush said in his State of the Union Address: "... our budget will run a deficit that will be small and short-term". He was sure wrong.