Accession Number:

ADA399652

Title:

Uncertainties in Projecting Budget Surpluses: A Discussion of Data and Methods

Descriptive Note:

Corporate Author:

CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC

Personal Author(s):

Report Date:

2001-02-01

Pagination or Media Count:

12.0

Abstract:

In January 31, 2001, the Congressional Budget Office CBO released The Budget and Economic Outlook Fiscal Years 2002-2011, which presents CBOs latest projections of federal revenues and outlays for that period. Chapter 5 of that report discusses the uncertainties in CBOs baseline projection of the total budget surplus and includes a chart reproduced here as Figure 1 illustrating how those uncertainties increase over six years. This supplement to that report discusses the data and methods used to construct the chart. Figure 1 presents CBOs baseline projection of the budget surplus as a fan of probabilities around the mean projection for fiscal years 2001 through 2006. The fan widens as the projection extends. The baseline projection falls in the middle of the highest probabilities the darkest part of the figure. But the figure makes clear that nearby projections-other paths in the darkest part of the figure have nearly the same probability as the baseline. Moreover, projections that are quite different from the baseline have a significant probability of being realized. The uncertainties shown in Figure I are based on CBOs historical record of budget projections. That is, the estimates of uncertainty presume that in the future, CBO will make errors similar to those it made in the past, with about the same probability distribution of large and small errors.

Descriptors:

• *ECONOMIC IMPACT
• *BUDGETS
• *REVENUE SHARING
• UNCERTAINTY
• PROBABILITY DISTRIBUTION FUNCTIONS
• ESTIMATES
• BASE LINES
• ERRORS
• FANS
• MEAN
• FISCAL POLICIES

Subject Categories:

• Economics and Cost Analysis

Distribution Statement:

APPROVED FOR PUBLIC RELEASE