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Expected Federal Budget Surplus: How Much Confidence Should the Public and Policymakers Place in the Projections? (ICPSR 1240)
Principal Investigator(s): Kliesen, Kevin L., Federal Reserve Bank of St. Louis; Thornton, Daniel L., Federal Reserve Bank of St. Louis
When the government runs a deficit, it can borrow from the public -- that is, it can create debt. Conversely, when the government runs a surplus, it can retire that debt. For the past three years, the federal government has recorded budget surpluses, and both the White House Office of Management and Budget and the Congressional Budget Office project that these surpluses will increase for at least the next decade. If these projections prove to be accurate, the $3.5 trillion of publicly held federal debt could be eliminated by around 2010. This article, which was written prior to the updated estimates published in January 2001, assesses the likelihood that these projected surpluses will materialize, and consequently eliminate the public debt, by comparing previous budget projections with actual outcomes. The authors show that the long-term budget projections have not provided a useful indicator of actual experience. Principally, these errors occur because of changes in macroeconomic conditions or unforeseen legislative actions, which both result in unanticipated increases or decreases in revenues or outlays. Not surprisingly, the projections have proven to be less reliable the longer the projection horizon. Moreover, over the period of available data, the projections have been biased upward, i.e., the actual deficits have been larger than projected. Accordingly, the authors suggest that prospects for eliminating the public debt may be overstated.
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Kliesen, Kevin L., and Daniel L. Thornton. Expected Federal Budget Surplus: How Much Confidence Should the Public and Policymakers Place in the Projections?. ICPSR01240-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2001-06-02. http://doi.org/10.3886/ICPSR01240.v1
Persistent URL: http://doi.org/10.3886/ICPSR01240.v1
Scope of Study
Geographic Coverage: United States
Data Collection Notes:
(1) One file was submitted, 0103kkd.xls. The file contains data and calculations. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigators if further information is desired.
Original ICPSR Release: 2001-06-12
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