US: in 29 budgets of 43 the President’s administration assumed more growth than came
US: real GDP growth in the budget year, the administration’s assumption and the outcome
Partly, OMB itself writes, because the forecast assumes the President’s proposals are enacted. But misses go the other way too: for 1996–2000 the budgets assumed 2.0–2.5% and growth came in at 3.8–4.8%.
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Every US President’s budget is computed on economic assumptions by the Office of Management and Budget (OMB) with the Council of Economic Advisers and the Treasury: growth, inflation, unemployment and interest rates for this year and the next ones. Since 2002 OMB has printed the Congressional Budget Office’s and the Blue Chip consensus’s forecasts beside them.
By year: blue, the growth the budget submitted a year earlier assumed for that year; orange, the outcome. The shading is the error.
- 2009: budget assumption → outcome
+3.0% → −2.6%
- 1996: budget assumption → outcome
+2.5% → +3.8%
- 1997: budget assumption → outcome
+2.3% → +4.4%
- 1998: budget assumption → outcome
+2.0% → +4.5%
- 1999: budget assumption → outcome
+2.0% → +4.8%
- 2000: budget assumption → outcome
+2.0% → +4.1%
- 2019: budget assumption → outcome
+3.2% → +2.6%
- 2022: budget assumption → outcome
+4.3% → +2.4%
- 2023: budget assumption → outcome
+2.8% → +2.9%
- OMB on its forecast errors (FY2027 budget)
«partly due to the assumption that Administration policy proposals contained in the Budget will be enacted»
One forecast per budget: real GDP (GNP until 1992) growth, annual average, for the year after the budget came out; 43 budgets for 1977–2023 without the pandemic years 2020–2021. Outcome: BEA, latest data. Sign test: p = 0.032.
The lean is after 2000: since 2001 growth fell short of the assumption 18 times and beat it 3; before, 11 and 11 (the split was chosen after looking at the data). The largest miss: 2009, +3.0% assumed, −2.6% came. A budget’s numbers are the assumptions it was computed on, not just a forecast.
A question for this picture
Should a budget rest on a forecast that treats all the President’s proposals as already enacted?