    [Analytical Perspectives]
    [Other Technical Presentations]
    [18. Comparison of Actual to Estimated Totals]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 373]]

                  18.  COMPARISON OF ACTUAL TO ESTIMATED TOTALS

      In successive budgets, the Administration publishes several estimates
    of the surplus for a particular fiscal year. Initially, the year appears
    as an outyear estimate at the end of the budget horizon. In each
    subsequent budget, the year advances in the estimating horizon until it
    becomes the ``budget year.'' One year later, the year becomes the
    ``current year'' then in progress, and the following year, it becomes
    the just-completed ``actual year.''
      The budget is legally required to compare budget year estimates of
    receipts and outlays with the subsequent actual receipts and outlays for
    that year.\1\ Part I of this chapter meets that requirement by comparing
    the actual results for 2001 with the current services estimates shown in
    the 2001 Budget published in February 2000.
    ---------------------------------------------------------------------------
      \1\ These requirements, for receipts and ``uncontrollable outlays,''
    are in 31 USC 1105(a)(18) through (20).
    ---------------------------------------------------------------------------
      Part II of the chapter presents a broader comparison of estimates and
    actuals. This part first discusses the historical record of budget year
    estimates versus actuals over the last two decades. Second, it broadens
    the focus to estimates made for each year of the budget horizon,
    extending four years beyond the budget year. This broader focus shows
    the growth in differences between estimates and the eventual actual
    results as the estimates extend further into the future.

            PART I: COMPARISON OF ACTUAL TO ESTIMATED TOTALS FOR 2001

      This part of the chapter compares the actual receipts, outlays, and
    surplus for 2001 with the current services estimates \2\ shown in the
    2001 Budget published in February 2000. This part also presents a more
    detailed comparison for mandatory and related programs, and reconciles
    the actual receipts, outlays, and surplus totals shown here with the
    figures for 2001 previously published by the Department of the Treasury.
    ---------------------------------------------------------------------------
      \2\ The current services concept is discussed in Chapter 15: ``Current
    Services Estimates.'' For mandatory programs and receipts the February
    2000 current services estimate is based on laws then in place. For
    discretionary programs the current services estimate is based on enacted
    appropriations adjusted for inflation.
    ---------------------------------------------------------------------------

                                    Receipts

      Receipts in 2001 were $1,991.0 billion, which is $18.9 billion less
    than the current services estimate of $2,009.9 billion in the 2001
    Budget. As shown in Table 18-1, this shortfall was the net effect of
    legislative and administrative changes; economic conditions that
    differed from what had been expected; and technical factors that
    resulted in different collection patterns and effective tax rates than
    had been assumed.

               Table 18-1.  COMPARISON OF ACTUAL 2001 RECEIPTS WITH THE INITIAL CURRENT SERVICES ESTIMATES
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                             Enacted
                                              Feb. 2000   legislation/    Different  Technical     Net
                                               estimate  administrative   economic    factors     change     Actual
                                                             actions     conditions
    ----------------------------------------------------------------------------------------------------------------
    Individual income taxes.................     978.2         -40.6          17.0       39.7       16.1      994.3
    Corporation income taxes................     189.6         -31.9           8.2      -14.8      -38.5      151.1
    Social insurance and retirement receipts     682.5          -0.4           6.7        5.2       11.5      694.0
    Excise taxes............................      69.4          -0.5           1.0       -3.8       -3.3       66.1
    Estate and gift taxes...................      32.0   ..............        0.3       -3.9       -3.6       28.4
    Customs duties..........................      22.2          -0.7          -0.9       -1.2       -2.8       19.4
    Miscellaneous receipts..................      36.0   ..............        0.8        1.0        1.8       37.8
                                             -----------------------------------------------------------------------
       Total................................   2,009.9         -74.2          33.0       22.3      -18.9    1,991.0
    ----------------------------------------------------------------------------------------------------------------

    [[Page 374]]

      Policy differences.--The Economic Growth and Tax Relief Reconciliation
    Act of 2001 reduced 2001 receipts by $68.1 billion (see Chapter 4:
    ``Federal Receipts'' for a description of this Act). Other legislative
    and administrative changes, including the extension of filing deadlines
    for taxpayers adversely affected by the terrorist attacks of September
    11, 2001, reduced 2001 receipts relative to the February 2000 current
    services estimate by an additional $6.1 billion.
      Economic differences.--Differences between the economic assumptions
    upon which the current services estimates were made and actual economic
    performance accounted for a net increase in 2001 receipts of $33.0
    billion.\3\ Higher-than-anticipated wages and salaries and other sources
    of personal income were in large part responsible for the increases in
    individual income taxes and social insurance and retirement receipts of
    $17.0 billion and $6.7 billion, respectively. Increased corporation
    income taxes, attributable to higher-than-expected corporate profits,
    increased 2001 receipts by an additional $8.2 billion relative to the
    February 2000 estimate. Higher-than-estimated levels of gross domestic
    product (GDP), which affect excise taxes, and higher-than-expected
    interest rates, which affect deposits of earnings by the Federal Reserve
    (miscellaneous receipts), increased receipts above the budget estimates
    by an additional $1.0 billion and $0.8 billion, respectively. Customs
    duties were $0.9 billion below the budget estimate, reflecting lower-
    than-expected imports.
    ---------------------------------------------------------------------------
      \3\ Changes in economic assumptions between the 2001 and 2002 Budgets,
    reflecting improvements in the economic outlook over that period,
    increased the estimate of receipts by $54.2 billion. This improvement
    was offset by weaker-than-expected economic outcomes subsequent to the
    2002 budget, which reduced receipts by $21.2 billion.
    ---------------------------------------------------------------------------
      Technical reestimates.--Technical factors increased 2001 receipts a
    net $22.3 billion above the February 2000 current services estimate.
    This net increase was attributable to higher-than-anticipated
    collections of individual income taxes, social insurance and retirement
    receipts, and miscellaneous receipts, which were partially offset by
    lower-than-anticipated collections of corporation income taxes and other
    sources of receipts. Higher effective tax rates on personal income than
    estimated in February 2000, and the effect of the stock market on
    capital gains, were primarily responsible for the net increase in
    individual income taxes of $39.7 billion. Higher-than-expected
    collections of payroll taxes, attributable in large part to adjustments
    for prior year receipts, partially offset by lower-than-expected
    unemployment insurance receipts, increased social insurance and
    retirement receipts a net $5.2 billion above the budget estimate.
    Different collection patterns and effective tax rates than assumed in
    February 2000 were primarily responsible for the lower-than-anticipated
    collections of corporation income taxes of $14.8 billion.

                                     Outlays

      Outlays for 2001 were $1,863.9 billion. This was $25.2 billion more
    than the $1,838.8 billion current services estimate in the 2001 Budget
    (February 2000).
      Table 18-2 distributes the $25.2 billion net increase in outlays among
    discretionary and mandatory programs and net interest.\4\ The table also
    makes rough estimates according to three reasons for the changes:
    policy; economic conditions; and technical estimating differences, a
    residual.
    ---------------------------------------------------------------------------
      \4\ Discretionary programs are controlled by annual appropriations,
    while mandatory programs are generally controlled by authorizing
    legislation. Mandatory programs are mostly formula benefit or
    entitlement programs with permanent spending authority that depend on
    eligibility criteria, benefit levels, and other factors.

               Table 18-2.  COMPARISON OF ACTUAL 2001 OUTLAYS WITH THE INITIAL CURRENT SERVICES ESTIMATES
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                        Current                  Changes
                                                       Services -----------------------------------------
                                                         (Feb.                                    Total   Actual \1\
                                                         2000)    Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Discretionary:...................................
       Defense.......................................     295.2       7.6  ........        3.4      10.9      306.1
       Nondefense....................................     340.3      10.4  ........       -7.5       2.9      343.3
                                                      --------------------------------------------------------------
         Subtotal, discretionary.....................     635.5      18.0  ........       -4.1      13.8      649.3

    Mandatory:
       Social Security...............................     422.2       5.5       3.4       -1.7       7.2      429.4
       Other programs................................     573.0      15.2       1.9      -11.0       6.0      579.0
                                                      --------------------------------------------------------------
         Subtotal, mandatory.........................     995.2      20.6       5.2      -12.7      13.2    1,008.4
    Net interest.....................................     208.1       3.1      -4.4       -0.6      -1.9      206.2
                                                      --------------------------------------------------------------
     Total outlays...................................   1,838.8      41.7       0.9      -17.4      25.2    1,863.9
    ----------------------------------------------------------------------------------------------------------------
    \1\ Actuals do not reflect the accrual funding of Federal retiree costs in the 2003 Budget.

      Policy changes are the result of legislative actions that change
    spending levels, primarily through higher or lower appropriations or
    changes in authorizing legislation. For 2001, policy changes increased
    outlays an estimated $41.7 billion relative to the initial current
    services estimates.
      Policy changes increased discretionary outlays by $18.0 billion,
    because outlays from final appropriations were above the initial current
    services estimates. Defense discretionary outlays increased by $7.6
    billion and nondefense discretionary outlays increased by $10.4 billion.
    Policy changes increased mandatory outlays by $20.6 billion above
    current law. The largest changes

    [[Page 375]]

    were an increase of $10.8 billion for agricultural programs, mostly for
    emergency assistance; an increase of $5.5 billion for Social Security
    benefit payments from repealing the Social Security earnings test and
    correcting a Consumer Price Index error; and an increase of $4.8 billion
    for expansion of Medicare benefits.
      Economic conditions that differed from those forecast in February 2000
    resulted in a net increase in outlays of $0.9 billion. Outlays for
    mandatory programs increased an estimated $5.2 billion, largely due to a
    higher-than-expected rise in prices, and consequently in cost-of-living-
    adjustments (COLAs), which increased outlays for Social Security benefit
    payments, refundable Earned Income Tax Credits, Medicare, and Federal
    employee retirement benefits. Lower-than-expected unemployment
    contributed to reduced outlays for Food Stamps, which partially offset
    the outlay increases resulting from higher-than-expected COLAs. The
    increased outlays for mandatory programs were largely offset by a
    decrease of $4.4 billion in net interest due to decreased borrowing
    requirements that resulted from the effect of economic factors on
    receipts.
      Technical estimating differences and other changes resulted in a net
    decrease in outlays of $17.4 billion. Outlays for discretionary programs
    decreased an estimated $4.1 billion. Outlays for mandatory programs
    decreased an estimated $12.7 billion, largely due to lower-than-
    anticipated outlays for Medicare. Technical changes result from changes
    in such factors as the number of beneficiaries for entitlement programs,
    crop conditions, or other factors not associated with policy changes or
    economic conditions.

          Table 18-3.  COMPARISON OF THE ACTUAL 2001 SURPLUS WITH THE INITIAL CURRENT SERVICES SURPLUS ESTIMATE
                                                 (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                          Current                  Changes
                                                         Services -----------------------------------------
                                                           (Feb.                                    Total    Actual
                                                           2000)    Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Receipts...........................................   2,009.9     -74.2      33.0       22.3     -18.9   1,991.0

    Outlays............................................   1,838.8      41.7       0.9      -17.4      25.2   1,863.9
                                                        ------------------------------------------------------------

        Surplus........................................     171.2    -115.9      32.1       39.7     -44.1     127.1
    ----------------------------------------------------------------------------------------------------------------
    Note: Surplus changes are receipts minus outlays. For these changes, a plus indicates an increase in the
      surplus.

                                     Surplus

      The preceding two sections discussed the differences between the
    initial current services estimates and the actual receipts and outlays
    for 2001. This section combines these effects to show the net impact of
    these differences on the surplus.
      As shown in Table 18-3, the 2001 current services surplus was
    initially estimated to be $171.2 billion. The actual surplus was $127.1
    billion, which was a $44.1 billion decrease from the initial estimate.
    Receipts were $18.9 billion less than the initial estimate, and outlays
    were $25.2 billion more. The table shows the distribution of the changes
    according to the categories in the preceding two sections.
      The net effect of policy changes for receipts and outlays reduced the
    surplus by $115.9 billion. Economic conditions that differed from the
    initial assumptions in February 2000 accounted for an estimated $32.1
    billion increase in the surplus. This was the combined effect of an
    increase in receipts of $33.0 billion and an increase in outlays of $0.9
    billion. Technical factors increased the surplus by an estimated $39.7
    billion. This was due to an increase in receipts of $22.3 billion and a
    decrease in outlays of $17.4 billion for technical estimating reasons.

    Comparison of the Actual and Estimated Outlays for Mandatory and Related
                                Programs for 2001

      This section compares the original 2001 outlay estimates for mandatory
    and related programs under current law in the 2001 Budget (February
    2000) with the actual outlays. Major examples of these programs include
    Social Security and Medicare benefits for the elderly, agricultural
    price support payments to farmers, and deposit insurance for banks and
    thrift institutions. This category also includes net interest outlays
    and undistributed offsetting receipts.
      A number of factors may cause differences between the amounts
    estimated in the budget and the actual outlays. For example, legislation
    may change benefit rates or coverage; the actual number of beneficiaries
    may differ from the number estimated; or economic conditions (such as
    inflation or interest rates) may differ from what was assumed in making
    the original estimates.
      Table 18-4 shows the differences between the actual outlays for these
    programs in 2001 and the amounts originally estimated in the 2001
    Budget, based on laws in effect at that time. Actual outlays for
    mandatory spending and net interest in 2001 were $1,214.6 billion, which
    was $11.3 billion more than the initial estimate of $1,203.3 billion,
    based on existing law in February 2000.

    [[Page 376]]

      Table 18-4.  COMPARISON OF ACTUAL AND ESTIMATED OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                              2001
                                                                           -----------------------------------------
                                                                              Feb. 2000
                                                                            estimate \1\   Actual \2\      Change
    ----------------------------------------------------------------------------------------------------------------
    Mandatory outlays:
      Human resources programs:
         Education, training, employment, and social services.............        10.7           2.9          -7.8
         Health:
           Medicaid.......................................................       124.2         129.4           5.2
           Other..........................................................         8.1           9.7           1.6
                                                                           -----------------------------------------
             Total health.................................................       132.3         139.1           6.8

         Medicare.........................................................       218.3         214.1          -4.2

         Income security:
           Retirement and disability......................................        85.2          86.2           1.0
           Unemployment compensation......................................        24.6          27.9           3.3
           Food and nutrition assistance..................................        31.4          29.4          -2.0
           Other..........................................................        80.6          82.1           1.5
                                                                           -----------------------------------------
             Total, income security.......................................       221.9         225.6           3.8

         Social security..................................................       422.2         429.4           7.2

         Veterans benefits and services:
           Income security for veterans...................................        24.3          22.5          -1.8
           Other..........................................................         1.6           0.2          -1.4
                                                                           -----------------------------------------
             Total veterans benefits and services.........................        25.9          22.6          -3.3
                                                                           -----------------------------------------
             Total mandatory human resources programs.....................     1,031.2       1,033.7           2.5

       Other functions:
         Agriculture......................................................        14.3          21.3           7.0
         Mortgage Credit..................................................        -4.5          -*             4.5
         Deposit insurance................................................        -1.5          -1.4           0.1
         Other functions..................................................         1.5           1.9           0.4
                                                                           -----------------------------------------
           Total, other functions.........................................         9.7          21.7          12.0
                                                                           -----------------------------------------
       Undistributed offsetting receipts:
         Employer share, employee retirement..............................       -38.5         -38.8          -0.3
         Rents and royalties on the outer continental shelf...............        -3.7          -7.2          -3.5
         Other undistributed offsetting receipts..........................        -3.6          -1.0           2.5
                                                                           -----------------------------------------
           Total undistributed offsetting receipts........................       -45.7         -47.0          -1.3
                                                                           -----------------------------------------
             Total, mandatory.............................................       995.2       1,008.4          13.2

    Net interest:.........................................................
       Interest on Treasury debt securities (gross).......................       359.3         359.5           0.2
       Interest received by trust funds...................................      -141.9        -144.1          -2.2
       Other interest.....................................................        -9.4          -9.2           0.2
                                                                           -----------------------------------------
             Total net interest...........................................       208.1         206.2          -1.9
                                                                           -----------------------------------------
             Total outlays for mandatory and net interest.................     1,203.3       1,214.6          11.3
    ----------------------------------------------------------------------------------------------------------------
    * $50 million or less.
    \1\ Estimates reflect the function shift for foster care and adoption assistance in the 2003 Budget.
    \2\ Actuals do not reflect the accrual funding of Federal retiree costs in the 2003 Budget.

      Actual outlays for mandatory human resources programs were $1,033.7
    billion, $2.5 billion more than originally estimated. This increase was
    the net effect of legislative action, differences between actual and
    assumed economic conditions, differences between the anticipated and
    actual number of beneficiaries, and other technical differences.
      Outlays for other functions were $12.0 billion more than originally
    estimated, largely due to increases of $7.0 billion for agriculture
    programs and $4.5 billion for mortgage credit programs. Undistributed
    offsetting receipts were $1.3 billion more than expected.
      Outlays for net interest were $206.2 billion, or $1.9 billion less
    than the original estimate. This decrease was the net effect of changes
    in interest rates from those initially assumed, changes in borrowing
    requirements due to differences in surpluses, and technical factors.

    [[Page 377]]

      Reconciliation of Differences with Amounts Published by Treasury for
                                      2001

      Table 18-5 provides a reconciliation of the receipts, outlays, and
    surplus totals published by the Department of the Treasury in the
    September 2001 Monthly Treasury Statement and those published in this
    budget. The Department of the Treasury made adjustments to the estimates
    for the U.S. Government Annual Report, which increased receipts by $727
    million and outlays by $870 million. Additional adjustments for this
    budget increased receipts by $100 million and outlays by $17 million.
    The major changes were for student loan reserve funds, highway trust
    fund revenues, the Federal Communications Commission universal service
    fund, and the transactions of the United Mine Workers of America benefit
    funds.

                                  Table 18-5.  RECONCILIATION OF FINAL AMOUNTS FOR 2001
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                         Receipts         Outlays         Surplus
    ----------------------------------------------------------------------------------------------------------------
    Totals published by Treasury (September 2001 MTS)...............       1,990,203       1,863,039         127,165
      Miscellaneous Treasury adjustments............................             727             870            -144
                                                                     -----------------------------------------------
    Totals published by Treasury in U.S. Government Annual Report...       1,990,930       1,863,909         127,021
      United Mine Workers of America benefit funds..................             150             150  ..............
      Federal Communications Commission Universal Service Fund......             109              87              22
      Highway trust fund............................................            -164  ..............            -164
      Student loan reserve fund.....................................  ..............            -231             231
      Other.........................................................               5              11              -6
                                                                     -----------------------------------------------
    Total adjustments, net..........................................             100              17              83
                                                                     -----------------------------------------------
    Totals in the budget............................................       1,991,030       1,863,926         127,104

                               MEMORANDUM:

                                                                     -----------------------------------------------
      Total change since year-end statement.........................             827             887             -61
    ----------------------------------------------------------------------------------------------------------------

         Part II: HISTORICAL COMPARISON OF ACTUAL TO ESTIMATED SURPLUSES

      This part of the chapter compares actual surpluses to estimated
    surpluses over the last two decades. The first section compares the
    estimate for the budget year of each budget with the subsequent actual
    surplus. The second section extends the comparison to the estimated
    surpluses for each year of the budget window--that is, for the current
    year through the fourth year following the budget year. This part
    concludes with some observations on the historical record of surplus
    estimates versus the subsequent actual surpluses.

     Historical Comparison of Actual to Estimated Surpluses for the Budget
                                      Year

      Table 18-6 compares the estimated and actual surpluses or deficits
    since the deficit estimated for 1982 in the 1982 Budget. The estimated
    surpluses or deficits here for each budget include the Administration's
    policy proposals. Therefore, the estimated surplus for 2001 differs from
    that shown in Table 18-3, which is on a current services basis. Earlier
    comparisons of actual and estimated surpluses were on a policy basis, so
    for consistency the figures in Table 18-6 are on this basis.
      On average, the estimates for the budget year underestimated actual
    surpluses (or overestimated actual deficits) by $5 billion over the
    twenty-year period. Policy outcomes that differed from the original
    proposals reduced the surplus by an average of $16 billion. Differences
    between economic assumptions and actual economic performance reduced the
    surplus an average of $1 billion. Differences due to these two factors
    were more than offset by technical revisions, which increased the
    surplus an average of $23 billion.
      The relatively small average difference between actual and estimated
    surpluses conceals a wide variation in the differences from budget to
    budget. The differences ranged from a $206 billion overestimate to a
    $190 billion underestimate. The $206 billion overestimate, in the 1991
    Budget, was due to the combination of weaker-than-expected economic
    performance (largely the effect of the 1990-91 recession) and
    unexpectedly large outlays to resolve the savings and loan crisis. The
    $190 billion underestimate of the surplus, in the 1998 Budget, stemmed
    largely from stronger-than-expected economic growth and a surge in
    individual income tax collections beyond that accounted for by economic
    factors.

    [[Page 378]]

                          Table 18-6.  COMPARISON OF ACTUAL AND ESTIMATED SURPLUSES SINCE 1982
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                   Surplus          Differences due to
                                                      or    ----------------------------------
                                                  deficit (-                                                 Actual
                                                      )                                           Total     surplus
                       Budget                     estimated    Enacted    Economic  Technical  difference      or
                                                     for     legislation   factors   factors               deficit(-
                                                    budget                                                     )
                                                   year \1\
    ----------------------------------------------------------------------------------------------------------------
    1982........................................        -62          15        -70        -11        -66        -128
    1983........................................       -107         -12        -67        -22       -101        -208
    1984........................................       -203         -21         38         -*         17        -185
    1985........................................       -195         -12        -17         12        -17        -212
    1986........................................       -180          -8        -27         -7        -41        -221
    1987........................................       -144           2        -16          8         -6        -150
    1988........................................       -111          -9        -19        -16        -44        -155
    1989........................................       -130         -22         10        -11        -23        -152
    1990........................................        -91         -21        -31        -79       -131        -221
    1991........................................        -63          21        -85       -143       -206        -269
    1992........................................       -281         -36        -21         48        -10        -290
    1993........................................       -350          -8        -13        115         95        -255
    1994........................................       -264          -8         16         52         61        -203
    1995........................................       -165         -18          1         18          1        -164
    1996........................................       -197           6         53         30         89        -108
    1997........................................       -140           1         -4        121        118         -22
    1998........................................       -121          -9         48        151        190          69
    1999........................................         10         -22         56         81        115         125
    2000........................................        117         -42         88         74        119         236
    2001........................................        184        -129         32         40        -57         127
                                                 -------------------------------------------------------------------
    Average.....................................                    -16         -1         23          5
    Absolute average \2\........................                     21         36         52         75
    Standard deviation..........................                     31         45         68         97
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.
    \1\ Surplus or deficit estimate includes the effect of the budget's policy proposals.
    \2\ Absolute average is the average without regard to sign.

      Because the average surplus difference obscures the degree of under-
    and overestimation in the historical data, a more appropriate statistic
    to measure the magnitude of the differences is the average absolute
    difference. This statistic measures the difference without regard to
    whether it was an under- or overestimate. Since 1982, the average
    absolute difference has been $75 billion.
      Another measure of variability is the standard deviation. This
    statistic measures the dispersion of the data around the average value.
    The standard deviation of the surplus differences since 1982 is $97
    billion. Like the average absolute difference, this measure illustrates
    the high degree of variation in the difference between estimates and
    actual surpluses.

              Five-Year Comparison of Actual to Estimated Surpluses

      The substantial differences between actual surpluses and the budget
    year estimates made less than two years earlier raises questions about
    the degree of variability for estimates of years beyond the budget year.
    Table 18-7 shows the summary statistics for the surplus differences for
    the current year (CY), budget year (BY), and the four succeeding years
    (BY+1 through BY+4). These are the years that are required to be
    estimated in the budget by the Budget Enforcement Act.
      On average, the budget estimates since 1982 understated the surplus in
    the current year and the budget year, by $19 billion and $5 billion
    respectively. The budget estimates overstated the surplus in the years
    following, by amounts growing from $4 billion for BY+1 to $26 billion
    for BY+4. While these results suggest a slight tendency to overestimate
    surpluses toward the end of the budget horizon, the averages are not
    statistically different from zero in light of the high variation in the
    data.
      The average absolute difference between estimated and actual surpluses
    grows dramatically over the six years from CY through BY+4, from $47
    billion in the current year to $75 billion for the budget year, to $205
    billion for BY+4. While under- and overestimates of the surplus have
    historically tended to average out, the absolute size of the under- or
    overestimates grows as the estimates extend further into the future. The
    standard deviation of the surplus differences shows the same pattern.
    The standard deviation grows from $60 billion for current year estimates
    to $97 billion for the budget year estimates and continues to increase
    steadily as the estimates extend further out, reaching $241 billion for
    BY+4.
      The estimates of variability in the difference between estimated and
    actual surpluses can be used to construct a range of uncertainty around
    a given set of surplus estimates. Statistically, if these differences
    are normally distributed, the actual surplus will be within a

    [[Page 379]]

    range of two standard deviations above or below the estimate about 90%
    of the time. Chart 18-1 shows this range of uncertainty applied to the
    surplus estimates in this budget. This chart illustrates that unforeseen
    economic developments, policy outcomes, or other factors could give rise
    to large swings in the surplus estimates.

        Table 18-7.  DIFFERENCES BETWEEN ACTUAL AND ESTIMATED SURPLUSES FOR FIVE-YEAR BUDGET ESTIMATES SINCE 1982
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                     Estimate for budget year plus
                                                               Current   Budget  -----------------------------------
                             Measure                            year      year      One      Two     Three     Four
                                                              estimate  estimate    year    years    years    years
                                                                                   (BY+1)   (BY+2)   (BY+3)   (BY+4)
    ----------------------------------------------------------------------------------------------------------------
    Average difference \1\..................................        19         5       -4      -12      -28      -26
    Average absolute difference \2\.........................        47        75      109      147      179      205
    Standard deviation......................................        60        97      142      178      207      241
    ----------------------------------------------------------------------------------------------------------------
    \1\ A positive figure represents an underestimate of the surplus or an overestimate of the deficit.
    \2\ Average absolute difference is the average difference without regard to sign.