[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.

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  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.