    [Analytical Perspectives]
    [Dimensions of the Budget]
    [20. Comparison of Actual to Estimated Totals]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 331]]

                  20.  COMPARISON OF ACTUAL TO ESTIMATED TOTALS

      In successive budgets, the Administration publishes several estimates
    of the surplus or deficit for a particular fiscal year. Initially, the
    year appears as an outyear projection 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. Part I of this chapter meets that requirement by comparing
    the actual results for 2006 with the current services estimates shown in
    the 2006 Budget, published in February 2005.
      Part II of the chapter presents a broader comparison of estimates and
    actual outcomes. This part first discusses the historical record of
    budget year estimates versus actual results over the last two decades.
    Second, it lengthens the focus to estimates made for each year of the
    budget horizon, extending four years beyond the budget year. This longer
    focus shows that the differences between estimates and the eventual
    actual results grow as the estimates extend further into the future.

           PART I:  COMPARISON OF ACTUAL TO ESTIMATED TOTALS FOR 2006

       This part of the chapter compares the actual receipts, outlays, and
    deficit for 2006 with the current services estimates shown in the 2006
    Budget, published in February 2005. \1\ This part also presents a more
    detailed comparison for mandatory and related programs, and reconciles
    the actual receipts, outlays, and deficit totals shown here with the
    figures for 2006 previously published by the Department of the Treasury.
    ---------------------------------------------------------------------------
      \1\ The current services concept is discussed in Chapter 24, ``Current
    Services Estimates.'' For mandatory programs and receipts, the February
    2005 current services estimate was based on laws then in place, adjusted
    to reflect extension of certain expiring provisions in the 2001 and 2003
    tax acts. For discretionary programs the current services estimate was
    based on the current year estimates, excluding one-time emergency
    appropriations, adjusted for inflation.
    ---------------------------------------------------------------------------

                                    Receipts

      Actual receipts for 2006 were $2,407 billion, $229 billion more than
    the $2,178 billion current services estimate in the 2006 Budget
    (February 2005). As shown in Table 20-1, this increase 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 20-1.  COMPARISON OF ACTUAL 2006 RECEIPTS WITH THE INITIAL CURRENT SERVICES  ESTIMATES
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                             Enacted
                                               February   legislation/    Different  Technical     Net
                                                 2005    administrative   economic     factors    change     Actual
                                               estimate      actions     conditions
    ----------------------------------------------------------------------------------------------------------------
    Individual income taxes.................       965           -11            10         81         79      1,044
    Corporation income taxes................       223             *            -5        136        131        354
    Social insurance and retirement receipts       819   ..............         16          3         19        838
    Excise taxes............................        76             *            -1         -1         -2         74
    Estate and gift taxes...................        26             1             *          1          2         28
    Customs duties..........................        27            -*             1         -3         -2         25
    Miscellaneous receipts..................        43             *             3         -1          2         45
                                             -----------------------------------------------------------------------
      Total receipts........................     2,178           -10            23        216        229      2,407
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.

       Policy differences. Several laws were enacted after February 2005
    that reduced 2006 receipts by a net $10 billion. The emergency tax
    relief provided to individuals and businesses affected by hurricanes
    Katrina, Rita and Wilma in the Katrina Emergency Tax Relief Act of 2005
    and the Gulf Opportunity Zone Act of 2005 accounted for $5 billion of
    the net reduction in 2006 receipts. The provisions of the Tax Increase
    Prevention and Reconciliation Act of 2005 (TIPRA), primarily the
    increase in the alternative minimum tax (AMT) exemp

    [[Page 332]]

    tion amount and a modification of the timing of estimated tax payments
    by corporations, also reduced 2006 receipts by a net $5 billion. The
    effects of other legislative and administrative changes on 2006 receipts
    were largely offsetting.
       Economic differences. Differences between the economic assumptions
    upon which the current services estimates were based and actual economic
    performance increased 2006 receipts by a net $23 billion. 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 $10 billion and $16
    billion, respectively. These increases were partially offset by a $5
    billion decrease in corporation income taxes, attributable to lower-
    than-expected corporate profits. Differences between anticipated and
    actual economic performance increased other sources of receipts by a net
    $3 billion.
       Technical reestimates. Technical factors increased 2006 receipts by a
    net $216 billion above the February 2005 current services estimate. This
    net increase was primarily attributable to higher-than-anticipated
    collections of individual and corporation income taxes of $81 billion
    and $136 billion, respectively. Different collection patterns and
    effective tax rates than assumed in February 2005 were primarily
    responsible for the higher-than-anticipated collections of individual
    and corporation income taxes. Changes in other sources of receipts
    attributable to technical factors were largely offsetting.

                                     Outlays

      Outlays for 2006 were $2,655 billion, $116 billion more than the
    $2,539 billion current services estimate in the 2006 Budget (February
    2005).
       Table 20-2 distributes the $116 billion net increase in outlays among
    discretionary and mandatory programs and net interest. \2\ The table
    also makes rough estimates according to three reasons for the changes:
    policy; economic conditions; and technical estimating differences, a
    residual.
    ---------------------------------------------------------------------------
      \2\ 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 20-2.  COMPARISON OF ACTUAL 2006 OUTLAYS WITH THE INITIAL CURRENT SERVICES ESTIMATES
                                                  (Outlays in billions)
    ----------------------------------------------------------------------------------------------------------------
                                                         Current                   Changes
                                                         Services -----------------------------------------
                                                          (Feb.                                     Total    Actual
                                                          2005)     Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Discretionary:
      Defense.........................................        437        93  ........        -11        83       520
      Nondefense......................................        477        48  ........        -28        20       497
                                                       -------------------------------------------------------------
        Subtotal, discretionary.......................        914       141  ........        -39       103     1,017

    Mandatory:
      Social Security.................................        540  ........         7         -3         4       544
      Other programs..................................        876        15        -1        -22        -7       868
                                                       -------------------------------------------------------------
        Subtotal, mandatory...........................      1,416        15         6        -25        -4     1,412

    Net interest......................................        209         3        12          2        17       227
                                                       -------------------------------------------------------------
        Total outlays.................................      2,539       160        18        -61       116     2,655
    ----------------------------------------------------------------------------------------------------------------

      Policy changes are the result of legislative actions that change
    spending levels, primarily through higher or lower appropriations or
    changes in authorizing legislation, which may themselves reflect
    responses to changed economic conditions. For 2006, policy changes
    increased outlays by an estimated $160 billion relative to the initial
    current services estimates.
      Policy changes increased discretionary outlays by $141 billion.
    Defense discretionary outlays increased by $93 billion and nondefense
    discretionary outlays increased by $48 billion. A significant portion of
    both defense and nondefense outlay increases resulted from enactment of
    emergency supplemental appropriation acts for defense, the Global War on
    Terror, and hurricane recovery in 2005 and 2006. Policy changes
    increased mandatory outlays by a net $15 billion above current law. This
    increase largely reflects a $19 billion increase in outlays for the
    National flood insurance program in response to hurricane recovery,
    partly offset by a $5 billion decrease in Medicare outlays, largely
    enacted in the Deficit Reduction Act of 2005.

              Table 20-3.  COMPARISON OF THE ACTUAL 2006 DEFICIT WITH THE INITIAL CURRENT SERVICES ESTIMATE
                                                      (In billions)
    ----------------------------------------------------------------------------------------------------------------
                                                          Current                  Changes
                                                         Services -----------------------------------------
                                                           (Feb.                                    Total    Actual
                                                           2005)    Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Receipts...........................................     2,178       -10        23        216       229     2,407
    Outlays............................................     2,539       160        18        -61       116     2,655
                                                        ------------------------------------------------------------
      Deficit..........................................       361       170        -6       -277      -113       248
    ----------------------------------------------------------------------------------------------------------------
    Note: Deficit changes are outlays minus receipts. For these changes, a plus indicates an increase in the
      deficit.

      Economic conditions that differed from those forecast in February 2005
    resulted in a net increase in outlays of $18 billion. The most
    significant changes consist of a $7 billion increase in Social Security
    benefits largely resulting from higher cost-of-living adjustments and a
    $12 billion increase in net interest due to higher-than-expected
    interest rates.
      Technical estimating differences and other changes resulted in a net
    decrease in outlays of $61 billion. Technical changes result from
    changes in such factors

    [[Page 333]]

    as the number of beneficiaries for entitlement programs, crop
    conditions, or other factors not associated with policy changes or
    economic conditions. Outlays for discretionary programs decreased an
    estimated $39 billion, because budget authority for both defense and
    nondefense programs was spent more slowly than expected. Outlays for
    mandatory programs decreased by a net $25 billion, largely because
    higher-than-anticipated outlays for higher education and mortgage credit
    programs were more than offset by lower-than-anticipated outlays for
    Medicaid, Medicare, unemployment compensation, and other programs. Net
    interest outlays increased by $2 billion due to technical factors
    compared to the February 2005 estimates.

                                     Deficit

      The preceding two sections discussed the differences between the
    initial current services estimates and the actual amounts of Federal
    Government receipts and outlays for 2006. This section combines these
    effects to show the net impact of these differences.
      As shown in Table 20-3, the 2006 current services deficit was
    initially estimated to be $361 billion. The actual deficit was $248
    billion, which was a $113 billion decrease from the initial estimate.
    Receipts were $229 billion more than the initial estimate and outlays
    were $116 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 increased
    the deficit by $170 billion. Economic conditions that differed from the
    initial assumptions in February 2005 accounted for an estimated $6
    billion decrease in the deficit. Technical factors reduced the deficit
    by an estimated $277 billion.

    Comparison of the Actual and Estimated Outlays for Mandatory and Related
                                Programs for 2006

      This section compares the original 2006 outlay estimates for mandatory
    and related programs under current law in the 2006 Budget (February
    2005) with the actual outlays. Major examples of these programs include
    Social Security and Medicare benefits, 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.

      Table 20-4.  COMPARISON OF ACTUAL AND ESTIMATED OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                              2006
                                                                           -----------------------------------------
                                                                              Feb. 2006
                                                                              estimate       Actual        Change
    ----------------------------------------------------------------------------------------------------------------
    Mandatory outlays:
      Human resources programs:
        Education, training, employment, and social services..............        11            38            27
        Health:
          Medicaid........................................................       193           181           -12
          Other...........................................................        20            21             1
                                                                           -----------------------------------------
          Total health....................................................       213           201           -11
        Medicare..........................................................       340           325           -15
        Income security:
          Retirement and disability.......................................       106           102            -3
          Unemployment compensation.......................................        37            31            -6
          Food and nutrition assistance...................................        51            48            -3
          Other...........................................................       113           116             3
                                                                           -----------------------------------------
            Total, income security........................................       307           298            -9
        Social security...................................................       540           544             4
        Veterans benefits and services:
          Income security for veterans....................................        35            36             *
          Other...........................................................         3             2            -1
                                                                           -----------------------------------------
            Total veterans benefits and services..........................        38            37            -1
                                                                           -----------------------------------------
            Total mandatory human resources programs......................     1,449         1,444            -6
                                                                           -----------------------------------------
      Other functions:
        Agriculture.......................................................        21            20            -1
        International.....................................................        -2            -7            -4
        Deposit insurance.................................................        -1            -1            -*
        Other functions...................................................        15            24             9
                                                                           -----------------------------------------
            Total, other functions........................................        33            37             4
                                                                           -----------------------------------------
      Undistributed offsetting receipts:
        Employer share, employee retirement...............................       -60           -61            -1
        Rents and royalties on the outer continental shelf................        -7            -7            -*
        Other undistributed offsetting receipts...........................        -*            -*            -*
                                                                           -----------------------------------------
            Total undistributed offsetting receipts.......................       -67           -68            -1
                                                                           -----------------------------------------
          Total, mandatory................................................     1,416         1,412            -4
                                                                           -----------------------------------------
    Net interest:
      Interest on Treasury debt securities (gross)........................       391           406            15
      Interest received by trust funds....................................      -172          -169             2
      Other interest......................................................       -10           -10            -*
                                                                           -----------------------------------------
            Total net interest............................................       209           227            17
                                                                           -----------------------------------------
            Total outlays for mandatory and net interest..................     1,625         1,639            14
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.

      A number of factors may cause differences between the amounts
    estimated in the budget and the actual mandatory 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 20-4 shows the differences between the actual outlays for these
    programs in 2006 and the amounts originally estimated in the 2006
    Budget, based on laws in effect at that time. Actual outlays for
    mandatory spending and net interest in 2006 were $1,639 billion, which
    was $14 billion more than the initial estimate of $1,625 billion, based
    on existing law in February 2005.
      As Table 20-4 shows, actual outlays for mandatory human resources
    programs were $1,444 billion, $6 billion less than originally estimated.
    This decrease 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 $4 billion more than
    originally estimated. Undistributed offsetting receipts were $1 billion
    higher than expected, thus reducing total outlays.
      Outlays for net interest were $227 billion, or $17 billion more than
    the original estimate. This increase was the net effect of changes in
    interest rates from those initially assumed, changes in borrowing
    requirements due to differences in deficits, and technical factors.

      Reconciliation of Differences with Amounts Published by Treasury for
                                      2006

      Table 20-5 provides a reconciliation of the receipts, outlays, and
    deficit totals published by the Department of the Treasury in the
    September 2006 Monthly Treasury Statement and those published in this
    Budget. The Department of the Treasury made adjustments to the estimates
    for the Combined Statement of Receipts, Outlays, and Balances, which
    decreased receipts by $6 million and increased outlays by $499 million.
    Nearly all of the outlay adjustment was the correction of reporting for
    the Exchange Stabilization Fund. Additional adjustments for this Budget
    increased receipts and outlays by $579 million and $557 million,
    respectively. Several financial transactions that are not reported to
    the De

    [[Page 334]]

    partment of the Treasury, including those for the Affordable Housing
    Program, the Public Company Accounting Oversight Board, and the United
    Mine Workers of America benefit funds, are included in the budget.
    Reporting for these programs adds roughly equivalent amounts to outlays
    and receipts, with little impact on the deficit. Another significant
    conceptual difference in reporting is for the National Railroad
    Retirement Investment Trust (NRRIT). Reporting to the Department of the
    Treasury for the NRRIT is done with a one month lag so that the fiscal
    year total provided in the Treasury Combined Statement covers September
    2005 through August 2006. The budget has been adjusted to reflect
    transactions that occurred during the actual fiscal year, which begins
    in October.

    [[Page 335]]

                                  Table 20-5.  RECONCILIATION OF FINAL AMOUNTS FOR 2006
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                         Receipts         Outlays         Deficit
    ----------------------------------------------------------------------------------------------------------------
    Totals published by Treasury (September 30 MTS).................       2,406,681       2,654,379        -247,698
      Miscellaneous Treasury adjustments............................              -6             499            -505
                                                                     -----------------------------------------------
    Totals published by Treasury in Combined Statement..............       2,406,675       2,654,878        -248,203

      Affordable Housing Program....................................             307             307  ..............
      Public Company Accounting Oversight Board.....................             131             131  ..............
      United Mine Workers of America benefit funds..................             119             114               5
      National Railroad Retirement Investment Trust.................  ..............             -48              48
      Other.........................................................              22              53             -31
                                                                     -----------------------------------------------
      Total adjustments, net........................................             579             557              22

    Totals in the budget............................................       2,407,254       2,655,435        -248,181

    MEMORANDUM:
      Total change since year-end statement.........................             573           1,056            -483
    ----------------------------------------------------------------------------------------------------------------

      Part II:  HISTORICAL COMPARISON OF ACTUAL TO ESTIMATED SURPLUSES OR
                                    DEFICITS

      This part of the chapter compares estimated surpluses or deficits to
    actual outcomes over the last two and a half decades. The first section
    compares the estimate for the budget year of each budget with the
    subsequent actual result. The second section extends the comparison to
    the estimated surpluses or deficits 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 estimates of the surplus or deficit versus the
    subsequent actual outcomes.

                    Table 20-6.  COMPARISON OF ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS SINCE 1982
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                  Surplus          Differences due to
                                                or deficit ----------------------------------
                                                    (-)                                                     Actual
                     Budget                      estimated                                       Total    surplus or
                                                    for       Enacted    Economic  Technical  difference   deficit(-
                                                  budget    legislation   factors    factors                   )
                                                 year \1\
    ----------------------------------------------------------------------------------------------------------------

    1982......................................         -62          15        -70        -11        -66        -128
    1983......................................        -107         -12        -67        -22       -101        -208
    1984......................................        -203         -21         38         -0         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        -153
    1990......................................         -91         -21        -31        -79       -131        -221
    1991......................................         -63          21        -85       -143       -206        -269
    1992......................................        -281         -36        -21         48         -9        -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        -107
    1997......................................        -140           1         -4        121        118         -22
    1998......................................        -121          -9         48        151        190          69
    1999......................................          10         -22         56         82        116         126
    2000......................................         117         -42         88         73        119         236
    2001......................................         184        -129         32         41        -56         128
    2002......................................         231        -104       -201        -84       -389        -158
    2003......................................         -80         -86        -34       -177       -297        -378
    2004......................................        -307        -122        -22         39       -105        -412
    2005......................................        -364         -67        -11        123         45        -318
    2006......................................        -390        -141          6        277        142        -248

    Average...................................  ..........         -34        -12         26        -20   ..........
    Absolute average \2\......................  ..........          38         39         70         99   ..........
    Standard deviation........................  ..........          46         57         94        136   ..........
    ----------------------------------------------------------------------------------------------------------------
    \1\ Surplus or deficit estimate includes the effect of the budget's policy proposals.
    \2\ Absolute average is the average without regard to sign.

    Historical Comparison of Actual to Estimated Results for the Budget Year

      Table 20-6 compares the estimated and actual surpluses or deficits
    since the deficit estimated for 1982 in the 1982 Budget. The estimated
    surpluses or deficits for each budget include the Administration's
    policy proposals. Therefore, the original deficit estimate for 2006
    differs from that shown in Table 20-3, which is on a current services
    basis. Earlier comparisons of actual and estimated surpluses or deficits
    were on a policy basis, so for consistency the figures in Table 20-6 are
    on this basis.
      On average, the estimates for the budget year underestimated actual
    deficits (or overestimated actual surpluses) by $20 billion over the 25-
    year period. Policy outcomes that differed from the original proposals
    increased the deficit by an average of $34 billion. Differences between
    economic assumptions and actual economic performance increased the
    deficit an average of $12 billion. Differences due to these two factors
    were partly offset by technical revisions, which reduced the deficit an
    average of $26 billion.
      The relatively small average difference between actual and estimated
    deficits conceals a wide variation in the differences from budget to
    budget. The differences ranged from a $389 billion underestimate of the
    deficit to a $190 billion overestimate. The $389 billion underestimate,
    in the 2002 Budget, was due largely to receipt shortfalls related to the
    2001 recession and associated weak stock market performance. About a
    quarter of the underestimate was due to increased spending for recovery
    from the September 11, 2001 terrorist attacks, homeland security
    measures, and the war on terror, along with lower receipts due to tax
    relief in the March 2002 economic stimulus act. The $190 billion
    overestimate of the deficit 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.
      Because the average deficit 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 $99 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 deficit differences since 1982 is $136
    billion. Like the average absolute difference, this measure illustrates
    the high degree of variation in the difference between estimates and
    actual deficits.
      The large variability in errors in estimates of the surplus or deficit
    for the budget year underscores the inherent uncertainties in estimating
    the future path of the Federal budget. Some estimating errors are
    unavoidable, because of differences between the President's original
    budget proposals and the legislation that Congress subsequently enacts.
    Occasionally such differences are huge, such as additional
    appropriations for disaster recovery, homeland security, and war efforts
    in response to the terrorist attacks of September 11, 2001, which were
    obviously not envisioned in the

    [[Page 336]]

    President's Budget submitted the previous February. Even aside from
    differences in policy outcomes, errors in budget estimates can arise
    from new economic developments, unexpected changes in program costs,
    shifts in taxpayer behavior, and other factors. The budget impact of
    changes in economic assumptions is discussed further in Chapter 12 of
    this volume, ``Economic Assumptions.''

        Five-Year Comparison of Actual to Estimated Surpluses or Deficits

      The substantial difference between actual surpluses or deficits 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 20-7 shows the summary statistics for the
    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 of
    1990.
      On average, the budget estimates since 1982 overstated the deficit in
    the current year by $26 billion, but underestimated the deficit in the
    budget year by $20 billion. The budget estimates understated the deficit
    in the years following, by amounts growing from $59 billion for BY+1 to
    $141 billion for BY+4. While these results suggest a tendency to
    underestimate deficits 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 deficits
    grows dramatically over the six years from CY through BY+4, from $58
    billion in the current year to $99 billion for the budget year, to $269
    billion for BY+4. While under- and overestimates of the deficit 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 deficit differences shows the same pattern.
    The standard deviation grows from $71 billion for current year estimates
    to $136 billion for the budget year estimates and continues to increase
    steadily as the estimates extend further out, reaching $289 billion for
    BY+4.

    [[Page 337]]

    Table 20-7.  DIFFERENCES BETWEEN ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS FOR FIVE-YEAR BUDGET ESTIMATES SINCE
                                                          1982
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                 Estimate for budget year plus
                                                     Current     Budget  -------------------------------------------
                                                       year       year                            Three       Four
                                                     estimate   estimate   One year  Two years    years      years
                                                                            (BY+1)     (BY+2)     (BY+3)     (BY+4)
    ----------------------------------------------------------------------------------------------------------------
    Average difference \1\........................         26        -20        -59        -97       -128       -141
    Average absolute difference \2\...............         58         99        149        202        245        269
    Standard deviation............................         71        136        202        249        271        289
    ----------------------------------------------------------------------------------------------------------------
    \1\ A positive figure represents an underestimate of the surplus or an overestimate of the deficit.
    \2\ Average absolute difference is the difference without regard to sign.

      The estimates of variability in the difference between estimated and
    actual deficits can be used to construct a range of uncertainty around a
    given set of estimates. Statistically, if these differences are normally
    distributed, the actual deficit will be within a range of two standard
    deviations above or below the estimate about 90 percent of the time.
    Chart 20-1 shows this range of two standard deviations applied to the
    deficit estimates in this Budget. This chart illustrates that unforeseen
    economic developments, policy outcomes, or other factors could give rise
    to large swings in the deficit estimates.