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

    [[Page 329]]

      ======================================================================

                            DIMENSIONS OF THE BUDGET

    ========================================================================

    [[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 2007 with the current services estimates shown in
    the 2007 Budget, published in February 2006.
      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 and a half
    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 2007

       This part of the chapter compares the actual receipts, outlays, and
    deficit for 2007 with the current services estimates shown in the 2007
    Budget, published in February 2006. \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 2007 previously published by the Department of the Treasury.
    ---------------------------------------------------------------------------
      \1\ The current services concept is discussed in Chapter 25, ``Current
    Services Estimates.'' For mandatory programs and receipts, the February
    2006 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 2007 were $2,568 billion, $124 billion more than
    the $2,444 billion current services estimate in the 2007 Budget
    (February 2006). 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 2007 RECEIPTS WITH THE INITIAL CURRENT SERVICES  ESTIMATES
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                             Enacted
                                               February   legislation/    Different  Technical     Net
                                                 2006    administrative   economic     factors    change     Actual
                                               estimate      actions     conditions
    ----------------------------------------------------------------------------------------------------------------
    Individual income taxes.................     1,119           -38             7         75         45      1,163
    Corporate income taxes..................       265           -12            15        102        105        370
    Social insurance and retirement receipts       884   ..............        -10         -4        -15        870
    Excise taxes............................        75            -*            -2         -8        -10         65
    Estate and gift taxes...................        24             1             *          1          2         26
    Customs duties..........................        29            -1             1         -3         -3         26
    Miscellaneous receipts..................        48   ..............          2         -3         -1         48
                                             -----------------------------------------------------------------------
      Total receipts........................     2,444           -49            13        161        124      2,568
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.

       Policy differences. Several laws were enacted after February 2006
    that reduced 2007 receipts by a net $49 billion. The provisions of the
    Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA),
    primarily the increase in the alternative minimum tax (AMT) exemption
    amount and a modification of the timing of estimated tax payments by
    corporations, reduced 2007 receipts by a net $34 billion. Enactment of
    the Tax Relief and Health Care Act of 2006, which extended a number of
    expired or expiring tax provisions,

    [[Page 332]]

    reduced 2007 receipts by an additional $16 billion. The effects of other
    legislative and administrative changes on 2007 receipts were largely
    offsetting.
       Economic differences. Differences between the economic assumptions
    upon which the current services estimates were based and actual economic
    performance increased 2007 receipts by a net $13 billion above the
    February 2006 estimate. Higher-than-expected corporation income tax
    liability in tax years 2006 and 2007, attributable to higher-than-
    expected taxable profits, increased collections of 2007 corporation
    income taxes $15 billion above the February 2006 estimate. Higher-than-
    anticipated non-wage sources of personal income, which more than offset
    lower-than-anticipated wages and salaries, were in large part
    responsible for the increase in individual income taxes of a net $7
    billion. These increases in individual and corporation income taxes were
    partially offset by a $10 billion decrease in social insurance and
    retirement receipts, attributable in large part to lower-than-expected
    wages and salaries. Differences between anticipated and actual economic
    performance increased other sources of receipts by a net $1 billion.
       Technical reestimates. Technical factors increased receipts by a net
    $161 billion above the February 2006 current services estimate. This net
    increase was in large part attributable to higher-than-expected
    collections of individual and corporation income taxes and estate and
    gift taxes, which were partially offset by lower-than-expected
    collections of other sources of receipts. Different collection patterns
    and effective tax rates than assumed in February 2006 were primarily
    responsible for the higher-than-anticipated collections of individual
    and corporation income taxes of $75 billion and $102 billion,
    respectively. Greater-than-anticipated numbers and values of taxable
    estates increased 2007 receipts an additional $1 billion above the
    February 2006 estimate. Court decisions that effectively invalidated
    part of the Federal telephone tax were in large part responsible for the
    $8 billion reduction in excise tax collections relative to the February
    2006 estimate. Technical factors reduced collections of the remaining
    sources of receipts (social insurance and retirement receipts, customs
    duties and miscellaneous receipts) below the February 2006 estimates by
    smaller amounts.

                                     Outlays

      Outlays for 2007 were $2,730 billion, $30 billion more than the $2,701
    billion current services estimate in the 2007 Budget (February 2006).
       Table 20-2 distributes the $30 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.
    ---------------------------------------------------------------------------

      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 2007, policy changes
    increased outlays by an estimated $133 billion relative to the initial
    current services estimates.
      Policy changes increased discretionary outlays by $124 billion.
    Defense discretionary outlays increased by $105 billion and nondefense
    discretionary outlays increased by $19 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, veterans' care, and hurricane recovery in 2006 and 2007. Policy
    changes increased mandatory outlays by a net $6 billion

               Table 20-2.  COMPARISON OF ACTUAL 2007 OUTLAYS WITH THE INITIAL CURRENT SERVICES ESTIMATES
                                                  (Outlays in billions)
    ----------------------------------------------------------------------------------------------------------------
                                                         Current                   Changes
                                                         Services -----------------------------------------
                                                          (Feb.                                     Total    Actual
                                                          2006)     Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Discretionary:
      Defense.........................................        463       105  ........        -18        86       549
      Nondefense......................................        500        19  ........        -25        -7       493
                                                       -------------------------------------------------------------
        Subtotal, discretionary.......................        962       124  ........        -44        80     1,042

    Mandatory:
      Social Security.................................        581  ........         3         -3         *       581
      Medicare and Medicaid...........................        589         3        -1        -29       -28       561
      Other programs..................................        324         3         1        -19       -16       308
                                                       -------------------------------------------------------------
        Subtotal, mandatory...........................      1,495         6         2        -51       -44     1,451

    Net interest......................................        244         4         3        -14        -7       237
                                                       -------------------------------------------------------------
        Total outlays.................................      2,701       133         6       -109        30     2,730
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.

    [[Page 333]]

    above current law. This increase reflects a $3.5 billion increase in
    outlays for the Commodity Credit Corporation, enacted in the Emergency
    Supplemental Appropriations and Additional Supplemental Appropriations
    for Agriculture and Other Emergency Assistance Act for 2007, and a $3
    billion increase in Medicare outlays, enacted in the Tax Relief and
    Health Care Act of 2006. Debt service costs associated with the policy
    receipt and outlay changes were $4 billion.

      Economic conditions that differed from those forecast in February 2006
    resulted in a net increase in outlays of $6 billion. The most
    significant changes consist of a $3 billion increase in Social Security
    benefits largely resulting from higher cost-of-living adjustments and a
    $3 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 $109 billion. 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. Outlays for discretionary programs
    decreased an estimated $44 billion, because budget authority for both
    defense and nondefense programs was spent more slowly than expected.
    Outlays for mandatory programs decreased a net $51 billion, largely due
    to lower-than-anticipated outlays for Medicare, Medicaid, and the
    Commodity Credit Corporation. Net interest outlays also decreased by $14
    billion due to technical factors compared to the February 2006
    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 2007. This section combines these
    effects to show the net deficit impact of these differences.
      As shown in Table 20-3, the 2007 current services deficit was
    initially estimated to be $257 billion. The actual deficit was $162
    billion, which was a $95 billion decrease from the initial estimate.
    Receipts were $124 billion more than the initial estimate and outlays
    were $30 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 $183 billion. Economic conditions that differed from the
    initial assumptions in February 2006 accounted for an estimated $7
    billion decrease in the deficit. Technical factors reduced the deficit
    by an estimated $270 billion.

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

      This section compares the original 2007 outlay estimates for mandatory
    and related programs under current law in the 2007 Budget (February
    2006) 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.
      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 2007 and the amounts originally estimated in the 2007
    Budget, based on laws in effect at that time. Actual outlays for
    mandatory spending and net interest in 2007 were $1,688 billion, which
    was $50 billion less than the initial estimate of $1,738 billion, based
    on existing law in February 2006.
      As Table 20-4 shows, actual outlays for mandatory human resources
    programs were $1,525 billion, $28 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 $24 billion less
    than originally estimated. Undistributed offsetting receipts were $9
    billion lower than expected, thus increasing total outlays.
      Outlays for net interest were $237 billion or $7 billion less than the
    original estimate. This decrease was the net effect of changes in
    interest rates from those ini

              Table 20-3.  COMPARISON OF THE ACTUAL 2007 DEFICIT WITH THE INITIAL CURRENT SERVICES ESTIMATE
                                                      (In billions)
    ----------------------------------------------------------------------------------------------------------------
                                                          Current                  Changes
                                                         Services -----------------------------------------
                                                           (Feb.                                    Total    Actual
                                                           2006)    Policy   Economic  Technical   changes
    ----------------------------------------------------------------------------------------------------------------
    Receipts...........................................     2,444       -49        13        161       124     2,568
    Outlays............................................     2,701       133         6       -109        30     2,730
                                                        ------------------------------------------------------------
      Deficit..........................................       257       183        -7       -270       -95       162
    ----------------------------------------------------------------------------------------------------------------
    Note: Deficit changes are outlays minus receipts. For these changes, a plus indicates
    an increase in the deficit.

    [[Page 334]]

      Table 20-4.  COMPARISON OF ACTUAL AND ESTIMATED OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                              2007
                                                                           -----------------------------------------
                                                                              Feb. 2006
                                                                              estimate       Actual        Change
    ----------------------------------------------------------------------------------------------------------------
    Mandatory outlays:
      Human resources programs:
        Education, training, employment, and social services..............        10            12             2
        Health:
          Medicaid........................................................       199           191            -9
          Other...........................................................        22            23             1
                                                                           -----------------------------------------

          Total health....................................................       221           214            -7
        Medicare..........................................................       390           371           -19
        Income security:
          Retirement and disability.......................................       111           111             1
          Unemployment compensation.......................................        38            32            -5
          Food and nutrition assistance...................................        49            49            -*
          Other...........................................................       114           117             3
                                                                           -----------------------------------------

            Total, income security........................................       312           310            -2
        Social security...................................................       581           581             *
        Veterans benefits and services:
          Income security for veterans....................................        36            36            -*
          Other...........................................................         3             2            -1
                                                                           -----------------------------------------

            Total veterans benefits and services..........................        39            38            -2
                                                                           -----------------------------------------

            Total mandatory human resources programs......................     1,554         1,525           -28

      Other functions:
        Agriculture.......................................................        21            12            -9
        International.....................................................        -2            -6            -4
        Deposit insurance.................................................        -2            -1             *
        Other functions...................................................        15             4           -11
                                                                           -----------------------------------------

            Total, other functions........................................        32             8           -24

      Undistributed offsetting receipts:
        Employer share, employee retirement...............................       -62           -62             *
        Rents and royalties on the outer continental shelf................        -9            -7             3
        Other undistributed offsetting receipts...........................       -20           -14             6
                                                                           -----------------------------------------

            Total undistributed offsetting receipts.......................       -91           -82             9
                                                                           -----------------------------------------

          Total, mandatory................................................     1,495         1,451           -44

    Net interest:
      Interest on Treasury debt securities (gross)........................       438           430            -8
      Interest received by trust funds....................................      -181          -178             3
      Other interest......................................................       -13           -15            -2
                                                                           -----------------------------------------

            Total net interest............................................       244           237            -7
                                                                           -----------------------------------------

            Total outlays for mandatory and net interest..................     1,738         1,688           -50
    ----------------------------------------------------------------------------------------------------------------
    * $500 million or less.

    tially assumed, changes in borrowing requirements due to differences in
    deficits, and technical factors.

      Reconciliation of Differences with Amounts Published by Treasury for
                                      2007

      Table 20-5 provides a reconciliation of the receipts, outlays, and
    deficit totals published by the Department of the Treasury in the
    September 2007 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
    increased receipts by $2 million and decreased outlays by $6 million.
    Additional adjustments for this Budget increased receipts by $566

    [[Page 335]]

    million and decreased outlays by $258 million. Several financial
    transactions that are not reported to the Department of the Treasury,
    including those for the Affordable Housing Program, the Public Company
    Accounting Oversight Board, the Electric Reliability Organization, 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 2006 through August 2007. The budget has been adjusted
    to reflect transactions that occurred during the actual fiscal year,
    which begins in October.

                                  Table 20-5.  RECONCILIATION OF FINAL AMOUNTS FOR 2007
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                         Receipts         Outlays         Deficit
    ----------------------------------------------------------------------------------------------------------------
    Totals published by Treasury (September 30 MTS).................       2,567,671       2,730,505        -162,834
      Miscellaneous Treasury adjustments............................               2              -6               8
                                                                     -----------------------------------------------
    Totals published by Treasury in Combined Statement..............       2,567,673       2,730,499        -162,826

      Affordable Housing Program....................................             315             315  ..............
      Public Company Accounting Oversight Board.....................             122             122  ..............
      Electric Reliability Organization.............................              65              65  ..............
      United Mine Workers of America benefit funds..................              44              49              -5
      National Railroad Retirement Investment Trust.................  ..............            -782             782
      Other.........................................................              20             -27              47
                                                                     -----------------------------------------------

      Total adjustments, net........................................             566            -258             824

    Totals in the budget............................................       2,568,239       2,730,241        -162,002

    MEMORANDUM:
      Total change since year-end statement.........................             568            -264             832
    ----------------------------------------------------------------------------------------------------------------

       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.

    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 $12 billion over the 26-
    year period. Policy outcomes that differed from the original proposals
    increased the deficit by an average of $36 billion. Differences between
    economic assumptions and actual economic performance increased the
    deficit an average of $11 billion. Differences due to these two factors
    were partly offset by technical revisions, which reduced the deficit an
    average of $35 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 $192 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. As discussed above, the
    $192 billion overestimate of the deficit in the 2007 Budget stemmed
    largely from higher-than-anticipated collections of individual and
    corporation income taxes due to different collection patterns and
    effective tax rates than initially assumed, as well as lower-than-
    expected outlays due to technical factors.
      Because the average deficit difference obscures the degree of under-
    and overestimation in the historical

    [[Page 336]]

                    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        -413
    2005......................................        -364         -67        -11        123         45        -318
    2006......................................        -390        -141          6        277        142        -248
    2007......................................        -354         -85          7        270        192        -162

    Average...................................                     -36        -11         35        -12
    Absolute average \2\......................                      40         38         77        103
    Standard deviation........................                      47         56        104        140
    ----------------------------------------------------------------------------------------------------------------
    \1\ Surplus or deficit estimate includes the effect of the budget's policy proposals.

    \2\ Absolute average is the average without regard to sign.

    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 $103
    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 $140
    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 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 $28 billion, but underestimated the deficit in the
    budget year by $12 billion. The budget estimates understated the deficit
    in the years following, by amounts growing from $50 billion for BY+1 to
    $147 billion for BY+4. While

    [[Page 337]]

    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.

    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\........................         28        -12        -50        -89       -122       -147
    Average absolute difference \2\...............         59        103        149        197        235        269
    Standard deviation............................         70        140        202        246        266        284
    ----------------------------------------------------------------------------------------------------------------
    \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.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]