Tuesday morning's New York Times had an interesting article on the federal budget and the fact that annual deficits are projected out as far as the eye can see. The federal forecast extends through 2020, and it shows year after year of trillions upon trillions of dollars of red ink.
One aspect of this I've always wondered about is: how accurate have past federal forecasts been about surplus/deficit projections? Intuitively, I had always assumed Washington's projections would have leaned heavily toward the rosy side. It turns out this supposition was correct.
The Times put together a very interesting graphic – shown below – illustrating, over the years, what the projection of the ensuing ten years would be (shown in light blue) versus the reality (shown in dark blue). As you can see (although I know the faint blue is hard to discern), in almost all cases, government projections were too high by hundreds of billions of dollars. I've highlighted some of these clusters of optimism with the rounded red rectangles.
Even the forecast from last year (the light blue line on the right side of the graph) has already been shifted downward (e.g. much worse deficits) just one year later.
What does this mean? It means that, even though the projections for the next ten years are the worst ever in the history of the United States, they are probably far too optimistic.
