In January 2001, CBO Projected an $889 Billion Surplus by 2011.

[Pilotguy]

So what happened? George W Bush happened.

"In the absence of significant legislative changes and assuming that the economy follows the path described in this report, the Congressional Budget Office (CBO) projects that the total surplus will reach $281 billion in 2001. Such surpluses are projected to rise in the future, approaching $889 billion in 2011 and accumulating to $5.6 trillion over the 2002-2011 period. That total is about $1 trillion higher than the cumulative surplus projected for 2001 through 2010 in CBO's July 2000 report. About $600 billion of the $1 trillion increase is due simply to shifting the 10-year horizon out one year, to 2011, and dropping 2001 from the total. The remaining $441 billion results mostly from changes in the economic forecast, which are offset in part by the cost of legislation enacted since CBO's previous report.

Perhaps more important to some policymakers, the on-budget surplus (which excludes the spending and revenues of Social Security and the Postal Service) is anticipated to equal $125 billion in 2001--a nearly $40 billion increase from its level in 2000. The on-budget surplus will continue growing over the 10-year period, CBO projects, exceeding $550 billion in 2011 and totaling over $3.1 trillion between 2002 and 2011.

The growth of economic activity--as measured by real (inflation-adjusted) gross domestic product (GDP)--is likely to slow from its rapid pace of recent years to about 2.4 percent this calendar year. Spending by consumers and investment by businesses slowed late last year in response to the rise in interest rates during 1999 and early 2000 and to reduced expectations about future business conditions. Although the Federal Reserve Board in early January responded to the slower growth by lowering the federal funds rate, spending by consumers and businesses is likely to remain weak in the near term. However, lower interest rates this year will set the stage for moderately faster growth of spending next year. Thus, CBO forecasts that economic growth will climb to about 3.4 percent in calendar year 2002.

How is it, then, that budget projections are getting better when the economy seems to be getting worse? There are two main answers to that question. First of all, the dip in the economy is expected to be short-lived. CBO forecasts that economic growth will pick up again by the middle of 2001. Over the 2002-2011 period, CBO anticipates that growth of real GDP will average a little over 3 percent per year--about 0.3 percentage points above its 10-year projection in July. That increase reflects a change in CBO's method of calculating the contribution of capital to growth, revised data showing greater investment for the past three years, and higher projected levels of investment. Changes due to higher projections of GDP and other economic factors boost projected revenues by $802 billion from 2001 through 2010.

Second, recent economic conditions and actions by the Federal Reserve have led CBO to significantly reduce its forecast of interest rates in 2001 and 2002 (but that factor is not nearly as large as the first). Lower near-term interest rates and reduced levels of projected debt across the 10-year period (due to higher projected surpluses) combine to increase estimates of the surplus by about $140 billion from 2001 through 2010."

http://www.cbo.gov/doc.cfm?index=2727&type=0&sequence=1

[OHdem10]

1. These are the Messages the Democrats should be putting out

there where the American people can learn them.

[jorno67]

2. +1

[City Lights]

4. +2. eom

[dissidentboomer]

3. Yep. I spent 4 years, or so,

of my career helping to get that done, for what it was worth. Many of us worked really hard under pressure - there were (are) shot nerves, failed marriages and careers, good people who lost jobs in their 40's and 50's and probably never recovered financially. As you imply, it was wasted and we all know why and we know the culprits. It still makes me sick.... and really angry. I saw a couple of other things not related to this but to foreign policy, southeast Asia in the '80's, that made me a tad ill but this one took the cake for me. Made me very cynical, once I realized that, just as now, the reduction could have been accomplished in ways that were better for the economy and preserved jobs, important functions, etc. but might have cost a few trust fund babies and kazillionaires a jag or two. I'll never get over it and now I get to watch it again. :7 Oh well, other generations have seen worse, I reckon.

Oh.... NO, I will not tell anyone under any circumstances what I did or what I do. Ok?

[Igel]

5. Crappy projection.

And its crappiness was discussed at the time.

In 12/00 it was fairly clear a recession was looming. All the indicators pointed to that. We'd had a great debate over whether * was "talking down the economy" or not. Then in 2/01 the recession that was in the works met the required criteria.

The CBO assumed not only would growth increase from the state of affairs after the NASDAQ correction and a stock-market "correction" but that for another decade there'd be no recession. The CBO itself complained about the assumptions they had to make for that projection. They considered it unreasonable, but they couldn't do more than discuss the unreasonableness in things like press conferences and interviews. The official documents reflected the official assumptions. That gold was pyrite, but they had to say it was pure Au.

Imagine a projection made in 1/2008, assuming that the conditions for the previous two fiscal years would continue. We had had slow growth for a couple of years, from 9/05 to 9/07, unemployment was at something like 4.8%, deficits had gone from $450 billion down to around $200 for 2007 and were slated for decreasing even more in 2008, and that was *after* increasing government most years. We should be back in the black again, no deficits and paying down the debt. Okay, there's that recession thing declared retroactively for 12/2007, but that's not part of your assumptions. As of 9/2007, things still looked good as far as the federal budget was concerned. Then you look at the present, and you think, "What happened?"

Instead in spring 2008 we had a $200+ billion stimulus package that cranked the deficit back up. Then that fall revenues began to fall short of projections, TARP happened with its optional $700 billion in two "tranches", one for Bush to spend and one for Obama, and then after the inauguration a spending bill for $400+ billion was signed (* had refused to) and there was the $800 billion or so second stimulus. (And still there were near-record tax revenues.) Again, a pesky little recession got in the way followed by a financial crisis a generation or more in the making.

The point: Ten-year budget projections would be useful for toilet paper, if they were on something that was actually reasonable to use for toilet paper. As long as the toner density isn't too great, I guess you could shred them and use them for mulch.

[dissidentboomer]

6. So what??? Who gives a rat's ass if the projection was bad? We HAD

a goddam balanced budget and the criminals in the white house and congress subsequently FLOODED US WITH debt - unnecessarily. We would have been in much better position to DEAL WITH a recession in the '00's without incredible stupidity and we were SET UP to deal with it without major pain. THAT'S the point.