Estimates vs. Realities

January 19, 1953

Early January is the time when the forecasters, many of them in the government, tell us exactly what the gross’ national product is going to be in the year ahead, and how much 45,500,000 different families are going to spend. Unfortunately for the forecasts, it is also the time when the President presents his budget. The record for the completed fiscal year behind him, as well as his revised estimates for the current fiscal year, remind us that, so far from being able to predict what everybody is going to earn and spend in the year ahead, government officials can’t even predict successfully what the government itself is going to take in and hand out.

Yet contrast the appallingly bad estimates of our own Presidents over the last twenty years with those of George Goschen, for instance, the British Chancellor of the Exchequer from 1886 to 1892. He had none of our ultra-modern statistical techniques. He was utterly ignorant of Keynesian economics. But somehow, year after year, he stumbled on incredibly accurate budget forecasts. For 1892–93 for example, he forecast expenditures at £90,253,000; actual expenditures were £90,375,000. He forecast revenues at £90,453,000; actual revenues were £90,395,000. He missed by only six-hundredths of 1 percent.

The table below compares, for each year since 1934, the President’s estimates (in millions of dollars) of expenditures, receipts, and deficits for the following fiscal year with the realities of that year. We still do not have a responsible budget system. And maybe, also, we haven’t learned as much about economic forecasting in the last 60 years as we think we have.