GovernmentExecutive.com

Fans of HBO's "Sex and the City" know that each show features a question. About 10 minutes into the program, after a great deal of exposition, central character Carrie Bradshaw types a question on her laptop that supposedly is the basis for her newspaper column but really is the crux of this particular episode.

That brings us to the federal budget.

I have tremendous admiration and respect for the analysts at the Office of Management and Budget, who do their jobs under great stress and with remarkable professionalism. Besides, many people at OMB read "Budget Battles" each week, so I have to admire their taste and selection of reading materials.

That said, the latest deficit estimates released in the midsession review of the Bush fiscal 2004 budget make one wonder.

The projected $304 billion fiscal 2003 deficit that OMB released when the president's budget was sent to Congress in February had to be increased by $151 billion - 50 percent - less than six months later. That original forecast was not made years before the fiscal year began, but rather four months after it started. And the economy didn't take an unexpected nose dive after the budget came out.

Which raises today's "Sex and the City"-like question:

Why should anyone believe anything OMB says anymore?

Many people involved with the federal budget in some way are going to rise up in great indignation over this question. After all, like anyone who does forecasting, OMB analysts must rely on a variety of assumptions about how the economy will perform, what legislative changes will be made and how each program will operate. All of these variables are difficult to predict with any degree of certainty.

But when you miss by as much as the administration did this time, you have to wonder whether there is something besides faulty assumptions at work.

The answer is almost certainly yes. When its budget was released earlier this year, the White House refused to project any additional spending for the war with Iraq - even though it was considered highly likely to happen. Like all presidential budgets, this one used an optimistic economic forecast. And, as is also the case in every president's budget, the fiscal 2003 deficit forecast assumed that all the administration's spending and taxing proposals would be enacted without change.

This means that the president's budget estimates - not just this one but every year's - should be given far less weight and credence than is currently the case. Except in the most unusual of circumstances - more sheer luck than anything else - deficit estimates and forecasts the White House puts out should be treated as what they are: political spin rather than analytical perfection. They are designed to further the president's program at least as much as they are intended to be correct.

This makes it hard to believe the administration's $475 billion deficit estimate for 2004 - or the steady improvement it is forecasting through 2007. The fiscal 2004 estimate again excludes any additional costs for the U.S. military presence in Iraq and Afghanistan, even though there is no doubt that they will be incurred. And as usual, it is based on a decidedly optimistic economic scenario.

Yet the headlines and reports concerning the midsession review again treated the administration's numbers as gospel. Most media coverage overlooked the increasingly obvious truth that the 2004 deficit could be $100 billion or more above what the White House projected, and that its long-term estimates could be equally out of whack.

There were some reports after the midsession review was released that the administration had intentionally overestimated the 2003 deficit by considerable amounts in the midsession review so that it would be able to provide what it considered to be good news when the fiscal year was actually over.

The truth, however, is that even if the deficit turns out to be substantially below the July estimate, the news will not be good. OMB will again have missed the forecast, this time only 10 weeks before the fiscal year ended. The fact that the deficit might be lower rather than higher will not make this any more acceptable.

All of this means two things:

First, it should be clear that the government either doesn't really know or won't really tell us what the deficit will be next year. In fact, it may not know what it will be this year either.

Second, because of this, those of us who follow the federal budget these days might identify less with the questioning Carrie Bradshaw and more with another "Sex and the City" character: Samantha Jones.

Question Of The Week

Last Week's Question. The question, which was straightforward and easy to research, asked, "In terms of outlays, what were the top four federal budget functions in fiscal 2002?" So why, then, did so many people get it wrong? It asked about "functions," not programs, agencies or departments. And it didn't say anything about on-budget spending only. The answer, from table 3.1 of the Historical Tables document that was submitted as part of the Bush administration's fiscal 2004 budget (PDF) is Social Security, National Defense, Income Security and Medicare.

The winner of the "I Won A 2003 Budget Battle" mouse pad, who was selected at random from all those who got it right, is Rita Reed, deputy assistant secretary for budget at the Department of Veterans Affairs in Washington.

This Week's Question. Reality TV - you either love or hate it. So why not a reality TV show about the federal budget? The question: What would it be called?

Click here to send in your response. Your answer must be received by 5 p.m. PDT on Saturday, Aug. 9, 2003. If there are similar winning answers, the "I Won A 2003 Budget Battle" mouse pad will go to the person selected at random from all those who submit the correct response. You must include your mailing address so the mouse pad can be sent if you are the winner.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the mouse pad actually gets to you.

COMMENTS

• Who in their right mind believes this administration on any thing? They obfuscate on every issue before the public. Stan is trying to do a good job, just read him for the humor. GovExec.com reader Posted August 8, 2003 8:27 AM
• I'm sorry, but Stan has no credibility when it comes to economic policy analysis. He likes to pull budget numbers "out of the air", as much as the OMB does. Just see his 7/23/03 article "Can you say $600 Billion?" Talk about not knowing the difference between "Fact" or "Fiction, Stan clearly doesn't. So my question is "Why should anyone believe anything Stan has to say on economic policies?" GovExec.com reader Posted August 6, 2003 9:13 AM