It has been reported in the nation’s newspapers that the Congressional Budget Office has revised its estimates of future U.S. deficits. The reports say that these revisions include a projected budget deficit in fiscal year 2004 of $480 billion. These reports are accurate. It has also been reported that the deficit for 2004 will be the largest in American history. This is also true — but only if you do not sensibly adjust that projected deficit for inflation.
The Consumer Price Index is a tool that allows economists to compare financial information about events that are separated in time. It’s easy to use: The mathematics of price inflation require nothing more advanced than a single multiplication calculation. Nevertheless, this calculation is typically not performed by those who write stories about deficits for large national newspapers.
In addition to this frequent error, BuzzCharts found that the CBO’s revised deficit for this year, 2003, will be considerably lower than had been anticipated. Earlier in the year the CBO warned America about a $450 billion deficit for 2003. I don’t blame the news media for its breathless and hyped reportage of that number, but doesn’t propriety require that members of the media similarly hype the new revelation that the number was $54 billion too high?
As for next year, yes, the 2004 budget is projected to be $480 billion; yes, that number, un-adjusted for inflation or growth in GDP is larger than this year’s deficit; but the same forecasting model asserts that the deficit falls every single year after 2004 through the year 2013 — which is the last year covered by the forecast.
One can question the CBO forecasts — by their very nature forecasts are estimates and subject to revision. But it’s very odd indeed for public commentators to uncritically accept bad budget news about 2004 and in the same breath, reject good budget news about the years 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, and 2013 when both are based on exactly the same model. There may be some genuine threats to the Bush Boom out there, such as a minor protectionist streak in the administration and an unwise tendency to jawbone the dollar down, but the deficits are not among those real threats.
— Jerry Bowyer is a successful entrepreneur who hosts a radio program and a television program dedicated to business and leadership. He is the author of The Bush Boom: How a ‘Misunderestimated’ President Fixed Our Broken Economy. He can be reached through www.jerrybowyer.com.