Summary

The critical issue for fiscal year 1992 budget projections was not whether any particular forecaster had more-accurate models or more-relevant data, but rather the capacity of any economic model to predict key turning points in economic performance; on this question, all forecasters to a large degree failed in 1992. The total budget for fiscal year 1990 was $290.2 billion--the highest in the nation's history, surpassing the previous record of $268.7 billion set in fiscal year 1991. This result appears to track rather well with the original deficit estimate of $280.9 billion. This rough comparability, however, masks (1) significant underlying variations between original receipt and outlay projections and actual results and (2) the impact of substantially lower deposit insurance spending than originally estimated. Actual 1992 receipts were more than $73 billion less than original estimates. Receipts from almost all sources fell below original estimates, led by individual income taxes ($53 billion) and social insurance taxes ($15.7 billion), due largely to the economy's not performing as well as assumed in the original estimates. Total outlays also were less than original estimates by about $64 billion. In 1992, the inherent difficulty of any economic model to accurately predict key turning points in the economy was clearly demonstrated, with significant implications for the accuracy of receipt and outlay estimates.

GAO found that: (1) 1992 economic forecasts were overestimated due to slower than expected economic growth and increases in spending; (2) the 1992 budget deficit totalled $290.2 billion; (3) 1992 receipts totalled $1.09 trillion, which was $73.4 billion less than the original estimate; (4) 1992 receipts were less than expected primarily due to reduced individual income and social insurance tax revenues; (5) 1992 outlays were $64 billion less than estimated, due to reduced deposit insurance outlays; (6) spending for deposit insurance activities was about $85 billion below original estimates; and (7) the budget deficit, when adjusted to exclude deposit insurance activities, would have exceeded estimates by $95 billion.