"The current outlook for the nation’s finances may be even grimmer than many now expect"

From the Wall Street Journal online: 

A new paper by the Federal Reserve Bank of St. Louis argues the Congressional Budget Office has for some time consistently underestimated how much the government would need to borrow.

According to bank researchers Kevin Kliesen and Daniel Thornton, “if past behavior is a guide to the future, our analysis suggests that projected future deficits will likely be larger than those currently projected.”


...According to the St. Louis Fed paper, the CBO has long struggled to project deficits correctly across any time horizon. When it comes to year-ahead projections, the paper says the CBO estimates are little better than just looking at what happened with the budget the year before....

Whatever it is that drives the CBO to forecast deficits incorrectly, the paper notes “the average under projection of the deficit in the recent decade is 1.30 percent of GDP.”

The CBO’s bias “suggests that deficit reduction programs that are projected to reduce the federal deficit by 1 percent of GDP over the next five years relative to the CBO’s projections may miss their mark by more than 1 percent of GDP.”

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Link: http://blogs.wsj.com/economics/2012/01/18/st-louis-fed-says-cbo-doesnt-forecast-deficits-well

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1%?  That means a $152 Billion error. ($15.176 TRILLION GDP x 1% = $152 Billion error.)  You say potato, I say....let's just call it a rounding error.

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