Feb. 14, 2016 SIGN IN | REGISTER

My Federal Budget Crystal Ball for Next Year

Although Iíve written them myself from time to time, more often than not Iíve found ďyear in reviewĒ stories to be a snooze. And given that December is only three months into the federal fiscal year, theyíre not really appropriate when it comes to the budget anyway.

So rather than remind everyone about what did or didnít happen in 2010 when it comes to revenues, spending, deficits and debt, itís far more interesting and fun to predict whatís likely to happen next year.

1. In general, 2011 is going to be very disappointing as far as the federal budget is concerned. Anyone who thinks there are going to be major changes in the outlook for federal spending and revenues will be very unhappy. Gridlock and stalemate are going to be the words most often used in 2011 to characterize every step in the fiscal 2012 budget debate. With tea party types defining compromise as a four-letter word and negotiations increasingly seen as collaborating with the enemy, especially on budget issues, itís hard to see how much of anything ó process or substance ó will get done on the budget next year.

2. The only reduction in the deficit will come from improvements in the economy. One of the most important budget developments next year will be the economic forecast included in the Obama administrationís fiscal 2012 budget, which must be sent to Congress by Feb. 7. As much as the White House might like to grab a few headlines early in the year by being as optimistic as possible, its better strategy will be to stay at the low range of optimism in February and then produce a steady series of better-than-expected economic and budget results as the year goes along.

With Wall Street and others starting to predict faster economic growth than was expected only a month or so ago, continuing improvements in the deficit outlook are definitely possible and perhaps even likely. Even if thatís not the case, a conservative early forecast could still benefit the White House. How much different would the political situation be if, instead of predicting that unemployment would rise to only 8 percent in 2009, the administration had blamed Bush policies for unemployment and then had predicted the rate would rise to 12 percent before starting to fall? Because it was too optimistic, the Obama administration took a beating for every 10th of a point the unemployment rate rose above its original estimate.

3. The Bowles-Simpson deficit reduction commission will quickly fade into oblivion. Other than an occasional reminder that a particular deficit reduction option was in the commissionís final plan or a panel discussion at an economic or budget conference, Bowles-Simpson wonít be discussed very much in 2011. Someone may offer the final Bowles-Simpson plan as an amendment to the budget resolutions considered by the House and Senate next year (see Prediction 4), but no one should think it is going to be supported by a majority or will have any impact.

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