The figure below, from one of the administration’s recent budget reports, provides a range of uncertainty around their central forecast of the deficit as a share of GDP. Using the errors from past forecast, we can get a rough sense of the confidence interval around our current estimates.
By 2019, the deficit has a 90% chance of being within a range of +4.6% of GDP and -9.1% of GDP. And this is just the five-year range. The 10-year range fans out much more than what you see below.
I’m not saying we shouldn’t make such forecasts. Within a few years of the forecast, they provide useful guidance of the budget path under a number of assumptions (each of which have their own range of uncertainty). I’m saying we should be a) very mindful that these are estimates that grow increasingly uncertain over time and thus b) very careful about asserting certain policy courses based on them.
Source: OMB, Analytical Perspectives