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- This report is grounded in what budget people do -- including forecasting revenues,
calculating budgets needed to continue current levels of government services, and
dealing with unexpected fluctuations in economic circumstances. Few people find these
topics interesting. Many consider them only in order to examine the basis for trends
that affect them adversely. This report reflects this reality. The text, designed
to be a "quick read," summarizes its conclusions and the reasons for them.
The supporting details appear in appendices.
Readers should recognize that two types of forecasts appear in the text without
repetitious reminders of how they differ. The forecasts -- of revenues from current
taxes, spending for current services, and thus shortfalls and fiscal flexibility
over the next decade -- are built just as revenue and spending forecasts are built
for annual government budgets. They are professional forecasts of circumstances beyond
the control of decision-makers. Since the estimates reflect a close consensus among
professional estimators and a widely accepted methodology, they closely approximate
what other professionals would produce if asked to address the same subjects. Such
forecasts are never exactly right. They are usually close to right. And, right or
not, they are generally considered authoritative.
Forecasts of the responses of decision-makers to predicted fiscal circumstances
are another matter. Their empirical base is inherently weaker. There is no close
consensus on how to predict political behavior. Actions of participants in the political
process can affect outcomes in ways experts are unable to predict as easily as economic
and tax collection growth, public school enrollment, and inflation. Forecasts of
how decision-makers will respond to the predicted fiscal circumstances are not authoritative;
they inherently reflect predictions of what people with power to decide will decide.
Their only empirical base is how similarly situated decision-makers, primarily legislators
and governors, have made similar decisions when confronted with similar circumstances
in the past. This approach makes sense in specifying a baseline of what policy would
likely be, given unchanged behavior by participants. But it is only a starting point
in considering the range of policy choices available to the participants.
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© 1999 The National Center for Public Policy and Higher Education