Episode 156: The Government’s Rosy Outlook
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CBO's Static Forecasting of Federal Revenues
CBO is required to do what's called static forecasting, which is a fancy way of saying they've got to assume that when the government raises taxes, it has no effect on people's behavior. So here we have CBO saying, okay, we're forced to assume that if we raise tax rates, no one's behavior is going to change. And of course, they come up with this result that 80% of the time they end up over-predicting federal revenues. If you know by how much they're over or under-p predicting, we can take their current forecasts and simply adjust them by their historical errors," he said.
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