The Concord Coalition, 2011, “Process Reform as Deficit Reduction: A First Step, But No Substitute for Policy”. Washington, D.C.
Congressional Budget Office, 2011, “Medicare’s Payments to Physicians: The Budgetary Impact of Alternative Policies”. Washington, D.C.
Mauro, Paolo, ed., 2011, “Chipping Away at the Public Debt: Sources of Failure and Keys to Success in Fiscal Adjustment” (Wiley, forthcoming).
Muhleisen, Martin, Stephan Danninger, David Hauner, Kornelia Krajnyak, and Bennett Sutton, 1995, “How Do Canadian Budget Forecasts Compare With Those of Other Industrial Countries,?” IMF Working Paper 05/66 (Washington, International Monetary Fund)
Orszag, Peter R., 2011, “Health Care, Political Polarization, and Our Fiscal Future”, Presentation at the Peterson Institute for International Economics.
Peterson-Pew Commission on Budget Reform and The Committee for a Responsible Federal Budget, 2011, “Peterson-Pew Fiscal Targets: Ten Issues in Designing a New Debt Failsafe” Washington, D.C.
This chapter was prepared by Martin Sommer. The author would like to thank Andrea Schaechter, Teresa Curristine, and Jiri Jonas for helpful discussions.
The Budget Enforcement Act of 1990 (BEA) established statutory caps on discretionary appropriations and a pay-as-you-go mechanism for revenue and mandatory spending. Both rules were later revised, expiring in 2002.
The pay-as-you-go (PAYGO) rules stipulate that new deficit-raising policies must be financed by other measures over a specified time period. Certain programs (for example, legislation with an “emergency” designation, Social Security, or the Bush tax cuts for the middle class) were exempt from these rules.
Some cross-country research suggests that, even during the pre-crisis period, the United States experienced unusually large deviations of budgetary outcomes relative to the administration’s plans (Muhleisen et al, 2005), which is unlikely to be explained by macroeconomic surprises.
As of last November (when the administration prepared its macroeconomic framework), the administration’s 2012 growth forecast of 4 percent (Q4-on-Q4) was in the middle of the Federal Reserve FOMC members’ central tendency. The administration’s 2013 growth projection of 4.5 percent was at the upper bound of the central tendency. Longer-term comparisons are not possible due to limited data availability.