BIAS IN OMBS ECONOMIC FORECASTS AND BUDGET PROPOSALS

The Office of Management and Budget (OMB) annually submits the Preside nt's budget for the U.S. government to the Congress. The economic fore casts and revenue and outlay proposals contained in the budget have be en criticized as biased, especially during the 1980s. Tests for bias i n one year ahead proposals for the 1963-89 period show no bias in econ omic forecasts and revenue estimates, but substantial bias in outlay p roposals. Most outlay proposals are consistently less than actual outc omes, accounting for underprediction of the Federal deficit. OMB outla y proposals appear to be influenced by politics. Republican administra tions show more significant proposal biases, with defense proposals hi gher and domestic outlay proposals lower than outcomes.