Government: Plan Thyself

July 23, 1951

In its budget estimates for the fiscal year 1951 the Administration made a series of bad guesses. The President originally figured that the government would spend $42,400,000,000, take in $37,300,000,000, and end up with a deficit of $5,100,000,000.

This estimate was made in January 1950. Had Mr. Truman foreseen the outbreak of war in Korea that June, his deficit guess would probably have been even larger. Last January, after six months of actual fighting and mobilization, he turned in a revised estimate reducing the expected Federal deficit to $2,700,000,000. Less than three months later this was changed to an expected surplus of $2,900,000,000. When the fiscal year had actually closed on June 30 last, actual government expenditures had come to $44,700,000,000, receipts to $48,000,000,000, and the surplus to $3,300,000,000.

So in spite of an unexpected year of war, an estimated deficit of $5,100,000,000 became an actual surplus of $3,300,000,000. This was an error of $8,400,000,000—an amount greater than the total average annual expenditures for all purposes in the Roosevelt Administrations prior to the second world war. This huge error merely comes on top of a record of chronic bad guesses. The table below compares, for each year since 1934, the President’s estimates (in millions of dollars) of expenditures, receipts, and deficits for the following fiscal year with the realities of that year.

Even if we disregard the five war years, 1942 to 1946 inclusive, and the wartime year 1951, we find that in the remaining eleven peacetime years there was an average error of 20 percent in estimating expenditures, an average error of 13 percent in estimating revenues, and appalling errors and reversals in estimating surpluses and deficits. In short, a government that presumes to plan and forecast for everybody, cannot even estimate with reasonable accuracy what its own expenditures, revenues, and surplus or deficit are going to be. It cannot predict even its own action, and makes errors of a dimension that would bankrupt a private business in no time.