MISSOURI COMMENTARY: THE UNEASY ART OF PREDICTING BUDGET BALANCES

It's the season to be jolly, and it's also the season to crunch the numbers. For a change, the crunchers are fairly jolly this season.

Now that the election is over, the budget formulators for the president and the Congress sharpen their pencils and make their forecasts not only for the year ahead, but nowadays for the year 2002 as well. That's the magic date by which both the president and the Congress express confidence that the budget will be in balance. Neither side, however, is confident that the other knows how to achieve this.

The season's fiscal blessing is that the pain of balancing the books has been considerably eased by the uninterrupted positive performance of the economy.

In the 1995-1996 pre-election time frame, the Republicans were forecasting gloomy economic performance with consequentially gloomy forecasts of budget deficits. Understandably, they couldn't, by their predictions, go into the fall election leaving the impression they felt Bill Clinton was an astute guardian of our nation's economic well-being.

Conversely, Clinton had to be the confident optimist and pledge that the economy would remain sound and the deficit would be low. Clinton bet right. The deficit for last year was $107 billion, the lowest since the Jimmy Carter years.

The election is over and the Republicans are now free to lower their deficit estimates a good bit. They don't have to be as optimistic as Clinton, but they can move away from the gloom of pre-campaign forecasts.

The president and the Congress are fairly close on raw numbers -- within $50 billion of each other by 2002. Yet there are some huge imponderables along the way.

-- Tax cuts. The Republicans want substantial tax reductions which the Supply Side wing of their party claim will pay for themselves along the way. The deficit hawk Republicans in their hearts don't believe it. The Democrats decry is as a dangerous return to Reagonomics. But not to be left totally out of the tax cut game, Clinton counters with some modest decreases of his own. Unless you believe in the tooth fairy, you have to assume that the more you cut taxes, the more difficult you make the business of balancing the budget.

-- The Consumer Price Index. One of Washington's longest-held arcane secrets has been that the CPI significantly overstates inflation. A congressionally appointed committee reported on this subject last week. A 1.1 percent savings on the CPI is megabillions between now and the magic year of 2002.

The CPI affects various government programs, principally Social Security and military retirement. (It also affects a massive number of private labor contracts.) Any move to reconfigure the CPI downward -- regardless of what the economists, actuaries and academicians say -- will generate furious opposition. The Republicans will await Clinton's move on this dicey item. Having felt done in on Medicare in 1996, they will not be eager to act alone on Social Security reform in the next election. Clinton will proceed with all deliberate deliberateness.

-- The innate impetus to spend. Despite protestations to the contrary, even super conservatives like to spend when they feel the urge. Phil Gramm, R-Texas, states "When it comes to Texas, I'll pork it with the best of them." Sen.-elect Sam Brownback, R-Kansas, says "I'm for balancing the budget by 2002; however, I'm not for cutting spending in Kansas. I'll do what I can to get our share of it to Kansas."

-- The art of forecasting. No one can safely predict the course of the economy between now and 2002. In any upcoming year, the forecast can be significantly off the mark.

In fiscal 1996, the government collected more taxes and spent less money than expected, with the result of a much lower deficit than had been predicted a year ago.

If predictions can be significantly off the mark from one year to the next, how reliable are predictions for 2002? Does the economy remain consistently positive for the next six years? Might there be a recession between now and then? How long, how deep? Will Medicare costs grow modestly or spiral upwards? If there is a tax cut, how big? Does it generate any Supply Side uplift? Are any budgetary savings generated along the way by addressing the CPI discrepancy?

Forecasting a balanced budget in 2002 is at best an educated guess made by well-intentioned people. Don't bet your house on it.

~Tom Eagleton of St. Louis is a former U.S. senator from Missouri.