The administration’s recent budget proposals and economic report have generated considerable controversy. The prospect of historically large deficits through 1987 has especially unsettled many observers. This article evaluates the consistency of the administration’s economic projections, given the structure of the economy and past experience with lags in the effect of economic policy. The author uses a monetary model of the U.S. economy developed at the Federal Reserve Bank of St. Louis. The implications of the analysis also are applied to the federal budget outlook.