…while upbeat, the administration’s forecasts are within the range of reasonable possibilities, according to economists we consulted.
Figure 1 from “Economic Projections and the Budget Outlook, February 28, 2009.CBO has presented their assessment of the stimulus bill in this report released today. The key graph regarding the impact on the output gap is below.
Figure 1 from CBO, Estimated Macroeconomic Impacts of the American Recovery and Reinvestment Act of 2009, March 2, 2009.Notice that CBO has presented the impact based upon a range of estimated multipliers. Hence, the calculations are transparent.
I will observe an interesting correlation: a good number of those who critique the Obama Administration’s forecasts the most vociferously are also typically the ones who had no criticisms of the previous Administration’s tendency to place off-budgeting process expenditures for Iraq and Afghanistan, as well as emergency expenditures . For additional discussion, see Jeff Frankel‘s comprehensive assessment.
One Response to “Is the Administration’s GDP Forecast Too Rosy?”
Eric Sprott says in his months Markets at a Glance:Firstly, they project GDP growth of –1.2% for this fiscal year, i.e. a mild recession. Based on the huge negative revision to 4th quarter GDP just released (which, incidentally, is the first quarter of this fiscal year), for the budget’s projection to be even close implies that the US is already out of recession this quarter and will grow strongly for the remainder of the year! Absolute nonsense, but it gets even more ridiculous. The budget then projects strong economic growth next year of 3.2%, to be followed over the next three years by real GDP growth of 4.0%, 4.6%, and 4.2% up to fiscal 2013. After this period of superlative growth under Obama’s watch, the economy will then return to a ‘normal long term growth rate’ of 2.6% per year thereafter. All told, according to the budget, for the six years 2008-2013 inclusive (a period that includes a severe global financial crisis and a once in a lifetime global depression) the US economy is projected to grow a cumulative 17.1% which, moronically, is even greater than it would have grown if it grew by the ‘long term growth rate’ of 2.6% over this six year period (16.6% cumulative) instead. In short, the depression, the financial crisis and the banking catastrophe are good for the economy!!