Saturday, February 28, 2009

Is "Rosy" Back? Economists Question Obama's Economic Forecasting

President Barack Obama seeks to slice the enormous federal budget deficit in half by 2013. This seems like an impossible task, especially in light of the magnitude of the deficit he inherited from Bush, the increasing rate of government spending, and the implementation of new tax cuts.

But if the economy recovers as rapidly as Obama anticipates that it will, he might actually accomplish his goal. Many economists, however, question the administration's economic forecasts because they greatly exceed the projections of private economists and the Congressional Budget Office.

Here's a clip from a Yahoo News article on the story:
"They used to joke during the Reagan years that the highest-ranking woman in the administration was Rosy Scenario," said Nariman Behravesh, the chief economist at IHS Global Insight, a major private forecasting firm.

Rosy may be back in town, said Behravesh, who called the Obama administration's forecasts "way too optimistic."

For its part, the administration insisted that it hadn't cooked the books to show greater growth, and thus more tax revenues, in coming years. But the administration forecast is far higher than the projections for growth in the overall economy, as measured by the gross domestic product, of many private analysts. . . .

GDP plays the biggest role in determining the accuracy of deficit forecasts because weaker-than-expected growth swells government payments for such things as unemployment benefits and food stamps and reduces tax receipts.

In its budget, the administration predicted that the overall economy, as measured by the gross domestic product, will shrink by 1.2 percent this year but will grow by a solid 3.2 percent in 2010. That growth would be followed by even stronger increases of 4 percent in 2011, 4.6 percent in 2012 and 4.2 percent in 2013.

By contrast, the consensus of forecasters surveyed by Blue Chip Economic Indicators in February predicted that the GDP will fall by a larger 1.9 percent this year and then increase at weaker rates of 2.1 percent in 2010, 2.9 percent in 2011 and 2012 and 2.8 percent in 2013.

7 comments:

Gordon said...

I don't know why he can't make up his own numbers for economic growth. He made up the numbers for his $2 trillion in budget cuts.

Anonymous said...

Sound like Rosy Palms, who never left us. How many years did Bush claim he'd half the deficit? Oh, he overpredicted the first year to give himself an easier target and still missed. Obama seems to take quite a few tricks from the master_ _ _ _ _

Desider

Darren Lenard Hutchinson said...

Decidere - maybe Rosy is the secret budget forecaster for all presidents! This seems to be a bipartisan problem: overestimating tax revenue and underestimating expenditure.

Hershblogger said...

"Rosy," indeed, are the savings based on projected spending in Iraq.

To show his savings, Obama goes out ten years and assumes we are still spending in Iraq at the current pace. George Bush didn't even contemplate this in his fever dreams. Besides, Obama already announced he will vastly reduce the cost by August 2010. Still, his budget assumes 8 more years of treasure at today's rate.

Obama claims a saving of about a trillion and a half on the Battle of Iraq that nobody contemplated spending in the first place.

Well done.

Infidel753 said...

It's really easy to save money by such methods. If I imagine that it's theoretically possible I might spend $5,000 on booze and hookers next month, and then I don't, then I'll be saving $5,000 relative to forecasts! (Of course I don't actually have that $5,000 in disposable income lying around in the first place, but that kind of issue never seems to matter to the government either.)

Actually it's starting to look like Obama has an ingenious plan to increase revenues: offer every major tax evader in America a cabinet position, thus forcing them to pony up their back taxes to avoid embarrassing publicity. It's working so far.

Darren Lenard Hutchinson said...

Infidel said: Actually it's starting to look like Obama has an ingenious plan to increase revenues: offer every major tax evader in America a cabinet position, thus forcing them to pony up their back taxes to avoid embarrassing publicity. It's working so far.

We missed you!

Infidel753 said...

Prof. Hutchinson: We missed you!

So aim more carefully..... :-) :-)

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