On Economic Arrogance - by Paul Krugman

[DonViejo]

FEB. 20, 2017

According to press reports, the Trump administration is basing its budget projections on the assumption that the U.S. economy will grow very rapidly over the next decade — in fact, almost twice as fast as independent institutions like the Congressional Budget Office and the Federal Reserve expect. There is, as far as we can tell, no serious analysis behind this optimism; instead, the number was plugged in to make the fiscal outlook appear better.

I guess this was only to be expected from a man who keeps insisting that crime, which is actually near record lows, is at a record high, that millions of illegal ballots were responsible for his popular vote loss, and so on: In Trumpworld, numbers are what you want them to be, and anything else is fake news. But the truth is that unwarranted arrogance about economics isn’t Trump-specific. On the contrary, it’s the modern Republican norm. And the question is why.

Before I get there, a word about why extreme growth optimism is unwarranted.

The Trump team is apparently projecting growth at between 3 and 3.5 percent for a decade. This wouldn’t be unprecedented: the U.S. economy grew at a 3.4 percent rate during the Reagan years, 3.7 percent under Bill Clinton. But a repeat performance is unlikely.

For one thing, in the Reagan years baby boomers were still entering the work force. Now they’re on their way out, and the rise in the working-age population has slowed to a crawl. This demographic shift alone should, other things being equal, subtract around a percentage point from U.S. growth.

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https://www.nytimes.com/2017/02/20/opinion/on-economic-arrogance.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-left-region®ion=opinion-c-col-left-region&WT.nav=opinion-c-col-left-region&_r=1

[PSPS]

1. I like his reference to "the Trump-Putin administration."

As I said, belief that tax cuts and deregulation will reliably produce awesome growth isn’t unique to the Trump-Putin administration. We heard the same thing from Jeb Bush (who?); we hear it from congressional Republicans like Paul Ryan. The question is why. After all, there is nothing — nothing at all — in the historical record to justify this arrogance.

[Igel]

2. It's not uncommon.

Having the administration a small amount above the CBO is fairly common, but the administration is rarely under the CBO's forecasts. It's sometimes a point or so above it, and when that's political (as it probably often is) it's defended by the usual defenders.

It's a nasty business regardless of who does it, but it's nothing I'm going to get bent out of shape over because forecasts are, well, pretty meaningless except when it comes to trying to control the economy. I for one think that the president isn't the all-wise Odin and all-power Yahweh that many think he is (when he's got the same (letter) after his name as mine, Igel (D) ) or the all-fool joker and Baal that many think he is when the post-surname partisan letter designations are opposed.

Krugman, however, does play this game. And that makes him unreliable as a scholar, no matter how his ranking as an advocate and quondam cheerleader may increase.

Then again, maybe they're right and the firm attribution of ill-will and manipulation to everybody but themselves is both merited and leaves them unscathed in their commitment to truth. It's just not the way to wager.

[Nitram]

3. Looks to me like Krugman was right on the money.

Conservatives tend to believe that economic theory is a liberal scam. They prefer to go by their gut. Their gut always tells them what they want to hear.