Last Friday, both armchair and tenured US economists found another reason to lash out at Trump in mockery: as the WSJ reported, the Trump administration had drafted economic growth forecasts in its budget plans that “rely on assumptions that are far rosier than projections made by independent agencies and most private forecasters.” According to the WSJ’ sources, the economic growth forecasts which are presented as part of White House budget submissions to Congress and are due out from the Trump team in the coming weeks, have an important role on projected debts and deficits: obviously, “a fast-growing economy produces more revenue while reducing the need for spending on programs such as food stamps or unemployment insurance. Fast growth estimates can thus hold down projected deficits.”
What are they? “The forecasts, which were initiated before President Donald Trump took office, project gross domestic product—a broad measure of national output of goods and services—growing between 3% and 3.5% a year over the coming decade, with inflation-adjusted annual growth ultimately settling at around 3.2% during the later years of the 10-year forecast.”
While the Journal concedes that the forecasts are being revised over concerns “that pressing staff economists to produce aggressive forecasts might undercut the credibility of top appointees forced to later defend those numbers”, those two numbers: between 3% and 3.5% were enough to launch a mini revolt by the so-called ‘respected’ economists and assorted hanger-on punditry (including central bankers who really should keep their mouths shut when it comes to predictions), to wit.
Staff ordered to project growth will average between 3-3.5% over the next decade eventually settling at 3.2% LOL
— Danny Blanchflower (@D_Blanchflower) February 17, 2017
The Trump administration’s growth forecasts are far more optimistic than those of CBO and most private economists https://t.co/NkzYrmF0ps
— Michael Maloney (@mikemaloneyny) February 17, 2017
— Thaddeus Hwong (@policyquests) February 18, 2017
Remember my rule of thumb: The more growth a politician promises, the worse his or her economic plan probably is. https://t.co/CDIwvOhx3v
— Catherine Rampell (@crampell) February 17, 2017
While one may certainly doubt the veracity of the projections – as of this month the US “expansion”, primarily the result of tens of trillions in central bank and Chinese liquidity – is now the third longest on record…
… something which none of the mocking economists pointed out, either now or then, is that in 2009 when Obama took office in the midst of a recession, the former president projected GDP growth of 3.5% to 4.5% for 2010-2014, even more optimistic than Trump’s “laughable” projections. This is what the Fiscal 2010 Budget said on page 173:
The Administration projects an economic recovery will begin in the second half of the year sparked by the American Recovery and Reinvestment Act. By the end of the year, real growth is expected to have reached 3-1/2 percent at an annual rate, a pace that is maintained through 2010. In 2011-2013, the rate of growth in real GDP is projected to accelerate to around 4-1/2 percent annually for several quarters. This rapid growth is expected to push down the unemployment rate, which is projected to return to 5.0 percent by the end of 2013.
Rapid growth indeed: 7 years later the Fed is terrified of hiking rates by 25 bps or else the entire house of hard will collapse. And that is even before Obama’s artificial “saved and created” jobs category came into play to “boost” a recovery which even his former White House chief economist said was entirely on the back of part-time workers.
Which is not to say that Trump’s numbers are fanciful and likely will never be achieved: what is notable however, is that while even a modest dose of optimism unleashes constant mocking from Trump’s “impartial” economist critics, not a peep could be heard from them 8 years ago when Obama’s forecasts were even more grandiose, not to mention wrong. As we reported last month, Obama was the only president in history to never have a year of 3% of more GDP growth, let alone 4.5%.