Bruce Krasting takes a closer look at the CBO report so you don’t have to. Read the whole thing.
Mr. Krasting questions five major assumptions in the report:
- Will GDP really return to its pre-2006 growth path by 2016 without any downturns? That would be an expansion of historic proportions.
- Will unemployment really return to 5% in just five years? My back-of-the-envelope calculation tells me that in order to do that we’d need to create roughly 220,000 net new jobs a month every month in order to do that. That’s a faster rate of job creation than we’ve seen in well over a decade.
- Will that putative increase in employment really be accompanied by a sharp increase in hourly earning? They’re projecting an increase nearly as great as that from 1995 to 2000.
- Will the year-on-year rate of inflation really hold to 2% for ten years? Wouldn’t that be unprecedented historically?
- Will revenues really increase an average of 7.3% per year while outlays only increase by an average 3.9% (excluding interest) over the next ten years? More specifically, will Medicare spending growth be restrained to 6.3% over the next ten years? It averaged 9% from 2000 to 2009.
Whatever they’re serving at the CBO cafeteria, I’ll have some. And make mine a double.
Has the CBO been mandated to use these assumptions? I don’t see how policymakers can plot reasonable courses of action using such tremendously rosy projections of the future.
More like 20 years at least, if you go by the Payroll survey. Yeah there were some good years in there, but overall, that kind of job growth was not consistent month to month for 10 or 20 years. If we take out recessions (assumption 1) then we get, about 180,000 jobs added each month.
Hmmm, I think then the issue is a single assumption then, productivity. Growth in productivity would lead to more output, higher wages and possibly even higher job growth as people spend those higher wages.
Who was it that called it hopium? I think that is pretty accurate. Economics is no longer the dismal science. We all went and had a few sessions with Dr. Phil and now we are giddy science.
Okay, I went with 1993 to 2000 and then 2003 to 2007 to try and look at the best years in the past 20 to see what job creation was like. The result, 211,000 jobs added on average each month. This includes the Clinton years…his best years BTW. The only way to really get to the 220,000 as a monthly average is to really, really cherry pick the data.
Anyone who says this is all Bush’s fault should be beaten with a stick.