Bloomberg has tabulated the best economic forecasters over the period of the last two years and ranked them. Here’s the prediction of one of the champs, Maury Harris of UBS:
The U.S. economy will expand 2.2 percent in 2012 and 2.5 percent the following year, according to the median estimate of 63 economists surveyed by Bloomberg from Nov. 4 to Nov. 9.
Harris this week revised down his forecast for U.S. growth next year, to 2 percent from 2.3 percent, citing projected weakness in both the euro zone and the global economy.
I agree with that. Barring catastrophe or major error we’ll see slow growth. Two observations. First, since 2011 GDP is likely to top the peak in 2007, it is clearly expansionary. I doubt that will persuade folk Keynesians that we should be running surpluses. Second, the reason they won’t be persuaded: that rate of growth is at or below the historic trend. That’s not high enough to bring the unemployed back to work or boost animal spirits. IMO anybody who thinks we will see 4% or high real GDP growth in the U. S. for the foreseeable future is engaging in wishful thinking.
Why only look at the last two years? Why not analyze their records since 2005? And let’s include some others in that too, such as Bill McBride and Tanta (up until the point of her untimely death) at Calculated Risk.
I can only speculate. The last two years encompasses the period since the end of the last recession (June 2009). It’s not completely unreasonable.
But it is unreasonable. It is only looking at a period when things have been relatively stable, if anemic. More important is who can see the next big break point. One can’t foresee everything (who knows if cheap room-temp superconductors will be patented next year, for example) but some things can be foreseen, e.g. that a massive housing bubble and financial risk taking could lead to an economic collapse. Let’s find out if any of these jokers got THAT right.
Then my next observation would be to consider the source. Bloomberg’s readers are less interested in the next big break point than the next day’s big movers.
If the desired outcome is another deep recession then by all means let’s get those surpluses going:
“With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called “a fund to meet future deficits.” (See Wray 1998, p. 63, and Stabile and Cantor 1991.) In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since. Since 1776 there have been six periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. (Thayer 1996) The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. Every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. Further, every budget surplus has been followed, usually sooner rather than later, by renewed deficits.”
http://www.epicoalition.org/docs/functional_finance.htm
Surpluses drain cash from the private sector, which is REAL crowding out.
Then my next observation would be to consider the source. Bloomberg’s readers are less interested in the next big break point than the next day’s big movers.
In other words, just the kind of myopic group-think that got us into this mess. Time to get a new elite.
It seems odd to me, nothing more than vacant crystal balling, to predict the US economy without knowing how Europe is going to turn out. And that is admittedly still very speculative, but I feel a tremendous downward bias. That’s a nice way of saying I speculate that Europe is in the can and we are going to suffer serious knock-on effects.