A Pessimisstic CBO is Not an Accurate CBO

The economy performed better in 2013 than previously expected, but the Congressional Budget Office’s short- and long-term forecasts are dire. Why?

Floyd Norris: “What changed was that the C.B.O. economists … have seen enough of a slow economy to begin to think that we should get used to sluggishness.”

“It is also almost certainly wrong.”

“Why is it wrong? It is highly unlikely that we will have both an anemic economy and high long-term interest rates.”

“One reason for that predicted decline is … Obamacare,” and the prediction that a portion of the workforce will choose to retire.

“That hardly sounds like a problem for the economy … But the C.B.O. does not see that as good news, at least in the long term. The assumption is that the number of jobs filled is a proportion of the number of people seeking work, and that if fewer people are looking for work, fewer people will be getting work. As a result, there will be less national income and thus less tax revenue.”

“I have no reason to doubt that the economists at C.B.O. are sincere in their pessimism. But it would be good if there were an alternative forecast out there.”

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