The administration's public economic projections are less than serious

[Kurt_and_Hunter]

A while back I suggested the administration's public economic projections were less than serious.

Which they were, and continue to be.

The administration sets economic priorities, crafts economic policy and conducts economic politics in the context of the likelihood of different economic scenarios. Nobody knows what WILL happen but we make policy, in good times and bad, based on our best guess of a range of likelihoods.

When the bank stress test levels were published many readers burst out laughing because the administration's "adverse scenario," the dire stressful scenario (described by the admin as "depression-like" and "highly unlikely") against which banks should be measured was actually on the optimistic side of the universe of projections of what what economic analysts believe will actually happen.

Again, the "unlikely" nightmare scenario designed to test the storm-worthiness of banks was more optimistic than many or most projections of what will actually happen, for real.

And the base-line scenario, what the administration said it believed to be the likeliest path, was so rosy that it begged the question of why we are all so upset in the first place.

Once again we are square in the "read Obama's mind" game. Depending on the topic we are supposed to believe that whatever the administration says is either a) the flat gospel truth, or b) an intricate and clever lie demonstrating an admirable depth of genius.

But the flat-truth or brilliant-lie analysis doesn't work well in this case because the administration numbers were meant to be honest then they are incompetent or delusional and if the rosy numbers are a brilliant political lie then they are part of an incompetent or delusional political strategy.

If we have educated reason to expect that things are going to get worse next year then there is no political upside to (falsely) convincing people things are great today. If the worst of the Bush crash is seen as behind us then the next down-turn will be considered the Obama crash. (unfairly and inevitably)

And if the administration actually believes their adopted blue-chip baseline numbers represented any sort of likely scenario then it suggests that they erroneously saw this economy as in a not-too-awful self-correcting slump and are, presumably, crafting policy on that basis.

It is genuinely confusing... do they believe the numbers or are they fudging the numbers in a way that will only be setting us up to face a bitter, disillusioned public ten months from now? I don't know.

For the Record, I give the Administration a B- on the economy thus far. I am not pissed because Obama has been terrible. I am pissed because he has not been as good as he NEEDS to be. The end of the world is not graded on a curve.

McCain would have gotten a D- and done that well only because our Congress wouldn't have implemented his demented campaign promises, saving him from getting expelled for failure in only 70 days. Bernanke rates high marks during the crisis... B+, his earlier failures notwithstanding. Geithner a C+. Summers has said a lot of the right things but they don't seem to have all won the day with the admin so he gets an incomplete.

Gordon Brown gets an A for effort, B+ for effect. And Sarkozy and Merkel are ridin' for a solid D. At least they can look down on Boehner and Cantor's lowly F.

I HOPE for the brilliant-lie option because if the administration actually came into office thinking this economic problem was exaggerated that's gloomy to contemplate. So I will assume that they think there is something politically clever about pretending to subscribe to rosy almost-certain-to-be-an-exploding-cigar projections.

Maybe it is clever. Maybe there's a deep and cynical method at work. Maybe I am playing Lawn Darts while the administration is playing three-dimensional Yahtzee.

But an ordinary citizen must be forgiven for her concern in the face of an administration that at least claims, for whatever reason, to be basing policy on what are generally recognized to be fantasy projections about the economy.

The OECD released an interim set of forecasts today. The OECD is not God, but it is certainly mainstream and respected. Calculated Risk blog (your one-stop-shop for cool and timely economic charts) charted the OECD projection of what will REALLY happen against the Treasury stress test "depression-like" disaster, cracks open in the Earth dogs and cats living together scenario. And their real projections are gloomier than Treasuries "what if the world fell into the Sun" projections. And the stress test scenario isn't ancient history. It is a few weeks old, and the intervening weeks have been full of less-bad data releases so nothing new has happened lately to render the stress test scenario obviously obsolete.








http://www.calculatedriskblog.com/2009/03/comparison-oecd-and-more-adverse.html