May 22, 2003

Brad DeLong confirms my belief that the primary role of the economist in government is to act as a kind of witch-doctor -- using make-believe "science" to give cover, comfort and confirmation to whatever decisions the Leader has already made. I.e. the economists job is to use fancy math and fake science to read chicken entrails and come up with the "forecast" that was required by political reality, not "science" or causal reality. Here is DeLong:

The hard-working Max Sawicky reports that the Bush Administration's forecasting "Troika"--the Council of Economic Advisors, the Treasury, and the Office of Management and Budget--are projecting that, with the president's proposed policies enacted, payroll employment in the United States will grow from 132,130,000 in July of 2003 to 137,640,000 by December 2004--a net increase of 5.51 million payroll jobs in eighteen months. Now the U.S. economy's level of employment has grown that rapidly twice--in 1977-1978, and again in 1983-1984 (with huge numbers of baby-boomers entering the labor force in the first case, and with an extraordinarily rapid 2.1 percentage-point decline in the labor force in the second). But those increases in employment came with 5.5% and 7.3% annual rates of increase in real GDP. No one is forecasting such rates of increase in real GDP over the next year and a half. [This is what must have happened]. Some high politician has reached down into the innards and guts of the forecasting process, and has said "employment in 2000 averaged 136.9 million. We cannot forecast that in December 2004--at the end of President Bush's first term--fewer Americans will be at work than in Clinton's last year. We cannot. We do have a history of Republican administration's economic forecasts being off in the gamma quadrant. The most famous example is the Larry Kudlow-Paul Craig Roberts-Murray Weidenbaum "rosy scenario" of 1981 that convinced Ronald Reagan that he really could cut taxes massively and still balance the budget, a rosy scenario forecast that was, as Marty Feldstein politely put it at the time, "not consistent with the tenor of Federal Reserve policy." But it's not alone: I remember the incoming Clinton administration looking at the last forecast made by Richard Darman of OMB, and howling with laughter.
Posted by Greg Ransom