'Economic Report of the President' Projections Way Out of Line With Other Forecasters

With the release of the Economic Report of the President on Tuesday, CEA Chairman Kevin Hassett noted, as Politico reports, that it was “not impossible” that the U.S. could have a recession next year. But he added that “it would be very unusual for that to happen given the massive amount of capital spending that’s coming online.”

The report projects 3 percent growth through 2023. It projects growth of 3.2 percent for 2019.

It is impossible to project out GDP to 2023 with any degree of certainty and 2019 is getting off to a very rough start to get to 3.2 percent growth.

Blue Chip Consensus estimates Q1 GDP will come in at 1.5 percent. Macroeconomic Advisers has it at 1.4 percent. The Atlanta Fed’s GDP Now forecast is now at 0.4 percent.

I hasten to add that the GDP number is a massive aggregation that tells little about individual sectors and does zero to highlight the changes in the all-important capital-consumption structure caused by the Federal Reserve manipulation of the money supply. Indeed, it could be argued that a decline in GDP growth during a recession is misleading in that it implies a negative when it reflects that positive corrections are being made to the capital-consumption structure.

That said, because the media and mainstream economists are focused on this number, the government will lie and make outrageous claims about the direction of this number more than most other numbers. In other words, Hassett is just doing his job.

-RW