Doug Henwood has a nice article showing what appears to be the CBO inserting itself into a political debate on the side of budget-cutting now. What did they do? Their budget projections assume that productivity growth in the future will be less than it has been historically, making the future budget situation look worse.
Longtime readers of this blog will remember how awful the CBOs projections were from the middle of December, 2008, when their projection was that the "worst case scenario" would result in unemployment maxing out at 8.5% in 2009, and that the "best case scenario" would see it hit 7.6% (if memory serves), a rate it hit just six weeks later. Six weeks which saw no real unemployment surprises... This extremely positive economic assessment bolstered the arguments of those who said the stimulus was too big, and then it bolstered the arguments of those, like Greg Mankiw, who pointed to the original CBO estimates as proof that the stimulus had a negative impact on growth!
To an "economist-critic" like myself, of course, the latest out of the CBO is just one more data point that helps paint a picture of a very troubled profession...
Tuesday: Case-Shiller House Prices
3 hours ago