GOP-Ryan Budget: Unicorns for Everybody!
If Rep. Paul Ryan's newly unveiled 2012 budget is signed into law, this is what Ryan's economic forecasters say will happen: The unemployment rate will plunge by 2.5 percentage points. The still-sinking housing market will roar back in a brand new boom. The federal government will collect $100 billion more in income tax revenues than it otherwise would have.And that's just in the first year. By 2015, the forecasters say, unemployment will fall to 4 percent. By 2021, it will be a nearly unprecedented 2.8 percent…
Where would that spectacular growth come from? Based on an analysis provided to Ryan by the Heritage Foundation, a conservative think tank, it would come from the liberating effects of lower taxes and less government debt.
But the forecasted growth is so high that it falls on the outer edge of what most economists say is plausible—or even desirable—for the next decade…
…Heritage modelers have made similar predictions before—and they didn't pan out. In 2001, they incorrectly projected that tax cuts pushed by President George W. Bush would create millions of new jobs; in fact, the 2000s were the most anemic decade for U.S. job creation since the Great Depression. Heritage experts say they couldn't have predicted the 2001 recession or the Bush administration's government spending increases…
"They don't have a strong track record of their projections matching reality when it comes to these kinds of scenarios," said Heather Boushey, senior economist at the Center for American Progress. In particular, Boushey called the math behind projections of massively increased housing investment "fuzzy" given the realities of the market…
An economist at IHS Global Insight, whose model Heritage employed in the analysis, seemed skeptical of the low unemployment projections on Tuesday.
Nigel Gault, Global Insight's chief U.S. economist, noted that in any economic model, forecasters make assumptions about labor supply, capital spending and other details that can affect the projections.
"I'm not quite sure what assumption... would deliver 2.8 percent unemployment," Gault said in an interview, adding: "We might assume different parameters."
More articles:
Read "Paul Ryan's Magical Jobs Plan" and "Paul Ryan's Tax Plan Based On Discredited Heritage Foundation Analysis That Forecast Bush Boom" by Matthew Yglesias»