How much confidence should Americans have in the latest economic forecasts from the Obama White House? In its latest update, Obama’s Office of Management and Budget slashed its GDP forecast for 2012, to 2.3% from 2.7%, and for 2013, to 2.7% from 3.0%. Pretty tepid growth.
But then, supposedly, comes a mini-boom from 2014-2017 with the economy growing by 3.5%, 4.1%, 4.0% and 3.8%.
Of course, the White House and its Keynesian economic models have continually forecasted mini-booms as being right around the corner. And those forecasts have yet to pan out.
Will this one? Well, the IMF recently put out its extended forecast for the U.S economy, and its sees markedly slower growth than the White House: 2.0% in 2012, 2.3% in 2013, 2.8% in 2014, 3.3% in 2015, 3.4% in 2016, and 3.3% in 2017. In total, the White House sees the U.S. economy generating about $1.5 trillion more in real GDP growth during the next six years than the IMF does. Adjusted for purchasing power, $1.5 trillion is equal to the economy of South Korea. Big difference.
And certainly there are mainstream economists out there more gloomy than the IMF. The economic team at JPMorgan, for instance, sees the economy growing at just 1.9% this year and next.
Oh, and none of those forecasts assumes a recession in the next half decade or so — even though such continually slow economic growth makes the U.S. economy more vulnerable to a downturn.
And if the White House is wrong and the IMF and other more pessimistic forecasters are correct, U.S. debt (held by public) as a share of GDP will be closer to 100% than the 75% predicted by Team Obama. That would be a dangerously high level of debt,creating a further drag on economic growth.