July 15, 2024

Economix: Lowering Economic Expectations



Dollars to doughnuts.

As my colleague David Leonhardt has written, government officials (both in the White House and at the Federal Reserve) have been overly optimistic in their economic forecasts. In particular, conservatives like to make fun of the administration’s rosy projections from 2009 for how the economy would behave under the Recovery Act; the administration’s economic advisers predicted unemployment today would be below 7 percent, rather than the 9.2 percent we’re actually stuck with. Buzzwords like “shovel-ready” and “Recovery Summer” have also become major mockery talking points.

Last Wednesday, in his Twitter town hall, President Obama acknowledged that his administration had not predicted enough doom and gloom. When asked for examples of things he might have done differently in his presidency, he said:

One would have been to explain to the American people that it was going to take a while for us to get out of this.  I think even I did not realize the magnitude, because most economists didn’t realize the magnitude, of the recession until fairly far into it, maybe two or three months into my presidency where we started realizing that we had lost four million jobs before I was even sworn in.

And so I think people may not have been prepared for how long this was going to take and why we were going to have to make some very difficult decisions and choices.  And I take responsibility for that, because setting people’s expectations is part of how you end up being able to respond well.

It seems the administration may have learned its lesson, and then some. On “Meet the Press” on Sunday, Treasury Secretary Timothy F. Geithner seemed to be doing his best to lower people’s expectations going forward:

This is a very tough economy.  And I think for a lot of people … it’s going to be — it’s going to feel very hard, harder than anything they’ve experienced in their lifetime now, for some time to come.  And that — but that is because that is the tragic effects of a crisis this deep and this bad caused by a long period of lost opportunities to do things to make the country stronger.

It will be interesting to see if this is a more permanent shift in the way the administration talks about the economy, and how it advocates for stimulative policy measures in the next few months.

Article source: http://feeds.nytimes.com/click.phdo?i=7cbaac3841ad04c25b9dc6ea4d9ac73c

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