To describe anything as "Trump's Economic Dream Comes True" even pre-pandemic is rewriting an awful lot of the history of confident statements about 3% growth--with John Taylor being the most prominent economist making those predictions.
Randall Stephenson (then Chair of the BRT and ATT CEO), said he saw no way the tax cut passes and we don't get 3% growth--again total confidence. (Quick search failed to find the quote, if anyone has it please share.)
The Trump Budgets all predicted 3% growth rates. They also had a potential growth forecast in the tenth year that was 1.0 pp above the Blue Chip. Under Bush, Clinton and Obama the potential forecast was never more than 0.1 pp above the Blue Chip.
I got pushback from them for my piece saying we wouldn't get 3% growth. I wasn't even blaming Trump, just explaining the consensus view of all forecasters except the above that demography would keep us from this goal. vox.com/the-big-idea/2…
The actual growth rate in the two years since the tax cut was 2.4 percent (that is through 2019-Q4, so pre-pandemic). It was also 2.4 percent in the two years leading up to the tax cut.
You can't infer anything about the impact of the tax cut let or Trump's more broadly by looking at realized growth rates which are affected by many factors.
But that is the test Cogan and Taylor set out in their piece & they have to lower the bar to argue that he cleared it.
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How should we think about the ideal size of fiscal stimulus right now? A thread with two approaches: (1) top down (based on filling the macro hole) and (2) bottom up (based on protecting people).
Three distinct issues:
(1) When do we need money? Simple: two months ago.
(2) How long do we need money? As long as it takes, could be years, ideally would have triggers to continue after Congress is fatigued.
(3) How much per month? Rest of thread is on this question.
A top down approach would ask what the output gap is and what the multiplier is. CBO's July forecast put the output gap at 6% in Q4, at a time when they expected the UR to be 10.5% this quarter. So presumably they would say something smaller, maybe 4%. cbo.gov/system/files/2…
In my oped in @WSJopinion arguing for the Biden tax plan--and the investments it pays for--I cited seven studies about its impact on the economy. One tweet for each study--plus a bonus tweet in this thread.
The @BudgetModel finds the tax+immigration plan would increase the GDP level by 1.5% in 2050 (rounds to 0.1pp higher annual growth rate).
@AEI co-authored by @kpomerleau found ~0 effect: "Biden’s proposals would reduce GDP by 0.06 percent over the next decade, slightly increase GDP the second decade (0.07 percent), and result in a small reduction in GDP in the long run (0.2 percent)." aei.org/research-produ…
My latest @wsjopinion explains why the Biden tax plan—and the economic program it funds—would help ensure we have more shared growth. wsj.com/articles/biden…
In addition two other estimates have been done of his tax plans alone. @AEI finds it has close to zero effect and the @TaxFoundation finds it would lower growth rates by an imperceptible amount over the next 30 years (not even enough to round to 0.1 percentage point).
We have an economy with a positive first derivative and negative second derivative—everything is continuing to improve but it improving at a slower pace than before.
Normally 661,000 jobs would be something to celebrate. But when you’re 11 million jobs short of where you were in February the slowing pace of recovery is a worry.
Three reasons for it:
1. Easy recovery already happened. Has been people being called back from temporary layoff, permanent unemployment rising.
The "Realistic" unemployment rate remains higher than the official one for two reasons:
1. 1.1m workers misclassified as employed
2. 3.7m have left labor force, more than would be expected even with the rise in unemployment.
The "Full recall" unemployment rate is a hypothetical that measures what would happen under the (wildly optimistic) scenario that all of the 5.4m added to temporary layoff went back to their jobs right away & that participation rates rose in step.
Many pointing to studies that $600/week did not increase disincentives. Those studies relevant in saying that policy was good in April, May and June. But they have limited relevance for how to set policy in Dec and Jan when economy will be very different than it was in lockdown.
Moreover, part of why the $600 didn’t cause disincentives is that many expected them to be temporary so would rather be in a job. If they had been smoothly extended through January as many originally wanted that would have undone some of that temporary expectation.
Supporters of triggers and enhanced automatic stabilizers should ask themselves what formula they would have for unemployment benefits. Would you pre-specify that at 8% UR it would be $600/week? And if so was it WAY too low with UR of 15% in the spring?