Wednesday, May 23, 2012

Romney Retreats From ‘Unrealistic’ Four Percent Unemployment Benchmark


GOP presidential hopeful Mitt Romney has come a long way from insisting “anything over four percent [unemployment] is nothing to celebrate.”
That benchmark, which he set earlier in May, drew criticism from economists of every political persuasion, including GOP loyalists.
On Tuesday, he set a new goal for himself — one that won’t create a hoped-for contrast with President Obama.
“I can tell you that over a period of 4 years, by virtue of the policies that we put in place, we get the unemployment rate down to 6 percent, or perhaps a little lower,” Romney said, “depends in part upon the rate of growth of the globe as well as what we’re seeing here in the United States, but we get the rate down quite substantially.”
Given that we’ve been hovering near eight percent for months, that sounds like a major improvement. But many models — including the one used by Congress’ non-partisan budget and economic scorekeeper — suggest we’ll reach that level whoever happens to be president. The table on page 129 of CBO’s 2012-2022 outlook (PDF) forecasts an average unemployment rate of 5.8 across fiscal year 2017, which begins October 1, 2016, just shy of four years after Romney’s hypothetical inauguration.
That’s an improvement, of course — just not one that leaves him looking like an economic superhero compared to the current President. But it does bring to the surface two structural flaws underlying U.S. politics: That candidates and elected officials offer unrealistic projections and make unrealistic promises all the time — even if they’re often based on high-level analyses that are by their very nature blind to the uncertainty of the future.
In January 2008 — early in the last presidential election cycle, and before the financial crisis — CBO’s outlook forecast unemployment rates of 5.3, 5.2, 4.9, and 4.8 for fiscal years 2009-2013. A year later, just after Obama’s inauguration, and with the economy in freefall, CBO predicted that without a stimulus bill, the unemployment would average 9.1 percent in fiscal year 2010, but then fall swiftly to 8.3 in FY 2011, 7.1 in FY 2012, 6.0 in FY 2013, and 5.3 in FY 2014. Even in absence of a second, major financial shock — and despite a significant stimulus package, these numbers ultimately proved to be way off base.

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