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Forecasting the Economy

More on the administration’s forecasts:

White House Forecasts Often Miss The Mark (washingtonpost.com)
President Bush last week caused a stir when he declined to endorse a projection, made by his own Council of Economic Advisers, that the economy would add 2.6 million jobs this year. But that forecast, derided as wildly optimistic, was one of the more modest predictions the administration has made about the economy over the past three years.
Two years ago, the administration forecast that there would be 3.4 million more jobs in 2003 than there were in 2000. And it predicted a budget deficit for fiscal 2004 of $14 billion. The economy ended up losing 1.7 million jobs over that period, and the budget deficit for this year is on course to be $521 billion.
These are not isolated cases. Over three years, the administration has repeatedly and significantly overstated the government’s fiscal health and the number of jobs the economy would create, but economists and politicians disagree about why.
[…]
Bush has since said that his optimism about budget deficits was based on the assumption that the economy would not hit a “trifecta” of trouble: recession, national emergency and war. But in February 2002 — after the recession was declared, the terrorist attacks had occurred and war had begun in Afghanistan — the administration continued to have upbeat predictions. Although it forecast a $106 billion deficit in 2002, it saw the deficit shrinking to $80 billion in 2003, $14 billion in 2004, and becoming a surplus of $61 billion in 2005. Those figures, too, quickly became seen as overly optimistic, as tax receipts continued to come in lower than expected. A year later, in 2003, the administration predicted a deficit of $304 billion for 2003 and $307 billion for 2004. In reality, the 2003 deficit was $375 billion, and the White House now expects a deficit of $521 billion for 2004.

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