Though the focus has often been elsewhere during much of the 2016 presidential campaign, the state of the U.S. economy, which has limped along at an annual growth rate of 1.2 percent during the past four quarters, remains an important election issue.
Since Democratic nominee Hillary Clinton represents the party currently in power, it is incumbent on the left-leaning press to make the current underachieving and bitterly disappointing economy look as good as it possibly can for the next two months. Accordingly, the headline Monday morning in a story at the Associated Press about a group of economists which has just lowered its consensus growth forecast only tells readers: "Growth expected for at least 2 more years."
The wire service's headline deliberately avoids the actual news in the unbylined dispatch, but it serves the campaigns of Mrs. Clinton's and other Democrats running for national office by ensuring that device users who see the headline without clicking through and print readers who are only skimming will believe that all is essentially well. It's not.
Here are several paragraphs from the wire service's story:
Economists: Growth expected for at least 2 more years
Business economists still think the economy will continue to grow for the next two years, but they again have scaled back their expectations for just how much.
The median estimate from economists surveyed by the National Association for Business Economics calls for gross domestic product growth of 1.5 percent this year, down from the 1.8 percent they forecast in June. The outlook for next year calls for 2.3 percent growth.
In addition, 81 percent of those surveyed said they don't expect the U.S. economy to peak until at least 2018.
The association notes that the September report, released Monday, represents the fourth-consecutive quarterly survey in which the participating economists have lowered their expectations for 2016 for GDP growth.
... The association added that 56 percent of those surveyed said they saw the possibility of a Hillary Clinton win as having a neutral effect on their economic growth expectations, while 60 percent said they thought the election of Donald Trump would have a negative effect.
In a Republican or conservative administration, the AP and the rest of the establishment press would not be dressing up predictions of historically weak annualized growth of 1.5 percent — which is only a half-point greater than annual population growth — as something acceptable, especially in a presidential election year. They would instead be wallowing in gloom about how a recession is just around the corner. How do we know? Because we saw it for years during the Reagan administration, even though post-recession annual growth averaged over 4 percent, and during the strong-economy years (2003-2006) of George W. Bush, when growth averaged over 3 percent.
The NABE, like so many others, has consistenty lowered its routine GDP predictions for years as each forecast period looms closer. Its ability to assess the economic impact of elections appears to be even worse.
The group believed that the June 23 "Brexit" decision, when a majority in Great Britain voted to leave the European Union, would be economically disastrous. (They're not alone, as will be seen shortly.)
Four days after the vote, NABE sponsored a seminar presented by a lofty panel of economists with a clearly derogatory title: "The End of Great Britain, the Dawn of Little England: Brexit's Global Impact." Gosh, hide the women and children.
An attendee posted his notes from the session, which included the following "sky is falling" items:
- "Big declines expected in UK GDP"
- "Britain won’t have any political influence in Europe anymore"
- "Minimum nine years of uncertainty and chaos"
- "Bad economic outlook for UK; extensive economic damage; recession in second half of 2016"
Of course it's still early, but those gloomy predictions are thus far not coming to pass, as an Investor's Business Daily editorial observed on Friday:
About All Those Dire Brexit Forecasts? Never Mind
Remember Brexit? Only three months ago, economists were near unanimous in believing it would be an economic disaster, creating market chaos and plunging Britain into recession, possibly even depression. It didn't happen. Will economists learn their lesson?
The failure of Britain to melt down after Brexit seems to have caught many by surprise and forced them to realign their forecasts to fit reality. Right now, its economy looks fine.
Just last week, two mighty Wall Street banks threw in the towel on their dire Brexit predictions, upping their growth forecasts for Britain this year and next. According to Financial Advisor, an online magazine, Morgan Stanley scrapped its prediction of a recession and now sees 1.9% growth this year. Meanwhile, Goldman Sachs revised up its basically no-growth outlook of 0.2% for 2017 to about 1%.
Truth be told, these banks weren't alone and don't deserve to be singled out. Some long-term forecasts were even more dire.
... Responding to such uniformly scary predictions, the media got busy. " 'Brexit' could send shock waves across U.S. and global economy," was how a Washington Post headline put it. And a month before the vote, the BBC carried a headline saying, "IMF says Brexit 'pretty bad to very, very bad.'"
... what's troubling is the now-common use of economic forecasting — a statistical technique, nothing more — for political or propaganda purposes. Most of the groups that predicted disaster, including the Wall Street banks, had clear reasons for opposing Brexit.
An even bigger problem is the models themselves. Today, economic models have embedded in them all kinds of nonsensical assumptions — mostly based on Keynesian fallacies, such as that government spending is "investment" that provides an equal kick to the economy as private sector spending and investment. It doesn't, as numerous studies show.
Given the so-far Brexit reality compared to NABE's predictions, it's safe to say that their economists' take on the impact of the U.S. presidential election — naturally, Hillary okay, Trump bad — should be given little current credibility — especially because the models its members are using likely contain many of the flawed Keynesian assumptions to which IBD referred.
Cross-posted at BizzyBlog.com.
