How Many Revised Economic Forecasts Before The Fed Says The "R" Word?
Economic forecasting isn't an exacting science...yet the American public often knows we're in a recession well before the experts. Politicians, on the other hand, love to hand out meaningless refund checks every time they hear rumblings of the "R" word. Americans should reject this stimulus package and demand sound & sustainable economic policy.
Just how many revised economic forecasts does it take to finally conclude that the U.S. is in a recession? Former Fed Chairman Alan Greenspan likes to up his odds we're heading into a recession by approximately 20 percentage points every quarter. Current Fed Chairman Ben Bernanke seems to prefer a different approach. His modus operandi is to lower GDP a few tenths of a percent with each revised outlook.
As an outside observer, this measured slide towards using the "R" word feels like being in my car at a red stoplight with my favorite backseat driver seated beside me. As we wait for the lights to change (because we know they will), my trusted traffic manager sits there predicting the seconds until the opposing green light will turn yellow...never getting it quite right...but jubilant each time he announces...after the fact...that "The light just turned yellow". This process continues until our red light turns green and we can proceed to the next intersection...to start all over again.
While I realize my analogy isn't an actual equivalent, the frustrations are much the same. Yes, predicting the twists and turns of the economy isn't an exact science...but I do find our willingness to grant these prognosticators a free pass each time they err to be a rather absurd practice. The fact that the nation holds its breath each time a new report is scheduled for release merely supports my contention.
WASHINGTON (AP) -- The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.
Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.