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Jewish World Review March 28, 2001 / 5 Nissan, 5761

Dale McFeatters

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The fiscal fortune tellers

http://www.jewishworldreview.com -- OVER the last decade, White House and congressional budget forecasts have all been wrong, first overestimating the amount of red ink and then underestimating the pleasant surprise of mounting surpluses. Even when the mistaken forecast is cause for optimism - for example, projections for tax revenues for the first five months of the fiscal year were $42 billion too low - that doesn't change the fact that it was still wrong.

The errors are not due to political doctoring or incompetence; macro-economic forecasting is a terribly complex art. The Bush administration's forecast of a 10-year $5.64 trillion budget surplus is accompanied by a small army of assumptions, footnotes, caveats and cautions. Nonetheless, once these figures are released the lawmakers ignore the fine print and, as the tax cut debate shows, treat the forecasts almost as actual money in hand.

Naturally, this worries the nation's chief economic worrier, Fed chief Alan Greenspan. In a speech to in-house economists of top corporations, Greenspan said economists should put greater emphasis on the quality and timeliness of data collected rather than ever more sophisticated forecasting models, in other words, the search for the perfect crystal ball. "I suspect greater payoffs will come from more data than from more technique," Greenspan said.

The government statistics-gathering agencies are neither sexy nor anyone's political pork barrel, and they tend to get shortchanged in the competition for funds. But Greenspan and the private-sector economists think accurate economic data is a wise and probably inevitable investment. After all, if you want to know where you're going, you have to know where you are.

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Up

03/23/01: Bush's free lunch, or: Why Dubya worries about Japan's economy
03/21/01: Congress' growing nuisance
03/16/01: A new kind of layoff for the New Economy
03/09/01: Another snow job in the nation's capital
03/02/01: Bush either brave or naive
02/23/01: Long hours=great presidency? What our 'dim-bulb' of a president knows
02/16/01: Just what the spin-doctor ordered? Bush can't even get ridiculed on TV
02/09/01: A heartbeat from presidency, and both feet in obscurity
02/02/01: AlGore is continuing his fall from grace
01/26/01: "Fifteen Minutes in December"

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