Jewish World Review March 28, 2001 / 5 Nissan, 5761
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
Comment on Dale McFeatters' column by clicking here.
03/23/01: Bush's free lunch, or: Why Dubya worries about Japan's economy