Sequester Predictions Are Ridiculous
Not even the world’s brightest economists can foretell what last week’s drastic budget cuts will bring.
I’ve gotten tired of explaining to people that even though I majored in economics at Harvard, I don’t really have a strong opinion about the sequester. To be honest, I find it difficult to care.
Most economists completely shun the business of economic forecasting. This is just a small part of our field, yet it gets all the media play. Predicting how an economic system as large as the economy of these United States will respond to various stimuli is close to impossible. On the first day of my intermediate macroeconomics class, my professor, David Laibson, made an unusual admission: “When we reach the part of the class about short-term macroeconomic growth, we only understand about 30 percent of what’s going on. That’s why we’re teaching it—so that one of you can hopefully increase our understanding in the future.” It’s no accident that those who, like Laibson, manage to stay humble about their forecasting abilities rarely offer bold predictions to newspapers, while those who take reporters’ calls serve up unreasonably confident opinions that—surprise, surprise—corroborate those economists’ political beliefs.
If it’s so hard for professional economists who study economic forecasting every day to make good, clear predictions about how the economy would react to an austerity program or a stimulus package, why are politicians so sure of themselves? Why is it that Senate Minority Leader Mitch McConnell felt the need to say of a minor, doomed legislative maneuver to allow some administrative latitude in determining which programs the cuts would affect, “Let’s be clear about the goal here … it’s to make sure these cuts actually happen, and that we don’t cut a penny less than we promised.” I can’t think of anything more irresponsible than going to the mattresses for economic arguments you probably don’t understand when a mistake could mean thousands of jobs lost at a time of 7.9 percent unemployment.
I entered college two weeks before Lehman Brothers went under and the economy crashed. For four years I learned in highly mathematical detail just how complex economics is, how hard it must be to steer this barely-not-sinking ship we’re all on, how careful you have to be when the only thing you know for sure is that kids depend on you for vaccinations and preschool funding. Simultaneously I watched Congress (let’s be honest: Republicans in Congress) wage one fever-pitched battle after another—the debt ceiling, the budget resolution, the fiscal cliff, and now the sequester—each of which was manufactured wholesale by convoluted legislation flowing forth from the pens of petty politicians willing to let national parks close and military equipment fall into disrepair if it meant they could have their way with an economic system even the most highly qualified experts don’t understand. I stopped caring about these clowns a long time ago.
Or maybe “caring” is the wrong word—I’m simply resigned, resigned to the fundamental disconnect between the arrogance and obstinacy that rule fiscal policy and the humility and flexibility that I have come to see as the only reasonable attitudes toward debate in such a difficult and complicated field. Our economy may take a hit from the sequester or it might not; short-term economic growth is extremely difficult to predict. The only thing we can be sure of is that what little credibility Congress has left took a swan dive on Friday.