Three Fantasyland Budget Projections by the Fed, Biden, and Congress

via Mike Shedlock

What’s the key item that’s wrong in the following table of GDP, inflation, unemployment, and interest rate projections?

Where’s a Recession?

Has the Fed, the nonpartisan Congressional Budget Office (CBO), or the White House Office of Management & Budget (OMB) ever forecast a recession?

The answers are no, no, and no.

Yet, for the next ten years, real GDP and the unemployment rate reflect the no recession idea without any discussion of recession by any of the above parties.

What About Inflation?

Since the Fed has a mandate on price stability, and the Fed ridiculously defines stability as 2.0 percent, the Fed predicts 2.0 percent.

What About Budget Deficits?

Without exception, budget deficits soar in recessions.

The Fed never predicts deficits but miraculously and arrogantly thinks no matter what they are, it can achieve a steady unemployment rate of 4.1 percent and inflation of 2.0 percent for a decade.

CBO Budget Deficit Projections

Please consider CBO Projections at a Glance

• The deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, and then returns to $1.6 trillion by 2027. Thereafter, deficits steadily mount, reaching $2.6 trillion in 2034.
• Debt held by the public increases from 99 percent of GDP at the end of 2024 to 116 percent of GDP—the highest level ever recorded—by the end of 2034. After 2034, debt would continue to grow if current laws generally remained unchanged.
• Outlays in 2024 amount to 23.1 percent of GDP and stay close to that level through 2028. After 2028, growth in spending on programs for elderly people and rising net interest costs drive up outlays, which reach 24.1 percent of GDP by 2034.
• Revenues amount to 17.5 percent of GDP in 2024, decline to 17.1 percent in 2025, and then climb to 17.9 percent of GDP by 2027 after certain provisions of the 2017 tax act expire. Revenues remain near that level through 2034.

Every one of those projections counts on there being no recession.

Federal Debt Held by the Public OMB

The only way to explain the above chart is the OMB projects no recession all the way to 2050.

Federal Debt Held By the Public 2023 Q4

 

Industrial Production Takes a Huge Revised Dive

Industrial production rose in February from huge negative revisions in January.

For discussion of the above chart, please see Industrial Production Takes a Huge Revised Dive, the Fed Blames the Weather

Has Industrial Production peaked this cycle? Many charts suggest the answer is yes.

Has the US Consumer Finally Waved the White Flag on Spending?

 

The answer to the question appears to be yes, starting October of 2023.

For discussion, please see Has the US Consumer Finally Waved the White Flag on Spending?

Six pictures of real vs nominal advance retail sales tell the story.

More Fantasyland Projections on Wednesday

The Fed will update its dot plot of expected economic conditions on Wednesday.

I can hardly wait.