Yet another economic projection by the administration is falling short – and in record time. Just a couple weeks after the publication of the Economic Report of the President, which forecasted 3.8 million* new jobs would be created in 2004, administration officials appears to be backing off the job estimates. The forecast was for 320,000 new jobs every month – a number most observers agree is exceptionally high. Job growth has not reached even half this level in any month over the past three years, according to data from the Bureau of Labor Statistics.

Unfortunately, this is part of a pattern of forecasts from the administration that appear to be wildly inaccurate. While there is always a degree of uncertainty in any economic forecast, the size of the errors and revisions seems to be exceptionally large, and the direction of the errors always appear to be in the favor of the political goals of the administration.

Some examples include:

• The projected impact of the tax cuts on job creation is failing miserably – the administration’s estimate of new jobs is currently off by 1.8 million net jobs over the period from July 2003 through January 2004.
• In the president’s budget for fiscal year 2004, released last February, the baseline deficit showed, optimistically, a deficit of $158 billion for 2004 (or a higher $307 billion with the president’s proposals enacted). Just last summer, the administration had projected a $475 billion deficit for 2004 (OMB Mid-session review, Table 1.) And now, this month they are predicting a $527 billion deficit (FY205 budget, Table S-14) for 2004. The estimates always seem to show the same pattern – projections of lower, “improving,” deficits in the future; but a growing deficit in reality.
• The estimated cost of the prescription drug bill was $400 billion when Congress debated and passed the bill by a narrow margin last fall, and just a couple months later, the Office of Management and Budget increased the cost estimate to $534 billion.

In addition to estimates that appear overly optimistic or politically convenient, there is also data that is not being released, such as full and complete distributional analyses of tax changes.

Accuracy and honesty in economic and budget projections is a necessity when formulating policy. By backing away from estimates produced by the president’s top economic advisors, the administration is turning budgetary and economic projections into a guessing game for those citizens concerned with the financial health of the country.

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*Note that it was widely reported that the new jobs number was forecast to be 2.6 million in 2004. This, however, is incorrect. The 2.6 million number was calculated using the average yearly employment number. A correct calculation shows that the true projection in the Economic Report of the President is 3.8 million. See DeLong or CNN for details.