The CBO Forecast and “Goldilocks” •
The U.S. economy has for decades evidenced a “not too hot, not too cold” Goldilocks pattern of annual growth – GDP real growth of between 3.0-3.5% real annual growth, or to be “precise” – 3.25% CAGR – GDP nominal growth of about 5%-6% growth, a combination of real growth plus inflation, which typically has been in the 2%-3% range – Goldilocks growth has typically kept unemployment in the “full employment” range of 3%-4% – Exceeding Goldilocks growth has been a harbinger of bubbles, inflation, etc., while slower growth creates deficits, political turbulence etc.
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A top down CEO and Board “enterprise” prescriptive goals for the American economy therefore should be: – Steady growth in the 3.0%-3.5% band, tending to a center of 3.25% – An objective of few to no “bad years” where bad is outside the target band
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The CBO unfortunately forecasts inadequate long term growth (2.74%) and all “bad years” – four years “too hot” and the rest “too cold.” Present-day Congressional tool kits lack the precision needed to put the economy on track The following charts quantify the problem and the opportunities of implementing “precision” stimulus to make the bad years ‘good”