The Economic Expectations Game
It's hard to get good ink on the economy. Putting up good numbers is only half the battle; the other half is putting up numbers that meet or exceed expectations.
Case in point; today's GDP report on the first quarter of 2005 is being described as the "slowest pace in two years." Here's a quote:
Jeannine Aversa - April 28th, 2005 WASHINGTON (AP) -- Buffeted by rising energy prices and weakened consumer and business spending, the economy grew at an annual rate of just 3.1 percent in the first quarter. The slowest pace of expansion since in two years was evidence of a new "soft patch."
Now, there are a number of ways to describe an annualized GDP growth rate of 3.1%. One way to describe it would be "exactly at the thirty-year average." Another way to describe it would be as "just below the average throughout the 1990s (3.26%)." The problem with these options, I presume, is that the former is neutral and the latter is (gasp!) positive.
It seems that the Bush administration's economic policy is, ironically, the victim of its own success. It grew at a robust 4.4% rate over the previous 21 months, an unreasonable pace to sustain indefinitely. Hit a mark above the standard, and it becomes the new standard. In other words, good is good, unless it comes right after great. The goalposts keep moving, and eventually it's seen as a failure to miss a 70-yard field goal.
Of course, it should be noted that as many as two revisions are on their way, and that most GDP revisions over the last two years have shown growth levels higher than originally reported. Just last quarter, for example, we were given the same estimate: 3.1%. It was eventually revised up to 3.8%, making the interpretation of the data not only slanted, but premature, as well.
UPDATE: Jayson at PoliPundit has some similar thoughts.
» April 28th, 2005
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