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Show THE VOICE OF BUSINESS CBO -ccn'v be objective By Richard L. Lesher, President Chamber of Commerce of the United States A big flap has developed in Washington . between the administration ad-ministration and the Congressional Budget Office (CBO) the official economic forecasting arm of Congress. The disagreement involves the long-term long-term impact of the Reagan economic recovery program. The administration says that if its program is passed, then by 1984 we will have much stronger growth, significantly lower unemployment, unem-ployment, the inflation rate cut in half and a balanced budget. Not CBO. It looks at the same program and sees a totally different picture: Only marginally improved growth, unemployment remaining high, inflation remaining high and a . budget deficit of $49 billion. So who's right? Well, obviously we won't know for sure until 1984. Also, it seems safe to suggest that given their track records, most economic forecasters have good reason to remain modest. Nevertheless, there is good reason to believe CBO should remain more modest than anyone else. CBO's economic forecasts over the past few years have served as the single most important influence governing the conduct of economic policy. Yet, despite this influence, CBO's results have been very poor, both in terms of its ability to track actual developments, and in comparison com-parison with other major forecasting models, such as Data Resources and Chase Econometrics. CBO consistently underestimated inflation and overestimated economic growth. Sometimes it could not even predict in which direction the economy was headed in the immediate future. The reason is quite clear: In making its forecasts, CBO relies on a theory of the economic world which is untrue and, in -fact, downright absurd. c.- In CBO's scheme of things, spending is what makes the world go round. Indeed, economic growth is held to depend upon more and more spending. This is why CBO's director. Alice Rivlin, once made the Alice in Wonderland Won-derland claim that a dollar spent by the government will stimulate tbeee-more tbeee-more than a dollar of tax re Why? Apparently, because payer might save some of Ms :-' Horrors! Little wonder then that for jen-has jen-has recommended increase! It spending and loose monetary ji; as the best way to achieves-, growth, lower unemployme::" stable inflation. It hasn't quite it" out that way. This nonstop;; priming has led only to higher i and inflation, higher interest K government absorbed i grorsi: of loanable funds thereby "crV out" private borrowers, and tan caused by inflation pushing tar, into high and higher tax brads ButtCBCf remains unp&acl unrepentant. So by what just, can this organriation, whidi failed record, which has coctntc-' and reinforced bad policies, asid refuses to acknowledge tbe rj implicit in its assumptions, dismiss out of hand the ef rea ch ing a tt empt in the past 5C reform our economy? In effet: what CBO is doing. It says that:? the tremendous reforms pro?" the new administration-re:" which rest on the historical; " fact that individuals wort si5" invest more when offered grs2-tax grs2-tax rewards they will all add;' real change. The Democrats on the Has:-Committee, Has:-Committee, led by Chato Jones of Oklahoma, havejuS 1 CBO's defense and props ! alternative budget to the Pre-' ; They claim their alternatives- a balanced federal budget by vear earlier than the Pre ' : thev do not say is that feyt? C balance the budget by rairf-. another SSO billion in ths; war alone- That's $S50 a creases for every indivw-' return! ' c It's policies like these tr create the mess were ft despite the biggest, susts' j-creases j-creases in our nations t federal government has balance its budget orJy : ' 20 years. After all Z--) it's safe to assume ft ? are wrong. Gwernmflit . our money. And it can tsf ' than we can. |
