Saturday, February 24, 2018
Business

PolitiFact: Lawmaker cherry-picks CBO remarks on the economic outlook

The statement

Says the Congressional Budget Office "is expecting a protracted economic malaise for at least the next decade under current policies."

Rep. Tom Price, R-Ga., March 28 on the website Medium

The ruling

We wondered whether Price accurately quoted the CBO, so we looked at the original document. It turns out that he repeated the CBO's glass-half-empty comments while glossing over the agency's alternate, glass-half-full interpretation.

The CBO estimate comes from "The Budget and Economic Outlook: 2016 to 2026," released in January. The number in question refers to inflation-adjusted "potential output," which is the CBO's best guess at the maximum growth the economy can achieve without triggering significant inflation.

The CBO projected 2.1 percent average annual growth between 2021 and 2026. (This is not the full decade, as the resolution indicates. However, the actual decadelong projection — for the period 2016 to 2026 — was even lower, at 1.9 percent, so we won't quibble.)

Beyond the numbers, the CBO's analysts offered both a darker interpretation and a rosier one.

The darker interpretation was that 2.1 percent is low compared with a long-term pattern of roughly 3 percent. The 2.1 percent figure "represents a significant slowdown" from the comparable growth rates that were achieved between 1981 and 2007," which was 3.1 percent, the CBO wrote.

But the CBO also had a rosier interpretation — that 2.1 percent "is substantially faster" than what has occurred since the end of 2007, which was 1.4 percent. The end of 2007 marked the start of the last recession.

The House resolution also avoids mentioning a common belief among economists, which is that the United States is unlikely to see the rapid growth it experienced during the first few decades after World War II, when the country had fewer international competitors.

For instance, when former 2016 Republican presidential candidate Jeb Bush laid out a goal for 4 percent growth, he faced skepticism.

It's also worth noting that calling growth rates around 2 percent "protracted economic malaise" would rope in quite a few Republican presidents.

According to a July 2014 paper by economists Alan Blinder and Mark Watson, GDP growth hovered around 2 percent during the second term of President Dwight Eisenhower; the combined second term of President Richard Nixon and the tenure of his successor, President Gerald Ford; and the one term of President George H.W. Bush. And the growth rate for the second term of President George W. Bush was well below 1 percent.

Tara Sinclair, an economist with George Washington University and the jobs website Indeed.com, said she considers the budget committee's phrasing problematic.

"Calling 2.1 percent growth 'economic malaise' is a bit strong given our demographics," Sinclair said. "It is frustrating that we never saw a bounce-back of a recovery after the Great Recession to regain the lost output from that period, but at this point looking forward, we wouldn't expect one now."

Even granting Price some leeway for his use of the subjective term "protracted economic malaise," he cherry-picks what the CBO wrote, offering its negative interpretation without acknowledging its positive interpretation. The statement is partly accurate but leaves out important details, so we rate it Half True.

Edited for print. Read the full version at PolitiFact.com.

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