Fun with math: What Ten Million Simulations Tell Us about Trump’s Chances of Achieving 3-Percent Economic Growth

❝ President Donald Trump’s budget is premised on the projection that the United States will be able to raise its long-run economic growth rate to 3 percent a year. This rate allows the budget to assume large tax cuts and still project a balanced budget after ten years. This long-run forecast represents the largest divergence between an administration forecast and that of either the consensus forecast of the Blue Chip survey of private forecasters (2.0 percent) or that of the nonpartisan Congressional Budget Office (CBO, 1.9 percent) in many decades…

❝ To assess how likely the United States is to experience 3-percent growth over the next decade, I estimated the likely range of future potential GDP growth by taking random draws from the history of productivity growth rates, changes in the labor force participation rate, and changes in average hours worked… In running 10,000,000 simulations, the estimated median annual growth rate over the next decade was 1.8 percent, while the 90-percent confidence interval ran from 0.7 percent to 3.0 percent… The odds of the growth rate being at or above 3 percent are only 4 percent — essentially requiring the economy to repeat some of the fastest productivity growth it has seen over the past seven decades.

Not that our so-called president or most of his so-called advisors are likely to consider any of these scenarios in their ideology. Even those few individuals accustomed to this level of arithmetic will challenge the boss on facts. He doesn’t want facts. He wants answers which fit his 6th grade-level semantics, economics understanding and a demographic base even more ignorant.

Thanks, Barry Ritholtz

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