In making the case that he would improve on President Trump’s policies, Joe Biden likes to cite forecasts from economist Mark Zandi that show that his platform would yield booming jobs and growth.
Yet Zandi’s predictions have often failed, GOP-aligned economists note.
They say that Zandi, who is the chief economist for Moody’s Analytics, a financial analysis firm, particularly got it wrong in projections related to Trump’s handling of the economy, as well as President Obama’s response to the Great Recession.
Biden cited Zandi’s analysis during a town hall last week to claim that his economic plan will create 18.6 million new jobs, 7 million more jobs than Trump would create, and expand GDP by $1 trillion more. Sen. Kamala Harris also cited Zandi’s predictions during her vice presidential debate.
“There is no economist over the last 20 years who has been more consistently wrong than Mark Zandi,” said Stephen Moore, one of Trump’s top outside economic advisers.
“He keeps predicting that more and more government spending causes more growth. It’s this extreme Keynesian model that has been proven incorrect over and over,” said Moore, who is also a contributor to the Washington Examiner.
In 2016, Zandi projected that Trump’s proposals would create a “lengthy recession” and millions of jobs lost. Yet, the economy grew at a healthy pace, with unemployment rate at a near a 50-year low, during the first three years of Trump’s administration, before the pandemic.
In response to the criticism, Zandi told the Washington Examiner that his 2016 prediction was based on the assumption that all of Trump’s campaign proposals, including those related to trade and immigration, which would hurt growth in his model, became reality.
Nevertheless, in the same 2016 forecast, Zandi also included a “most-likely scenario” for policies that Trump would actually be able to implement, and it too was off the mark.
Zandi predicted in this scenario that the economy would avoid a recession, but growth would slow to “a near standstill early in Mr. Trump’s term,” with only 2.8 million jobs created during Trump’s four years in office and unemployment rising to near 6%.
Pre-pandemic, over 6.7 million jobs were created, and GDP grew about 2%.
“I know firsthand how difficult forecasting can be, particularly for events and statistics far off in the future,” said Steve Cortes, a senior adviser for the Trump 2020 campaign. “Those Moody’s projections bear no resemblance to actual economic reality, both the past performance of Trump’s economic agenda as well as the present trajectory of the accelerating recovery.”
Zandi has also been criticized for overestimating the economic recovery from the Great Recession, a mistake he has acknowledged in the past.
Zandi said that critics have “cherry-picked” his analyses and that some of his predictions are “just an exercise” in plausible realities based on hypothetical situations.
He added that his analysis of Obama’s recovery efforts matched up with those of the nonpartisan Congressional Budget Office.
Part of what sets Zandi apart from other business economists and forecasters, beyond his high-volume data analysis, is a stint he did with John McCain’s 2008 presidential campaign. Furthermore, he is likable and well-informed, Moore and former Trump economist Keven Hassett said.
Zandi’s experience with the McCain campaign later made him invaluable to the Obama White House, which rarely missed a chance to tout Zandi as a McCain adviser when mentioning his flattering stimulus estimates. Hilary Clinton also used Zandi’s analysis to attack Trump’s economic proposals in 2016.
Conservative economists say that Zandi’s forecasts fit the Democratic narrative.
“There’s a big demand for the forecasts he does, that large spending is great,” said Casey Mulligan, the former chief economist for Trump’s Council of Economic Advisers.
There’s an increasing demand in the current political environment, Mulligan said, for analysis, like Zandi’s, which shows that economic redistribution is beneficial for both the rich and the poor.” Furthermore, he said, there is an even bigger demand for predictions that illustrate something negative about Trump.
“It’s a group think, lots of people hate Trump, so if somebody predicts something bad about him, they don’t want to look too closely at it, they just want it to be true,” said Mulligan.
Mulligan, who is an economics professor at the University of Chicago, particularly tore into Zandi’s use of spending “multipliers,” meaning the assumption that federal spending results in more total economic output than the amount spent. Zandi has said in the past that $1 in federal spending can contribute more than $1.50 to the economy.
“Zandi just does multiplication with 1.5, or whatever his number is. He shouldn’t be called an economist. He should just be called a multiplier,” said Mulligan. He said that Zandi does not consider the possibility that spending can create incentives for businesses and households that depress economic activity.
Zandi said he uses spending multipliers in his analysis only when appropriate, such as during a recession, and added that incentives matter a great deal in calculating a multiplier. He said that he has become known for multipliers because he has popularized their use in the public as a heuristic — or story-telling tool to explain complex predictions in a straightforward manner.
Zandi, who got his doctorate in economics at the University of Pennsylvania before getting into the forecasting business, said that most of his predictions and analysis are well within the “mainstream” of economics and are often backed up by analysis done by the Federal Reserve, the World Bank, and the Congressional Budget Office.
Although he is a registered Democrat, Zandi said he has advised and given money to politicians in both parties. He added that large government spending, like most Democrats are in favor of, is needed within the current context of a pandemic-induced recession, high unemployment, low inflation, and bottomed-out interest rates. Spending freely from the government’s coffers isn’t always the right answer, though, he added.
“Spending isn’t always a good idea. Depending on the situation, sometimes a tax cut can be helpful, or we might need to reign in spending,” Zandi said.
Author: Nihal Krishan
Source: Washington Examiner: Biden’s favorite economist has a bad track record on predictions, GOP economists say