From the blogsite Econobrowser.
Last May, Governor Romney stated that in a typical recovery, monthly employment increases should be about 500,000 per month . The sheer implausibility of that statement (assessed in this post) has induced him to reduce his estimate (without explanation of the change) to 250,000 per month. . In Figure 1, I provide a plot of the implied path, as well as that from his May statement (which made me laugh for days!). In other words, his forecast has moved from clearly “Heritage Foundation space” to something that seems a bit less implausible, even if not clearly motivated by a specific model.
- The 500,000 number clearly exceeds that recorded in recent history. Kudos to Governor Romney for disposing of that number.
- While 250,000 jobs per month is more in line with recent “jobless recoveries” (i.e., after the recessions of 1990-91, 2001, and 2007-09), it is still substantially above that recorded during the G.W. Bush recovery (250K >> 91.7K). It is also very much above (!!!) the 11,100 jobs per month recorded during the entire G.W. Bush administration, when we last implemented tax cuts advocated by supply-side advocates.
- 250,000 is also above that recorded in the 1991-2001 recovery (196,700/mo, mostly spanning the Clinton Administrations).
- To my knowledge, the 250,000 figure is not based on simulations from a model. Rather (inferring from the Romney white paper), it is based on extrapolations from two previous recessions, specifically the 1974-75 and 1981-82 recessions.
Beezer here. Econobrowser also points out that balance sheet induced recessions are historically much more difficult to recover from and cites a recent IMF study as supporting evidence for that view. The lesson is that Romney is not immune to making ridiculous assumptions to give his more outrageous predictions a sheen of respectability–until someone with academic heft, like the Tax Policy Center report last week on Romney’s tax reforms plans, dismantles his claims.