Cross-posted from Smirking Chimp
A lot of people know the old quote which says "predicting is hard, especially about the future." Granted, everybody gets it wrong sometimes, but this time our economists were really wrong. We were told the economy grew slightly in the first quarter of this year. Now, two revisions later, the latest GDP estimate concluded that the economy actually shrank.
A crisis of confidence is in order.
This was the worst quarter for the GDP since the peak of the Great Recession five years ago. At this point American people might be forgiven for doubting the experts and leaders who should be counted on to make responsible decisions.
And by that, we don't mean Republicans. Nowadays the GOP's approach to economic policy amounts to little more than a reckless determination to repeat the errors which created the crisis in the first place. But the rest of our economic leadership should be questioning its assumptions today too.
Here's where we are now: Unless the economy grows at a relatively dazzling 4 percent for the remaining three quarters of the year, 2014 won't even keep pace with the tepid average growth rate of 2.4 percent we've experienced since 2009.
Everybody knows that "SNAFU" is an old military term that means "situation normal, all 'effed' up." That's been the state of play in economic policy for some time now. When indicators are good, they're not good enough to help the dying middle class. When they're bad, we get more spinning than action. And nothing ever seems to produce a sense of urgency to match the crisis which millions of people are experiencing every day.
Let's face it: On the economy, it's just been one snafu after another.
SNAFU: They got the numbers wrong.
The Bureau of Economic Analysis' initial GDP forecast produced a palpable sense of relaxation in some quarters. Predictions were made for solid economic progress throughout the year, and there were suggestions that a crisis point had finally passed. But the figures were wrong. Instead of growing at an annualized rate of 0.1 percent, the BEA now says that the economy shrank by 2.9 percent.
That's a huge swing. How did it happen?
We were told that the most significant shift in the numbers came from the healthcare portion of the economy. Its growth was estimated at an annualized 9.9 percent, which was a stunningly large figure. It also happened to be wrong. We are now told that health spending actually shrank by -1.4 percent in the first quarter.
One wonders why a startling number like that wasn't questioned more thoroughly.
SNAFU: Policymakers don't understand health care spending.
The BEA's original numbers were greeted with a raft of headlines telling us that "Obamacare saved the economy." (The Huffington Post's Mark Gongloff was a good sport about his own.) The assumption was that millions of people had receive coverage for the first time, and promptly received all sorts of needed services.
There were problems with that from the start. First, the ACA's open enrollment period lasted through March 31, so enrollment wasn't complete for most of the quarter. There's also some lag between enrollment and treatment. If Obamacare had caused expenditures to grow by nearly 10 percent before people were even done signing up, the headlines should have read "Health spending expected to explode in second quarter."
What's more, a great many ACA enrollees have signed up for "high deductible" plans, which have the most affordable premiums but require a great deal of out of pocket spending. While there is likely to be pent-up demand for medical services, many uninsured Americans will still lack the ready cash needed to obtain them.