Prologue
Pre-2020 Presidential Election
When a macroeconomic model substantially under projects the impact of a specific variable on economic growth (in this case tax rates), underlying biased assumptions are typically the culprits. One or more substantial misspecification errors not attributable to a theoretical bias could also a factor. A glaring example of this is the projection made by Mark Zandy of Moody Analytics, prior to the 2016 presidential elections, that Trump’s tax policy would significantly harm the economy. Published data, presented by Steven Moore of the Heritage foundation, exposed a severe miss associated with Mark Zandy’s projections leading up to the 2016 Presidential election. His projections relating to Trumps agenda leading up to the 2016 presidential election were summarized by his statement “If Mr. Trump gets precisely what he’s proposed, then the US. economy will suffer meaningfully.” It was well publicized by the Trump campaign that tax cuts and less regulation were the primary drivers of his economic plans. Curiously, he comes up with a similar prognosis leading into the 2020 presidential election apparently downplaying the phenomenal economic growth that occurred following the 2017 Trump tax cuts.
Post 2020 Presidential Election
Given the Biden victory in the 2020 Presidential election Mark Zandy’s prognostications are going to face a difficult reality check over a four year horizon that is likely to require some major “spin” with the usual media support as damage control. These projections effectively envision greater economic growth and well being under a Keynesian style government underwritten spending spree rather than under a low tax, less regulatory environment. The merits of this conclusion are discussed, in greater detail, in the papers, “A Keynesian Thumb on the Scale – Written Prior to the 2020 Presidential Election” published (viewable) and the Post 2020 Presidential Election update in Georgeeconomics.com. If Mark Zandy’s projections are to be deemed accurate, then after the economy is fully opened, the growth rate of GNP should significantly exceed the rate that existed prior to the pandemic and the rate of unemployment should be lower than the rates across all income levels that existed prior to the pandemic.
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