NEW YORK – Every January, I try to craft a forecast for the coming year. Economic forecasting is notoriously difficult; but, notwithstanding the truth expressed in Harry Truman’s request for a one-armed economist (who wouldn’t be able to say “on the other hand”), my record has been credible.
In recent years, I correctly foresaw that, in the absence of stronger fiscal stimulus (which was not forthcoming in either Europe or the United States), recovery from the Great Recession of 2008 would be slow. In making these forecasts, I have relied more on analysis of underlying economic forces than on complex econometric models.
For example, at the beginning of 2016, it seemed clear that the deficiencies of global aggregate demand that have been manifest for the last several years were unlikely to change dramatically. Thus, I thought that forecasters of a stronger recovery were looking at the world through rose-tinted glasses. Economic developments unfolded much as I anticipated.
Not so the political events of 2016. I had been writing for years that unless growing inequality – especially in the US, but also in many countries throughout the world – was addressed, there would be political consequences. But inequality continued to worsen – with striking data showing that average life expectancy in the US was on the decline.