Ten Year Forecast? Thanks for Nuthin’
I don’t know about you but I’m getting a little sick of Washington’s ten year projections. “Unless we act now the deficit will double in ten years.” Or, “If we pass this pork ladened bill it will reduce the deficit over ten years.” Can we please face facts and stop giving these ridiculous predictions any merit at all.
How Do Predictions Work?
Various groups show up on the doorstep of the CBO (Congressional Budget Office) with some juryrigged figures and ask for a ten-year projection. If the news is good, the media is alerted; otherwise it ends up in the round file. On the surface this might seem like a good goal setting exercise and would probably be very accurate if that nasty old thing called “life” didn’t get in the way.
Numbers work fine if everything stays the same. Unfortunately, they rarely do. We are not the only guests at this party. There are close to 200 other countries in the world and their actions have an effect on our actions. When gas prices went up we adjusted our driving. When food prices fluxuate so do our menus. Countries, currencies, and economies experience the same pressures.
History Is a Real Pain
What were the ten year economic projections made back in 1995? Did they take into account that three planes were going to kill over 3,000 citizens in 2001? Did anyone take into account that the Internet was going to totally change how consumers purchase products and services? Were smart phones, flat screen high definition TV’s for less than the old glass tube versions considered?
Did anyone in 2003 consider that Facebook would have a billion members in just 9 short years and would create several billionaires? Twitter? LinkedIn? Did anyone predict Apple would pass Exxon as the worlds most valuable company? (Note: Exxon has regained their status in the past couple of months.)
What about Katrina? Sandy? Two wars in the Middle East? Dictatorships falling like dominos? Oil Prices? Subprime mortgage loans? Corporate Bailouts? Shovel ready projects? Cash for Clunkers? First Time Homebuyers Rebates? Unemployment? Food Stamps?
In 2001 it was predicted that a balanced budget and total reduction of the national debt was a distinct possibility within ten years. When politicians make these predictions you would think they are using language from the Declaration of Independence, “We hold these truths to be self evident…” I give these prophecies the same weight I give the 10-day weather forecast. Looking out the window is probably a more accurate indicator. There are just too many variables and too many human factors for any prediction regarding the economy to be even remotely accurate for more than a few days.
In March of 2009, the stock market went below 7,000. By December, it was back near 12,000. In July of 2008, oil was selling for $140 a barrel. In December, it was selling at $38 a barrel. Both these events occurred within a 6-month window of time. And somehow a ten-year prediction holds water?
Some Final Thoughts
Politicians love to pontificate about their numbers, knowing full well, that not even the news media will call them on it down the road. Every few months the CBO will adjust the numbers. Taxpayers will save money; whoops, no they won’t. Yet both Republicans and Democrats delight in spinning the numbers for their personal ideological benefit. The closer we get to elections the more lavish the predictions become. I’ll give you my prediction for the next ten years and you can take this one to the bank. Taxpayers will get hosed over the next ten years no matter who’s in office.
Tom Egelhoff is an Amazon best selling author of three business books. His 400+ page web site www.smalltownmarketing.com is one of the oldest continuous sites on the Internet. He has been featured on MSNBC’s “Your Business” and quoted in business publications in China, Turkey, India and the UK. He hosts “Open for Business” each week, 11-2 PM Mountain Time on http://kmmsam.com