She’s back! The return of Rosy Scenario

The Return of Rosy Scenario

Way back in 1983 George Will characterized the Reagan Administration’s economic projections as a rosy scenario. That term has become synonymous with overly optimistic government projections. Well she’s back.

I have always said “prove me wrong and I will adopt your opinion.” It is now prove me wrong time with the Big Beautiful Bill. Most times when Trump does something the knee jerk reaction from the Trump haters is to oppose it while the knee jerk reaction from the MAGA apologists and those paid to lie (like the press secretary) is to support it. So we expect the left to assert that whatever Trump does is going to kill grandmothers, babies and the poor while profiting billionaires. Those on the right will contend that the same action will make America great again. Such is the case with the Big Beautiful Bill.

The analysis of the projected economic impact of the bill was virtually unanimous with the only outlier beings Trumps Council of Economic Advisors. Here outlier should be spelled outliar. Recall that the Congressional Budget Office (one of my many old employers) estimated meager growth in GDP of only 0.5% over ten years and an increase in the deficit of $430 trillion over that period if all the gimmicks were removed from the assumptions. The White House immediately blasted CBO saying that it was biased being populated by democrat hacks who hated Trump. However, CBO is headed by a republican economist appointed by the Speaker of the House and the Senate President pro tempore – both republicans. The White House spokesperson, who is paid to lie, also pooh poohed the CBO findings saying that a more accurate assessment was from the president’s Council of Economic Advisors. Their projection was a 4.6% to 4.9% increase in growth and a cut in the deficit of $2 trillion. The Council of Economic Advisers’ head, Stephen Miran made all the talk shows touting the bill. Kelly Loeffler, head of the SBA said that 1 million jobs would be created.

Well eight forecasting entities differ projecting growth from a paltry -0.1& (The Budget Lab) to an anemic 1.0% (Tax Foundation). All see significant increases in the deficit. Again, only Trumps CEA thinks otherwise. Naturally Speaker Johnson parrots the CEA saying The Council of Joint Economic Advisers predicts “a 3% growth rate in the economy, the addition of four million jobs, and for the average U.S. household to have an added $13,000 in take-home pay. “We’re giving everybody a tax cut, and that’s going to help the economy. We’re super excited about what we were able to deliver.” The Speaker added “We’re excited about the upcoming election cycle in ’26 because people will be riding an economic high, just as we did after the first two years of the first Trump administration. This time, it’s on steroids.”

Well this time it is different. Johnson can be excused for stretching the truth. It is what he has to do. Images of a pig with lipstick come to mind. Yes the Trump tax cuts in the first term led to economic growth, despite the imposition of tariffs. However, the Big Beautiful Bill doesn’t really cut taxes – except on a few piddling items – it only makes permanent the temporary tax cuts of the president’s first term. There is no new stimulation coming from the BBB that will have any significant economic impact. Also the $2 trillion in deficit reduction is wholly predicated on a 4.5% increase in economic growth which simply won’t happen despite what all the MAGA types are telling us. One modeler of the impact of the BBB noted that the CEA’s estimates were the only one that did not include the cost of financing the debt and that along with other “fantasy growth assumptions are many times higher than other estimators.” I believe this is another way of saying that the CEA’s projections are a rosy scenario.

Lastly, I do not have a lot of confidence in any of the models because of  Trump’s tariffs. How long will they be in effect? Of what magnitude will they be? All the models show that there will be a drag on the economy in the short run while only the CEA’s will contend that the tariffs will contribute to economic growth over the 10 year period. Since the estimates are over 10 years, are all the models keeping the tariffs static over the entire period? I would predict that the Trump tariffs will be temporary once their full impact is felt because the pressure will be on the president to remove them. But given the stubbornness of this president, he may be willing to keep them in place even if it appears that the republicans are going to lose congressional seats – despite Speaker Johnson’s having to endorse with a straight face the conclusions of the Council of Economic Advisors.