"New Heritage Model of Paul Ryan’s New Budget Still Doesn’t Make Very Much Sense"
Having embarrassed itself with a kookily optimistic projection of the employment benefits of Paul Ryan’s plan to raise middle class taxes and abolish Medicare, the Heritage Foundation then made the analysis disappear down the memory hole. Now Dave Weigel reports that they’ve devised a new analysis that’s a bit less laughable, though still doesn’t really make sense.
Specifically, according to Weigel they’re now projecting 7.89 percent unemployment in 2012, and 4.27 percent unemployment in 2020. Now 4.27 isn’t totally impossible, but it still ignores the past several decades worth of Federal Reserve practice. The way things work, when unemployment gets to the neighborhood of five percent, up go the interest rates in an effort to restrain wage growth by creating labor market slack. This may be a bad idea—I think there’s some reason to think it is a bad idea—but it’s a monetary policy and central bank governance issue, not a budget issue. Paul Ryan can’t do anything about it, and it seems irresponsible to me for a think tank to pretend he can, and doubly irresponsible for Ryan to pretend to believe a think tank pretending to believe that he can.