patrick.net

Hey, the projected GDP trend is only "slightly" steeper, nothing the great housing economy can't fix!

For some reason CBO thinks nominal wages are going to be 40% higher by 2020, with 5.1 - 5.8% annual rises 2014 through 2017.

Pull the other one. Average wage increases in the past:

http://research.stlouisfed.org/fred2/graph/?g=pP7

It took 10 full years to get 40% wage growth in the go-go 1990s:

http://research.stlouisfed.org/fred2/graph/?g=pP8

The 1980s saw 50% wage growth:

http://research.stlouisfed.org/fred2/graph/?g=pP9

but that came with very high inflation, something the CBO isn't foreseeing here (just 2% YOY CPI through 2019).

We got 40% wage growth 1964-71:

http://research.stlouisfed.org/fred2/graph/?g=pPa

but that was with a very tight labor market:

http://research.stlouisfed.org/fred2/graph/?g=pPb

(% longer-term unemployed of working-age population)

Our system is about as corrupt as the Soviets got, ca 1980 I guess.

Wonder if we can keep the balls in the air better than they did.

People say how wonderful Medicare has been working for ~50 years, but . . . the baby boom's been paying into it their entire lives and starting just around now they're beginning their transition from rate payers to beneficiaries.

I was listening to Pawlenty today on CNN hewing to the Party Line of "No New Taxes". What a joke.

hmm, I do see we also got 40% wage growth in the previous decade:

http://research.stlouisfed.org/fred2/graph/?g=pPe

guess it's easier paying people more when you fire 1/16th of them:

http://research.stlouisfed.org/fred2/graph/?g=pPh

So how do we eliminate the deficit?
Cut welfare.
Cut tax loop holes.
Tax the crap out of fossil fuels, fast foods and sodas.

Strategist says

Cut welfare

A man can dream!

I don't think it will be that smooth and constant (GDP growth that is) until 2030, but it is not unreasonable to assume 2.3% annual GDP growth, which is what is reflected on that graph.

03-12 GDP growth averaged 1.5%
94-03 GDP growth averaged 3.0%
85-94 GDP growth averaged 2.7%
76-85 GDP growth averaged 3.0%.

Bellingham Bill says

For some reason CBO thinks nominal wages are going to be 40% higher by 2020,
with 5.1 - 5.8% annual rises 2014 through 2017.

40% higher by 2020? Ok that is 6 years, 1.4^(1/6) = 5.7% annually, nominal. Seems high, except when you consider they are projecting the 3 mo to increase to 4% by the end of 2017, with a corresponding increase in the 10 year from 2.1% - 5.2%.

That is, they are expecting inflation - to increase from around 1% now to around 4% by the end of 2017.

5.7% nominal wage growth less 4% inflation = 1.7% real wage growth. I believe wages and inflation are tied so I don't think we will see any increase in wages above inflation, but we will see.

Regardless, 1.7% real wage growth is not unreasonable in any model.

Any disconnect between inflation and real wages is caused by distribution issues. That is, median wages can fall relative to inflation while mean wages can not. In fact, this is what we would expect during an increasing Gini situation - if we assume that inflation is tied to aggregate income. Thats my thesis, anyway.

Strategist says

So how do we eliminate the deficit?

Cut welfare (welfare queen AND corporate).

Cut tax loop holes.

Tax the crap out of fossil fuels, fast foods and sodas.

Also:
Cut military spending.

Here's their data btw:

http://www.cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBOSupplementalData2013_0.xlsx

(sheet 2 Economic Vars and Population)

where they see real wages grow 20% by 2020.

they are expecting inflation - to increase from around 1% now to around 4% by the end of 2017

Nope:

2013 1.5%
2014 1.8%
2015 2.1%
2016 2.1%
2017 2.2%
2018 2.3%
2019 2.3%

1.7% real wage growth is not unreasonable in any model

Their average for the remainder of the decade is 2.8%.

Wage growth is fine actually, it can theoretically come out of "the 1%"'s take.

What troubles me more is the per-capita (16-64) productivity projections.

They have productivity from the working-age population rising from $80,000 to $115,000 by 2030 and a $20T real economy by 2019.

I don't see how we get there from here. $4T more productivity by the end of the decade is a 25% jump -- are we going to a 50hr workweek???

Demographic expansion of the 22-67 cohort is averaging 0.5% a year this decade.