The Congressional Budget Office Doesn't Believe Robots Will Take Our Jobs

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Friday, 28 February 2014 06:22

The elite policy types in the United States are truly extraordinary in their ability to show great concern about completely contradictory possible states of the world. Floyd Norris shows one of the bases for serious hand wringing, higher future budget deficits, as projected by the Congressional Budget Office (CBO) in its latest outlook. Norris points out that the report assumes that the weak economic growth of recent years persists long into the future. (Norris notes CBO has badly erred before by extrapolating from the recent past, noting its projections from 2001 that assumed the stock bubble would persist into the indefinite future -- a point some of us noted at the time. However, its biggest error was failing to recognize that the housing bubble's collapse would tank the economy.) 

However more important than CBO's checkered track record is the fact that CBO's assumption of slow growth and slow productivity growth is 180 degrees at odds with the robots will take our jobs story. If robots are taking our jobs, then productivity growth will be fast, inflation will be very low (goods and services will be getting cheaper), and presumably interest rates will also be low. While it is possible that CBO's forecast will be right, if it is then the robot story is wrong and vice versa. That's the simple logic, but elite policy types are such impressive sorts that they can worry about both fast and slow growth simultaneously being a problem.