Whenever I get depressed about the economy, I go over to visit with one of the administration's leading forecasters, Arnie Hackle. Arnie shares his office with Madame Tula, the fortuneteller over Doc Dalinsky's Drugstore. He could have an office at the White House, but he needs the use of Madame Tula's tea leaves to make his predictions for the next fiscal year.
"You economists blew it again," I said to Arnie.
"How did we blow it?" he asked.
"You predicted a mild recession and you wound up with a hurricane."
"I think you're just reacting to the bad economic news that has been coming out. It's true the depth of the recession is deeper than we predicted, and the speed of it is faster than we thought, and it's sharper than we expected, but in the long run we expect to see a turnaround after the summer is over, providing the erosion of purchasing power is reduced."
"I understand that," I said. "But can't you Carter people even organize a good recession?"
"The model we used checked out perfectly in the lab. What we failed to take into consideration was that the Consumer Price Index, driven up by higher interest rates on mortgages, would reach a peak where no one could afford to buy a house. Now that mortgage rates are sliding down, we expect to see an upturn in the building industry either before or after the end of the year."
"But by the time they come down everyone will be out of work and no one will be able to afford a house at any interest rate."
"That is the conventional wisdom, but we economists have to ignore it if we ever hope to get the big bubble out of inflation. Once we get the bubble out, we can go to high-single-digit numbers."
"Is the bubble the underlying cause of the rate of inflation?"
"No, but it is the thing you can see in an inflationary cycle," Arnie said.
"Once the bubble is broken, then you can start work on monetary and fiscal safeguards to maintain the status quo."
"Your unemployment figures were way off, Arnie. What happened there?"
"When we planned this recession, we made allowances for a 7.5 percentunemployment rate, which we felt the administration could live with What we didn't count on was that more people would be out of work than we allowed for. They threw our model all off and now we've had to recalibrate our figures."
"That must have caused the administration a great deal of hardship."
"It isn't easy to make a recession work if the people refuse to cooperate by violating our projections."
"Can you see the recession bottoming out in the near future?"
"It might after a few more dips. Then again, you wouldn't want it to bottom out before we get our inflationary expectations too high."
"From what you've told me, the Carter economic game plan is right on target."
"I would say so, providing we reduce inflation, balance the budget and get people back to work as soon as possible. Taking into account that all these factors will be operating in the next year and factoring in the price of oil and food, we should have the economy on the track by 1984, providing no one asks for a raise, and everyone buys a new car."
"What does Carter want us to do until then?"