in the year 2021

The Ryan plan, aka the greatest thing to ever happen to David Brooks, is essentially the internet right now. It is either “serious” and “courageous” or unfair and kind of sketchy. If you lurk the internet enough to be here, you’ve certainly seen plenty without me throwing links at you. Something that has been commented on by many skeptics is the super rosy estimates of the Heritage Foundation. Particularly noteworthy is unemployment falling to 6.4 next year…only to fall and fall until we reach 2.8 in 2021.

Now, the “such and such report” is based on unrealistic assumptions argument is not completely convincing to me, without some argument about why relaxing those assumptions would make a huge difference. I’m not sure exactly what happens if we are less optimistic about unemployment in terms of how the Ryan plan scores, but certainly assuming historically low unemployment also creates upward-biased estimates of government debt/deficit relief. I’m sure these points will be teased out somewhere, and it is not really my pressing concern (the distribution of “courageous” cuts/sacrifices is) but I couldn’t help but wonder what inflation would be like during sustained sub-4% unemployment.

Here is the the Phillips Curve with historical data (in blue) and the Heritage forecast of the Ryan plan (in red/magenta).

I dunno. Either something is missing or they’re very very optimistic about weakening labor’s bargaining power.

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