Friday, April 8, 2011

One More Thought on Ryan's Economic Model

The above chart is from Ryan's economic projections, courtesy of Professor Krugman. It assumes that under the Ryan plan, there will be a big increase in residential investment.

Consider that in light of this statement from the latest FOMC Minutes regarding the housing market:

Activity in the housing market continued to be depressed, held down by the large inventory of foreclosed or distressed properties on the market and by weak demand. In January, starts and permits for new single-family homes remained near the low levels that had prevailed since the middle of 2010. New home sales moved down in January; existing home sales stepped up somewhat but still were quite low by historical standards. Measures of house prices softened again in December and January.

There is a large inventory of homes on the market and that's before we get to the issue of foreclosed homes entering the inventory. In short, this is another example of magical think tank "thinking."