The Bureau of Economic Analysis clearly vastly underestimated the depth of the contraction that we experienced during the financial crisis. Felix Salmon thinks that this matters a lot:
The BEA is happy to try to explain what happened here -- but whatever the explanation, the original 3.8% figure was a massive and extremely expensive fail. It was bad enough to be able to get a $700 billion stimulus plan through Congress, but if Congress and the Obama Administration had known the gruesome truth -- that the economy was contracting at a rate of well over $1 trillion per year -- then more could and would have been done, both at the time and over subsequent months and years. Larry Summers warned at the time that the risks of doing too little were much greater than the risks of doing too much; only now do we know just how right he was on that front. (And even he didn't push for a stimulus of more than $700 billion.)
I would like this to be true--that is, whatever you think about fiscal policy, I would like to think that Congress sits down and spends oodles of time thinking about GDP and where it's going, and studying the data, and carefully crafting policy in accordance with their read of the numbers.
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