Via Kevin Drum, UCLA economist Ed Leamer seems to be very pessimistic about the near-term growth prospects:

The forecast for GDP growth this year is 3.4 percent, followed by 2.4 percent in 2011 and 2.8 percent in 2012, well below the 5.0 percent growth of previous recoveries and even a bit below the 3.0 percent long-term normal growth. With this weak economic growth comes a weak labor market, and unemployment slowly declines to 8.6 percent by 2012.

And then Kevin Drum indicts Congress, ostensibly for dropping on the ball in passing the weak jobs bill, which should probably read “useless jobs bill”…but I can imagine that Mr. Drum would like other fiscal measures as well.

So, why the persistent unemployment? Well, today’s CPI report shows that inflation edged lower by .2 percent. Just as worrying, the 5yr TIPS spread is currently at 1.68%, which is a full .32% below previous trend. We’re looking at a long path of grinding price and wage deflation to the new trend, which is +-6% below the previous NGDP trend from the Great Moderation.

Make no mistake, this is a failure of monetary policy to boost expectations of future NGDP. Getting mad a Congress is an exercise in futility.

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