In a prior post (here), I presented alternative futures for the US Economy. In terms of growth (the USL20 US1 state variable), the best models are the Business-As-Usual (BAU) model or the basic US state space model itself, both without input from the World System or other countries. From a statistician's perspective, this is the Make America Great Again (MAGA) model. Alternatively, the Random Walk (RW) model (history is just one damned thing after another) actually seems to be the best description of the Trump II administration's current (early) performance in office. Finally, from the Akaike Information Criterion (AIC, see the Notes below), the best description of US Growth from (1950-2010) is the RW model.
Does all this make your head hurt? First, no one can know the future. This is why the IPCC presents Alternative Emission Scenarios (here) rather than forecasts for CO2 emissions. The unpredictability of the future is why the Trump II administration (to be charitable) is behaving randomly (here) even though their preferred future is the BAU model with the US dominating the World-System.
The RW is a well-known but little acknowledge business strategy and Trump is trying to run the US government as if it was a business. The business theory is that if you are too predictable in your behavior, your competitors can easily predict your behavior and set up against you. The Left Wing cannot predict what Trump will do next so it is impossible to develop a strategy against him. The approach is similar to the Gish Gallop debating style which is also used by Trump and is difficult to rebut.
How reasonable is the RW model as a description of US growth? In the graphic above, I ran eight simulations of the US1 RW model, starting in 1950. Two of the models produced an upward growth trend, one of the models produced collapse. The other models produced weak performance with a slight negative trend. So, there is about an 88% chance that random management of the US Economy will not produce a crisis and might even produce an upward trend. Those are pretty good odds for a businessmen willing to take large risks and who has no idea how to run a government.
As a comparison, I've done a similar analysis for Mexico (here) where the RW is also the best short-term model and for Canada (here and here) where the BAU model is best. Argentina also is a favorite of the Trump II Administration for it's slash-and-burn policy approach (here); the RW model is also a good competitor (AIC = 76.58) for Argentina (you can run the ARL20 BAU model here) or read the verbal discussion (here).
Notes
Akaike Information Criterion (AIC) for alternative models shows that the RW model is a strong competitor for US Growth, at least in the short-term.
You can run the USL20 BAU model here. It is also a strong competitor and produces uncontrolled exponential growth, a future growth path favored by many commentators.
State Space Model Estimation
The Measurement Matrix for the state space models was constructed using Principal Components Analysis with standardized data from the World Development Indicators. The statistical analysis was conducted in an extension of the dse package. The package is currently supported by an online portal (here) and can be downloaded, with the R-programming language, for any personal computer here. Code for the state space models is available on my Google drive (here) and referenced in each post.
Atlanta Fed Economy Now
My approach to forecasting is similar to the EconomyNow model used by the Atlanta Federal Reserve. Since the new Republican Administration is signaling that they would like to eliminate the Federal Reserve, the app might well not be available in the future.
While the app is still available, there have been some interesting developments. In earlier forecasts, the Atlanta Fed was showing GDP growth predictions outside the Blue Chip Consensus. Right now, after unorthodox economic policies from the Trump II Administration, the EconomyNow model is predicting a drastic drop in GDP (the Financial Forecast Center is only predicting a slight drop here).
Climate Change
Another comparison for what I have presented above are the IPCC Emission Scenarios. These scenarios are for the World System. Needless to say, (1) the new Right-Wing Republican administration plans on withdrawing the US from all attempts to study or ameliorate Climate Change and (2) the IPCC does not produce any RW modes for the World System (but seem my forecasts here).
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