The Trouble with Macroeconomics (2016) [pdf]

As far as I can read it, the top half shows (in blue) two estimates of "potential GDP", which is a measure of how much an economy could produce if all available resources were used to the fullest. (For example, an economy may be below potential because of difficulty matching workers to jobs, or credit to investment, for example.) Both blue lines are estimates of potential future GDP, with the light blue line the estimate made in 2007 while the dark blue line is the estimate made in 2018. Then, against this potential GDP line, the red line is the actual GDP at those times. The bottom half of the figure is the same data, but zeroed at the red line and flipped, so the blue shapes are how far the economy was below potential GDP, according to the 2007 and 2018 estimates.

I think the grandparent is implying that the 2018 estimate is modified to suit the preferences of revered leaders (not sure who... Trump? Obama? Yellen? Powell?), presumably to portray the economy as doing well (whereas the 2007 estimate would suggest the economy is still far below its potential). I am guessing at the grandparent's intentions, so it would be good to get clarification.

I think it is a silly claim. One reason for the 2007 estimate to differ from the 2018 estimate is political bias. Another is 11 extra years of data.

And plenty of anecdotal signs suggest the 2018 estimate is clearly better than the 2007 estimate. According to the 2007 estimate, the economy is slowly falling further and further behind its potential. Does anyone think the employment situation is currently worse than 2010? If improving the unemployment rate from 10% to 4% just leads to treading water against potential GDP, how low does it need to go to catch up? -10%? (Unemployment is relevant here because one of the underutilized resources in the economy ~2009 was workers: plenty were without work.)

Krugman calls it "The Great Shortfall", the massive drop in projections of potential GDP (at a fixed point in the future) depending on when the estimate was made, before or after the financial crisis (ie now).

The basic point is that both Europe and the US have "[...] returned to sort-of full employment at a much lower level of real GDP than informed people projected we’d reach before the crisis struck." [1]

There are certainly economic implications (eg, should fiscal and monetary policy be tight or loose now), and political implications (is the economy doing really well currently, or not).

[1] https://www.nytimes.com/2018/09/30/opinion/the-economic-futu...

EDIT to add: And the bit about the "facts" and "revered leaders" probably alludes to this:

Potential GDP is what a country could produce using all its resources (including machines = capital and employees = labour, multiplied with productivity). Why is there a drop? Maybe productivity dropped, maybe capital dropped, maybe employment dropped. The chart wants to imply that employment dropped. However, the chart goes on to imply, the unemployment rate has gone back to pre-crisis levels. Why is that? Because many unemployed people are not counted, and this is convenient for the current administration. That's what I take the chart and OP to be alleging.

Ya this thought is common "In the deep waters of theoretical physics, the "problem" is that the scientific method gets to be a little abstract. A theory is falsifiable, in principle, but not in practice." but I dont know of an area where it applies. Even the vacuum energy (way beyond my academic level) is verified in experimentation with the Casimir effect.