James Pethokoukis

Politics and policy from inside Washington

Roubini: More pain to come

May 28, 2009 18:11 UTC

Nouriel Roubini paints a gloomy picture of the economy ahead:

“I still expect that economic growth in the U.S. is going to be negative through Q4, and that we’ll see positive growth in Q1,” Roubini told Reuters in an interview on the sidelines of the Seoul Digital Forum.

“The U.S. recession is going to be U-shaped, lasting roughly 24 months,” he added. “Compared to the current consensus that says we are practically at the end of the recession … my view is: no, it’s going to last another six to nine months before it’s over.”

Confused taxpayers are happy taxpayers?

May 28, 2009 18:00 UTC

Bob Williams over at the Tax Policy Center takes note of recent research that suggests “taxes don’t always have to depress demand. People may not react to tax changes they don’t perceive. If the price change isn’t obvious, homo economicus goes on merrily consuming the same as before.”

He points to research that found a) toll roads with electronic toll payment systems take in more revenue; and  b) a drop in demand when sales taxes were made clear to consumers before purchase.  Now one could interpret this as an argument for a value-added tax. In general, I think it makes a lot of sense to tax consumption over investment. But the interest in Washington is in a VAT that would be in addition, more or less, to our current income and investment taxes — not a replacement.

Cheney: Let GM fail

May 28, 2009 17:48 UTC

Larry Kudlow had a marvelous chat with the former veep yesterday. I think this exchange on GM is particuarly noteworthy:

Mr. CHENEY: Well, some of us at the time wanted GM to go bankrupt, go to Chapter 11.

KUDLOW: Were you in that camp?

Mr. CHENEY: I was. The decision was made that, in the final analysis, since our administration was almost over and a brand-new team was about to take over that the president wanted, in effect, not to take a step that wasn’t necessarily going to be followed by his successor, but rather to set up a situation which the new guys could address that issue and make a decision about what the long-term policy was going to be. And we came up with a short-term package, in effect, that got us through the–through the inauguration.

Happy ending unlikely for GM

May 28, 2009 17:44 UTC

My pal Pete Davis over at Capital Gains and Games gives a  great 96-word GM sitrep:

This is not going to come to a happy end for taxpayers for several reasons.  First, the taxpayers will not get back all of $19.4 b. they’ve already “invested” in GM, nor all of $30 b. in loans they’re about to be saddled with.  Second, auto parts firms will soon need additional funds as well.  Third, the collateral damage to Ford and other companies making cars in the U.S. will not be small.  Finally, despite Administration assurances that they will be “reluctant owners,” eager to sell, it will take a long time to extricate ourselves from this mess.

The Republican healthcare gambit

May 28, 2009 16:20 UTC

I wrote a Reuters column yesterday about the GOP alternative to Obamacare just offered by Sens. Coburn and Burr and Reps. Ryan and Nunes. Read the column. Study it. Memorize it. But here are a few observations:

1) CBRN would go a long way toward moving the U.S. healthcare system from being employer based to individual based. If you a want to create a consumer-driven healthcare market, that’s a biggie.

2) It shows that GOPers realize that a 1994-style, “just say no” strategy won’t be enough to defeat Obamacrat healthcare reform.

3) The language surrounding the GOP bill does make it almost sound like it is a Democrat bill. That could confuse the public into thinking there are no real differences between the GOP plan and the Obama plan (which seems likely to create a public health plan option), helping the legislative momentum of the latter.

On a side note, here a story about problems with the Mitt Romney-designed Massachusetts healthcare system.