Jed Graham of IBD highlights the coming fiscal drag in a pretty picture:
Me: What would that mean for GDP growth? A pre-financial crisis analysis by Goldman Sachs predicts, for instance, found that getting rid of all the Bush tax cuts at the end of 2010 would cause a 3 percentage point drop in the economy in 1Q 2011. In any event, anti-growth fiscal policy is one more reason to believe in the dreary New Normal
David Rosenberg of Gluskin Sheff doesn’t think so:
These attempts to stimulate consumption at a time when household spending relative to GDP is already at an all-time high are not going to carry much of a multiplier impact. There is a youth unemployment crisis, a skills crisis, a crisis among the ability of small businesses, who have been responsible for 65% of the new hiring in the U.S.A. over the past 15 years — to secure financing for working capital purposes, there is a crisis in terms of a declining manufacturing capital stock, and the programs we get are these old and tired Keynesian attempts at temporary boosts to consumer demand. It truly boggles the mind, and as we show below, American taxpayers are still a long, long way from paying for all these transitory fiscal policies out of Washington.
Me: When I hear folks start talking about new WPA and CCC programs, I know they’re out of ideas.
Thanks for the post and for sharing the very useful information related to job crisis.
Kim Strassel is right, cap-and-trade looks terminal for 2010 and beyond. Sure, the EPA could try to push its own draconian carbon regulation. But I think that would cause a firestorm on Capitol Hill. Strassel:
Polls show a public already losing belief in the theory of man-made global warming, and skeptics are now on the offense. The Competitive Enterprise Institute’s Myron Ebell argues this scandal gives added cover to Blue Dogs and other Democrats who were already reluctant to buck the public’s will and vote for climate legislation. And with Republicans set to pick up seats, Mr. Ebell adds, “By 2011 there will hopefully be even fewer members who support this. We may be close to having it permanently stymied.” Continued U.S. failure to act makes an international agreement to replace Kyoto (which expires in 2012) a harder sell.
Karl Rove makes a good point:
The administration says it is now instructing agencies to either freeze spending or propose 5% cuts in their budgets for next year. This won’t add up to much unless agencies use the budgets they had before the stimulus inflated their spending as their baseline in calculating their cuts.
For example, if the Education Department uses its current stimulus-inflated budget of $141 billion instead of the $60 billion budget it had before Mr. Obama moved into the White House, freezing its budget will do nothing to fix the fiscal mess the president has created.
Me: Indeed, one thing to watch out for is how these elevated, stimulus-related spending levels become incorporated into budget baselines.
There are some that have credibility on the deficit (Bartlett, Rubin etc.) there are others that do not. Those who cite folks like Rove and claim to be anything other than polemic deserve derision. Do you perceive Karl Rove as a legitimate expert? Can you rebut the substance of my comment which directly rebuts Rove’s alleged insight?
My pal Felix Salmon makes a good point about the dollar and Dubai. The greenback initially slid on the news. But isn’t the greenback supposed to be a safe haven. Felix opines as follows:
Needless to say, this isn’t exactly a classic risk-aversion reaction: when the markets are really scared, they tend to flee to the safety of the dollar, rather than to the Japanese yen. So my feeling is that this — along with the relatively modest stock-market reaction in New York this morning — counts as a sign that Dubai really isn’t all that bad: it shows that markets are trading the news, rather than panicking.
On the other hand, it’s clearly not good news that a severe-if-not-life-threatening shock such as this one sends the dollar down rather than up. The immense fiscal cost of the financial crisis has hurt the dollar’s standing as the global reserve currency, and if I were at Treasury right now I’d be very concerned about this reaction. Not that there’s much Treasury can do about it.
If former CNN anchorman Lou Dobbs decides to make an independent bid for president in 2012, he will probably find the political climate as hospitable for an insurgent run — if not more so — as it was in 1992, when Ross Perot captured a fifth of the popular vote. (It was the best showing by a third-party candidate since Bull Moose Teddy Roosevelt finished second with 27.4 percent of the vote in 1912.)
The dreary economic New Normal that is the aftermath of the Great Recession has created a huge political opening for Dobbs or Michael Bloomberg or Sarah Palin, or some other American with high visibility or deep pockets or both.
It was a slow-recovering economy and concern about big deficits that drove the Perot phenomenon. There’s a high probability both factors will be at play three years from now. The Center on Budget and Policy Priorities forecasts annual budget deficits to average $1.2 trillion over the next three years. And the Federal Reserve is forecasting a so-so economic expansion that will leave unemployment over 7 percent in 2012. Overall, the nation’s economic mood might be a lot worse than it was in 1992.
Then you have a populist, anti-Wall Street sentiment that neither Democrats nor Republicans have been able to capture successfully. The result is that party loyalties are frayed, with the tea party movement one manifestation. According to the Pew Research Center, 36 percent of Americans identify themselves as independents, the highest number since 1992. And they seem to be up for grabs. Barack Obama won 52 percent of the independent vote in 2008. But a recent poll by Rasmussen Reports shows Obama with a 61 percent disapproval rating among the group.
None of this means an independent would actually win. Rasmussen has Dobbs at 14 percent in a race with President Obama (42 percent) and Mitt Romney (34 percent.) With the more populist Palin replacing Romney, Dobbs gets 12 percent versus 44 percent for Obama and 37 percent for Palin. Yet without Dobbs in the race, Romney is tied with Obama and Palin trails by just three. So an independent could, at the very least, radically alter the political landscape.
And not just for the GOP. Unhappiness about an escalation in the Afghanistan war and muddled healthcare reform could create a more liberal independent challenger. Take Howard Dean, for instance. The former Vermont governor and chairman of the Democratic National Committee has been ripping ObamaCare lately and says he would vote with Sen. Bernie Sanders of Vermont, an independent socialist, against it if he were a senator. And Dean sure knows how to use the Internet to raise money, as he showed in his 2004 run for the Democratic nomination.
But here is the bottom line: If the New Normal turns out to be worse than expected, with the GOP blamed for the original collapse and Democrats for a bungled remedy, an independent might accomplish much more than just being a spoiler.
Jim Gilchrist,who is a leader of more than a million Minuteman, Viet Nam vet with Purple Heart and other medals, charisma, well spoken, well known, been on turncoat Lou Dobbs Show, idiot Larry King Live Show and Fox News etc. retired accountant and nice guy. The fact that he is not a corrupt politician is gold. He will have the Minutemen,people who think like the Minutemen like us and the Vets behind him. He is a lot better than obama and the ones on the right by far for president.Lou Dobbs is a con artist with a hidden agenda for Money and Fame. Anyone who is really against amnesty and illegal has it in them like an arm or a leg. So he was never against amnesty and illegal from the beginning. Just the only way he could get Money and Fame. Schemer with illusions of Grandeur. Opportunist. Who is going to vote for him now other than his own family? That turncoat is a joke. The stunt he pulled would be like Rush coming out and saying he was really a Democrat. Dobbs stabbed his listeners in the back with really being for amnesty all these years for the money. But telling his audience he was against amnesty, illegal like them. Should be some kind of law against it.Palin is another one who is a schemer with illusions of grandeur. Opportunist. United the Republican base with religion and morals. She is copying bush’s strategy of using the fundies to be elected. After the fundies left the oval office bush and the Republicans made fun of them. How can these fundies be duped twice? But then the liberal left fundiea and left are duped by obama. Separation of Church and State. What is she going to do rule the country with the Bible instead of the Constitution? Well seeing as how she didn’t know what NAFTA was she doesn’t know the Constitution either. She left being governor of Alaska with how many? 50 ethic violations? She was against the poor polar bears etc when she was governor. Hypocrite hunts for the thrill of the kill. She is a big joke too.4th generation Democrat no longer and never again. There is no such thing as a Democrat today. My father’s Democratic Party when men were men and took care of their own, would never have been for illegal, foreign workers, amnesty, CAFTA, NAFTA, outsourcing, North American Unoin, NWO etc. like these so called Democrats today. The Democrats of today are just the opposite of my father’S Democratic Party, who were all for the Americans and US Made.
If Lou Dobbs decides to make an independent bid for president in 2012, he will probably find the political climate as hospitable for an insurgent run — if not more so — as it was in 1992, when Ross Perot captured a fifth of the popular vote.The dreary economic New Normal that is the aftermath of the Great Recession has created a huge political opening for Dobbs or Michael Bloomberg or Sarah Palin, or some other American with high visibility or deep pockets or both.It was a slow-recovering economy and concern about big deficits that drove the Perot phenomenon. There’s a high probability both factors will be at play three years from now.The Center on Budget and Policy Priorities forecasts annual budget deficits to average $1.2 trillion over the next three years. And the Federal Reserve is forecasting a so-so economic expansion that will leave unemployment over 7 percent in 2012.Then you have a populist, anti-Wall Street sentiment that neither Democrats nor Republicans have been able to capture successfully.The result is that party loyalties are frayed, with the tea party movement one manifestation. According to the Pew Research Center, 36 percent of Americans identify themselves as independents, the highest number since 1992. And they seem to be up for grabs.Barack Obama won 52 percent of the independent vote in 2008. But a recent poll by Rasmussen Reports shows Obama with a 61 percent disapproval rating among the group.None of this means an independent would actually win. Rasmussen has Dobbs at 14 percent in a race with President Obama (42 percent) and Mitt Romney (34 percent.) With the more populist Palin replacing Romney, Dobbs gets 12 percent versus 44 percent for Obama and 37 percent for Palin.Yet without Dobbs in the race, Romney is tied with Obama and Palin trails by just three. So an independent could, at the very least, radically alter the political landscape.And if the New Normal turns out to be worse than expected, with the GOP blamed for the original collapse and Democrats for a bungled remedy, an independent might accomplish much more than that.
Rick,Which is presumably why the chart cuts off at 2013 instead of showing the out years when the net impact of the reform will be neutral.