An economic double whammy

October 4, 2010

My pal Don Luskin  gets it just right in the WSJ today: America is wrong on both taxes and trade.

All else being equal, if the Bush tax cuts don’t get extended, that’s a 2.3% hit to 2011 GDP. That means instant double-dip recession, starting at midnight, Dec. 31. … Now to protectionism. Last week the House passed the Currency Reform for Fair Trade Act. … The bill, if passed by the Senate and signed by the president, would mandate that the Department of Commerce take a foreign country’s currency interventions into account in determining whether its trading practices are unfair. In the case of China—the target at which this bill is aimed—Commerce would determine that the amount by which the yuan is allegedly undervalued.  … Surely China would retaliate. That makes the bill a nuclear threat of mutual assured economic destruction. If carried out, it would crush trade between China and the United States, which are huge export markets for each other.

As Luskin also points out,  a rising yuan is no silver bullet — there’s lots of risk with little potential reward. Along with the tax increases, Washington is amazingly anti-growth right now. Instead, they need to make growth the new government initiative.

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Perhaps, perhaps not. Is it possible Team Obama is spending all its spare time reading polls and predictions for the mid-terms? Trying to figure out how to get the Democratic Party back on the rails, and letting policy slide in the meantime?

With respect to Mr. Luskin’s excellent points, it’s not like anybody in the White House a) understands what Mr. Luskin is saying or b) cares. Everything is about appealing to the LCD blue-collar union vote. Watch for more class warfare rhetoric. So sad. Mr. Obama is facing being just a half-term president.

Posted by Gotthardbahn | Report as abusive