James Pethokoukis

A Chimerica stimulus policy?

July 13, 2009

David Goldman of the great Inner Workings blog loves the Chimerica concept, a furthering of the economic relationship between China and America. He even thinks it would make a great stimulus and long-term economic recovery program:

The bull case for the economy and Democrats

July 13, 2009
Brian Wesbury and Bob Stein of First Trust Advisers give the bull case for the economy. If these smart guys are right, 2010 might well be the third consecutive wipeout for Republicans. Some excerpts (bold is mine):
To be more precise, we are forecasting that real GDP grows at a 3.5% rate in the second half of 2009 and 4.5% next year. But, in all truth, we are much more confident about the overall 4%+ figure for the full 18-month period then about the exact growth rate for any particular quarter. … First, we project business inventories are going to end 2010 about $25 billionlower than they are right now. (But with businesses no longer reducing stockpiles as forcefully as they have been in recent months, inventories will contribute 1.3 points to the real GDP growth rate.) Second, we expect continued declines in the trade deficit, although not as quickly as in the last two years. The trade deficit was 5.4% of GDP in early 2007 and is now only about 2.2% of GDP. If the trade gap declines to 1.1% by the end of 2010, net exports can contribute 0.9 points to the real GDP growth rate. Third, we expect home building to bottom later this year and rise in 2010, contributing 0.4 points to the real GDP growth rate. Housing starts are now only one-third of the long-term trend, justifiably so due to excess home inventories. But excess inventories have already dropped from about 4.5 million a few years ago to 2 million today. We think, realistically, it will take another three or four years to fully eliminate the excess. Fourth, for government, we assume government spending contributes its long-term average of 0.4 points to real GDP growth, despite massive stimulus spending. Fifth, despite our gut instinct that business investment in plant and equipment is going to turn around much faster, we assume an annualized rate of decline of 3.2%, which subtracts 0.3 points from the real GDP growth rate. And last, we expect real consumer spending to rise at a relatively modest 2.1% annual pace, adding 1.5 points to the real GDP growth rate. To put this in perspective, we are forecasting that real consumption will be up at only a 0.6% annual rate from the end of 2007 through the end of 2010, the slowest three-year period for real consumer spending since World War II, including the early 1980s, when the jobless rate went up to almost 11%. It also means consumer spending drops to the lowest share of GDP since 2001.

Larry Summers: US not doomed to low-growth future

July 11, 2009

This interesting bit from an FT chat with Larry Summers,  director of the National Economic Council

Does the U.S. need a dose of Viagra economics?

July 10, 2009

The Obama presidential campaign was one of the all-time great branding efforts, from message to packaging to platform. So how disappointing it must be for the Obama administration that its signature achievement so far, the $787 billion American Recovery and Reinvestment Act, has been utterly misunderstood by the American public.  Listen to what megabillionaire Warren Buffett, an unofficial Obama economic adviser, had to say earlier this week: “Our first stimulus bill, it seemed to me, was sort of like taking a half a tablet of Viagra and then having also a bunch of candy mixed in … It doesn’t have really quite the wallop that might have been anticipated there.”

The all-powerful consumer? Feh. Boost business …

July 10, 2009

My colleague, confidant and occasional kick-boxing sparring partner, the fantastic Felix Salmon is worried about what comes the Day after Tomorrow:

Is Falling America losing out to Rising China?

July 10, 2009

There was a bit of a kerfuffle about the new Fortune global 500 rankings which showed  that the number of U.S. businesses fell to lowest level ever while more Chinese entries appeared than ever before. A few thoughts:

Bill Gross: America’s dark economic future … Happy Independence Day!

July 2, 2009

Pimco bond guru — and occasional White House economic adviser –  Bill Gross paints a really depressing economic future

America, don’t let this happen to you!

June 29, 2009

Stick with me on this. The WSJ outlines three economic options for Germany, whose trade-based economy has fallen nearly 7 percent during the past four quarters: 1) do nothing and wait for the global economy to pick up; 2) increase domestic consumption via higher union wages; 3) innovate!

Yes, there are still some mustard seeds out there …

June 23, 2009

Mike Darda of MKM Partners spys some of them:

1) The ratio of leading to coincident indicators is up nearly 5% since bottoming in October, a magnitude not seen outside of economic recoveries going back to 1960.

Economic growth makes the world a whole lot brighter

June 22, 2009

My pal Larry Kudlow makes a point that shouldn’t need making during a terrible recession. But I guess it does: