Mark Zandi and Alan Blinder have launched a maximum defense of all the government interventions in the economy since 2008. Without TARP, stimulus, various Fed actions — the who kit and caboodle – their model estimates the following:
The always fantastic Joel Kotkin lays out the argument:
By 2030, all our major rivals, save India, will be declining, with ever-larger numbers of retirees and a shrinking labor force. … By then, the U.S. will have 400 million people, which may be more than the entire EU and three times the population of our former archrival Russia.
Paul Krugman makes his case for the New Normal:
1) Earlier recessions were preceded by sharp rises in interest rates, as the Fed tried to choke off inflation. This produced a housing slump, with a lot of pent-up demand; when the Fed decided that we had suffered enough, it relented, and both housing and the economy sprang back.
This would be New Normal with extreme prejudice. Bad for Democratic incumbents in the 2010 congressional midterms, but it should make the White House political team nervous as well for 2012. If Goldman Sachs is right, of course. Here is the firm’s 2011 forecast:
David Goldman sums it up:
Far more worrying [than Dubai] is the commercial real estate problem in the United
States, the continued high rate of homeowner deliquency, the huge
backlog of foreclosures–in short, the whole range of problems that stem
from an effective unemployment rate (including “discouraged” and
underemployed workers) of 17.5%. The cumulative effect of the popping
of innumerable mini-bubbles, none of which are large enough to take
down the system but all of whom together constitute a millstone around
the neck of the banking system, will keep lending weak and the economy
in very, very prolonged recession.
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.)
Trust me, these are not the kind of numbers that the White House and congressional Democrats want to see. Goldman Sachs is now forecasting unemployment to rise all next year, peaking at 10.5 percent. The firm expects the economy to grow at just 2.1 percent. Also, the budget deficit will be a few billion bigger at $1.6 trillion. If correct, these stats absolutely confirm the collective freakout happening right now among Ds on Capitol Hill, such as calling for Geithner to resign. Economist Jan Hatzius:
A classic from David Goldman:
The crystal-meth monetary policy at the Fed makes everyone feel better, until they don’t. The nonstop rise in the price of dollar hedges tells us that it can’t last forever. Large balance sheets attached to the Fed’s money pump can show profits, and the price of spread assets (as PIMCO’s Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isn’t just the 17.5% broad-measure unemployment number that we should worry about, but the massacre of smaller businesses, who are concentrated in the most vulnerable sectors: real estate, construction, and retail. Retail sales may get a temporary shot in the arm from cash for clunkers, and a combination of tax credits and (de facto) subsidized mortgage rates may hold up the bottom of the housing market for a short time. But today’s data show how fragile these matters are.
I am writing a column on this for later today, but I wanted to toss out a few quick thoughts on the state of cap-and-trade. Other than the die-hard greenies, Dems don’t want this bill anymore than Republicans. It is too easy to frame cap-and-trade as both a jobs killer and a distraction from job creation. Actually, some Rs would love for Dems to push this bill since it makes such a great election issue.
This is the most disturbing thing I have read in a while (via AP):
Trade agreements with South Korea, Colombia and Panama won’t be put before Congress until it grapples first with President Barack Obama’s pressing legislative goals, the U.S. commerce secretary said Friday. Commerce Secretary Gary Locke said Obama has an ambitious high-priority legislative agenda focusing on health care, financial regulation and alternative energy. “Trade agreements are going to have to wait,” he said at a luncheon hosted by the American Chamber of Commerce in Singapore. “Right now, the administration is focused on a very aggressive and very tight legislative agenda.”