James Pethokoukis

Washington vs. Wall Street … profits

June 1, 2010

The U.S. profits story has been a bright one for the American economy.  But it may be dimming, says Ed Yardeni:

State capitalism, crony capitalism

May 11, 2010

When Ian Bremmer offers to tell you “what comes next, it is wise to pay attention:

The false choice of higher taxes and less spending

May 11, 2010

Over at NRO, Kevin Williamson tries to figure out how to reduce the US budget deficit:

Dealing with debt: America needs a growth experiment

May 10, 2010
Europe’s debt problems should inspire Americans to explore just how the U.S. will solve its own fiscal woes. I mean, no one is going to cut us a check like Germany and France just did for Greece. This is a topic I tackle in a piece I just wrote for The Weekly Standard. A few key points: 1) Cutting spending and raising taxes is a risky formula. It doesn’t have a great track record:
Since 1980, some 30 debt-plagued nations have tried to reduce their indebtedness through such austerity measures. In practically all cases, according to a new study by financial giant UBS, the increase in national debt was only slowed, not reversed, by such policy pain.
2) Trying to take more from rich people has its limits. Higher and higher income taxes or even wealth taxes create incentive to find tax havens and avoid productive work or capital allocation. 3) Cutting spending is better than raising taxes. Hey, I even have a study to prove it:
A 2009 study by Harvard University’s Alberto Alesina and Silvia Ardagna. It examined 40 years of debt reduction plans by advanced economies and found that “those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases.” They’re also associated with higher economic growth.
4) Less spending +more growth. This is my money graf from the piece:
But what if (a) government spending tracks current projections over the next 70 years, (b) government revenue as a percentage of GDP stays at its historic average of 18 percent, and (c) the economy were somehow to grow a bit faster than its 20th-century average, about 3.5 percent. Under those conditions, according a recent study by JPMorgan Chase, a much wealthier America (generating $100 trillion in tax revenue rather than $50 trillion) would be able to afford projected spending without raising taxes. The long-term budget gap would vanish. … Indeed, that is typically how successful countries in the UBS study managed to get their books in order; they grew their economies faster than they added debt. … Easier said than done, of course. … And there is no one policy to help make that happen. It will take a full-spectrum effort: lower taxes on companies and capital, pork-free spending on infrastructure and basic research (beyond health care), an education system that teaches students rather than feathering the nests of teachers’ unions. Every aspect of U.S. public policy will need to be optimized for economic growth.

US debt woes could explode in just three years

May 7, 2010

The great Jed Graham over at Investor’s Business Daily writes an important piece on America’s debt problems. It is not a long-term or intermediate-term issue, it is a short-term issue:

10 reasons to be cautious on economy

May 3, 2010

I will say this: As much as I press WH officials to take a victory lap on the economy, they want no part of that — especially not with unemployment at these high levels and the evolving EU debt crisis.  David Rosenberg of Gluskin Sheff gives some more reasons for caution:

Obama’s deficit commission and the politics of crisis

April 27, 2010

Good luck to the Obama deficit commission. In my heart, I do not believe Congress will pass huge entitlement cuts (preferable)  or tax increases without a  crisis.  (There needs to be a focus on boosting economic growth.) To quote Milton Friedman in Capitalism and Freedom:

American job insecurity

April 26, 2010

Two interesting polls from Gallup show why a few ticks in the unemployment rate here and there are really besides the point. (Thanks to Jim Geraghty of NR.)  This downturn has scarred the American psyche. The first chart shows how worried workers are about finding a comparable job if they ever lose their current one. The second chart shows that they are still pretty worried about losing their existing job.

Growth is the key to US fiscal recovery

April 21, 2010

The Obama deficit commission has its first meeting next week. And when the panel  finally releases its report after the election, I am sure it will contain an unsurprising mix of tax increases and spending  cuts as a way of dealing with the deficit. But a new report from the  wealth management group at UBS  looking at public sector debt dismissed that policy prescription:

5 reasons why the Tea Partiers are right on taxes

April 16, 2010

Here is the new Washington Consensus: American taxes must be raised dramatically to deal with exploding federal debt since spending can’t/shouldn’t be cut. Only the rubes and radicals of the Tea Party and their Contract from America movement think otherwise. And don’t worry, the economy will be just fine.