Falling poll numbers and rising joblessness = time is not on the Dems side for passing healthcare reform — as liberal blogger Matthew Yglesias just realized:
So what explains the crazy, cockeyed optimism of House Democrats? Maybe they still believe Team Obama’s rosy-scenario forecast that shows the stimulus package a) keeping unemployment under 8 percent this year and b) launching an economic boom next year and beyond. For some reason, though, they think the battered U.S. economy is so strong that politicians can pile tax upon tax on it with no fear of further harm. Less than three weeks after passing a costly cap-and-trade carbon emission plan, Pelosi & Co. have giddily unveiled a $1.2 trillion healthcare plan partially funded by a $544 billion surtax on the work and investment income of wealthier Americans, including small business owners.
America’s Treasury Secretary speaks in Saudi Arabia: “Given the extent of damage to financial systems, the loss of wealth, the necessary adjustments to a long period of excessive borrowing around the world, it seems realistic to expect a gradual recovery, with more than the usual ups and downs and temporary reversals.”
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.
From The Hill:
The House will propose raising taxes on people earning more than $350,000 a year to pay $540 billion for healthcare reform, Ways and Means Committee Chairman Charlie Rangel (D-N.Y.) said Friday. … Rangel said Democrats will seek to enact one large tax increase targeting wealthier workers to generate the revenue they need to finance their $1 trillion-plus healthcare reform bill. “We have decided that instead of putting pieces of different revenue raisers together, that the best that we can do [is] we would have graduated surtaxes starting at [$]350],000],” Rangel said. The tax hikes would begin in 2011 and raise $540 billion over 10 years, he said after a meeting with Democratic committee members.
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.”