James Pethokoukis

Politics and policy from inside Washington

Huntsman tax plan goes big and bold

Aug 31, 2011 15:18 UTC

Current polls say Jon Huntsman, former Utah governor and ambassador to China, isn’t a top tier candidate for the 2012 Republican presidential nomination. But he certainly has a top-tier economic plan. Huntsman will offer a broad proposal later today – covering taxes, regulation, trade and energy. But I already had a peek at the tax part. And I think it is excellent. Huntsman says he would do the following:

1) Eliminate all deductions and credits in favor of three drastically lower rates of 8%, 14% and 23%.

2) Eliminate the Alternative Minimum Tax.

3) Eliminate taxes on capital gains and dividends in order to eliminate the double taxation on investment.

4) Reduce the corporate rate from 35% To 25%. Huntsman would also shift to a territorial tax system and implement a tax holiday for the repatriation of foreign earnings.

Basically, this is the “zero option” Bowles-Simpson tax plan that lowers marginal tax rates and broadens the tax base. But there is at least one big difference. B-S would use part of the money from axing some $1 trillion in annual tax breaks to lower marginal rates and part for deficit reduction – a net tax hike. Huntsman would divert that extra tax revenue into “paying for” the elimination of investment taxes.

At first glance, this looks like perhaps the most pro-growth, pro-market (and anti-crony capitalist) tax plan put forward by a major U.S. president candidate since Ronald Reagan in 1980. But it is not without political risk. In addition to killing tax breaks for businesses, Huntsman would eliminate the mortgage interest deduction, healthcare exclusion, and the child tax credit among other “tax expenditures. ” We’re talking about a whole herd of sacred cows. Both his fellow presidential candidates and Washington lobbyists will likely attack him for some of those ideas.

I would like to see an analysis of the plan’s distributional impact on various household income tax levels. In addition, a CBO-style revenue and spending breakdown would be helpful.  Keep on the look out for a chat I had with Huntsman about his economic plan. I will post it sometime after his speech later today on the proposal.

COMMENT

Where would the elderly fit in to this tax plan of 8%, 14% and 23%? Thank you.

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Panic at the White House? Gloomy Goldman Sachs sees high unemployment, possible recession

Jul 16, 2011 12:22 UTC

Last night in a new report, Democrat-friendly Goldman Sachs dropped an economic bomb on President Obama’s chances for reelection (bold is mine):

Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012.

The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations. … Some of this weakness is undoubtedly related to the disruptions to the supply chain—specifically in the auto sector—following the East Japan earthquake. By our estimates, this disruption has subtracted around ½ percentage point from second-quarter GDP growth. We expect this hit to reverse fully in the next couple of months, and this could add ½ point to third-quarter GDP growth. Moreover, some of the hit from higher energy costs is probably also temporary, as crude prices are down on net over the past three months. But the slowdown of recent months goes well beyond what can be explained with these temporary effects. … final demand growth has slowed to a pace that is typically only seen in recessions. .. Moreover, if the economy returns to recession—not our forecast, but clearly a possibility given the recent numbers …

Alarms bells must be ringing all over Obamaland today. Unemployment on Election Day about where it is right now? Sputtering — if not stalling — economic growth? To many Americans that would sound like the car is back in the ditch — if it was ever out. Maybe Goldman is wrong, but economists across Wall Street have been growing more bearish.

And recall that back in August of 2009, the White House — after having a half year to view the economy and its $800 billion stimulus response — made an astoundingly optimistic forecast. Starting in 2011, with Obamanomics fully in gear and the recession over, growth would take off. GDP would rise 4.3 percent in 2011, followed by … 4.3 percent growth in 2012 and 2013, too!  And 2014? Another year of 4.0 percent growth. Off to the races, America.

Even in its forecast earlier this year, Team Obama said it was looking for 3.5 percent GDP growth in 2012, followed by 4.4 percent in 2013,  4.3 percent in 2014.

Goldman Sachs doesn’t have to tell you things are bad. I don’t have to tell you things are bad. Everybody knows things are bad. Unemployment is at 9.2 percent (11.4 percent if the official labor force hadn’t collapsed since 2008 and 16.2 percent if you include discouraged and underemployed workers.)  Moreover, the economy grew at just 1.9 percent in the first quarter of this year and may have grown less than 2 percent in the second. Wages and income are going nowhere fast.

When will the White House signal a change of economic direction? Will cutting tax rates and regulation ever make it on the agenda? That may be the only way Obama can win another term. And time is running short.

 

COMMENT

Oddly, disliking what Obama and Obamanomics have done to the country doesn’t make you:

racist
unpatriotic (if you were a real patriot you’d just nod and say yes to anything the administration wants to do)
conservative
Republican
Tea Party

It just makes you intelligent. Welcome to the disenfranchised.

Posted by notthistime | Report as abusive

Obama really might have made it worse

Jul 6, 2011 04:34 UTC

The Republican charge is a body shot aimed right at the belly of President Barack Obama’s re-election effort: He made it worse.

No, not that White House efforts at boosting the American economy and creating jobs and “winning the future” were merely inefficient or wasteful, which they certainly were. Even Obama finally seems to understand that. “Shovel-ready was not as shovel-ready as we expected,” he joked lamely at a meeting of his jobs council.

Rather, that the product of all the administration’s stimulating and regulating is an economy that’s in significantly worse competitive and productive shape than when Obama took the oath in January 2009. He was dealt a bad hand, to be sure – and then proceeded to play it badly. At least, that is what Republicans have been saying. “He didn’t cause the recession as we know,” presidential candidate Mitt Romney said in New Hampshire yesterday. “He didn’t make it better, he made things worse.”

Team Obama offers a different narrative, of course. As the president said in his State of the Union address earlier this year, “Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again. … These steps we’ve taken over the last two years may have broken the back of this recession.” He somehow failed to insert his usual boilerplate about the economy losing 700,000 jobs a month when he took office.

But Obama is correct, to a degree. The economy is growing (slowly) now and adding jobs (modestly) whereas neither was happening back in early 2009. Of course, economies in recession will eventually recover even without government action. So the question is whether Obamanomics helped, hurt or was inconsequential.

The centerpiece of Obama’s plan to “push the car out of the ditch” was the trillion-dollar (including interest expense on the borrowed money) American Recovery and Reinvestment Act. A recent article in The Weekly Standard determined that it may have cost as much as $278,000 for each job created. But that’s generous. Respected Stanford economist John Taylor, perhaps the next chairman of the Federal Reserve, has analyzed the actual results of the ARRA. Not what the White House’s garbage-in, garbage-out models say happened, but what actually happened as gleaned from government statistics. Taylor, simply put, looked at whether consumers actually consumed and whether government actually spent in a way that produced real growth and jobs. His devastating conclusion:

Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers. Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.

Indeed, the results are horrifying. The two-year-old recovery’s terrible tale of the tape: A 9.1 percent unemployment rate that’s probably closer to 16 percent counting the discouraged and underemployed, the worst income growth and weakest GDP growth of any upturn since World War II, a still-weakening housing market. Oh, and a trillion bucks down the tube. Oh, and two-and-a-half years … and counting … wasted during which time the skills of unemployed workers continue to erode and the careers of younger Americans suffer long-term income damage. Losing the future.

Next, add in healthcare reform that Medicare’s chief actuary says will not slow the overall growth of healthcare spending. (Even its Obama administration godfather, Peter Orszag, warns that “more drastic measures may ultimately be needed.”) And toss in a financial reform plan that the outspoken and independent president of the Kansas City Fed says he “can’t imagine” working. “I don’t have faith in it all.” Indeed, markets continue to treat the biggest banks as if they are still too big to fail.

But wait there’s more. Obama created a debt commission that produced a reasonable though imperfect plan to deal with America’s long-term fiscal woes. But he stiffed it and then failed to supply a plan of his own, sowing the seeds for an impending debt ceiling crisis and making an eventual fiscal fix that much harder. One more step along the path not taken, along with pro-growth tax and regulatory policies that would have reduced policy and economic uncertainty and unleashed the private sector to invest, expand and create.

Elections have results. So do bad policies. Obama’s choices on taxing and spending and regulating, sorry to say, seem to have made things worse.

 

 

COMMENT

Edited by the media again.

Posted by glennataylor | Report as abusive

Why the GOP shouldn’t go wobbly on taxes

Jun 27, 2011 17:59 UTC

It’s up to House Speaker John Boehner now. Democrats, the media and Wall Street will be pounding him to agree to raise taxes as part of a debt ceiling deal. But now is no time for Republicans to go wobbly. Here’s why the GOP should stick to its guns until Aug. 2 – and beyond if necessary:

1. The last thing the economy needs is a tax hike. If the economy was too weak to absorb a tax hike last December – when the White House and Congress agreed to extend all the Bush tax cuts for two more years –  its health is even worse today. The economy grew at just a 1.9 percent pace in the first quarter, and many economists now think it might grow just 2.0 percent in the second quarter – or even less. This should be a red flag to Washington. New research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48 percent of the time. (And when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time.)

 

In other words, the economic recovery is sputtering with stall speed fast approaching. Now would be a terrible time to penalize investors and business, both big and small, with new taxes.

2. Tax revenue isn’t the problem. Spending is. The recent Congressional Budget Office budget outlook was illustrative. The CBO forecast to note is its “alternative fiscal scenario” which “incorporates several changes to current law that are widely expected to occur or that would modify some provisions that might be difficult to sustain for a long period.”

By 2021, the the CBO says, the annual budget deficit would be 7.5 percent of GDP and by 2035 a truly monstrous 15.5 percent. Throughout this period, tax revenue would be 18.4 percent, right around the historical average. But spending would be 25.9 percent in 2021, 33.9 percent in 2035 vs. an average of roughly 21 percent. It’s spending that’s way out of whack, not revenue.

But let’s say all the Bush tax cuts were left to expire, as was AMT relief. Assuming no economic fallout, according to the CBO, revenue would be 23.2 percent of GDP by 2035. Three problems here: a) even with all those tax increases, the annual budget deficit would still be nearly an unsustainable 10.7 percent of GDP in 2035; b)  the U.S. tax code has never generated that level of revenue and almost certainly can’t without a value-added tax; and c) there would be tremendous economic fallout. Axing all the Bush tax cuts would chop three percentage points off GDP growth, according to Goldman Sachs, certainly sending America back into recession. Tax revenue would again plummet.

And as bad as those numbers are, they don’t fully take into account the economic impact of all that debt. When the CBO does makes those calculations, total debt as a share of output is not 187 percent of GDP – the number you frequently see in media accounts – but rather 250 percent of GDP since economic growth would slow sharply due to debt overload. And more than likely the economy would suffer a debt crisis long before 2035 came around.

3. The key to boosting tax revenue is faster economic growth. A team of economists from the American Enterprise Institute recently fashioned a debt-reduction plan that would raise tax revenue to a long-term level of 19.9 percent of GDP. That’s pretty high when you consider there have only been three years in U.S. history that have seen a higher tax burden. Its tax plan:

To achieve this goal, the income tax system would be replaced by a progressive consumption tax, in the form of a Bradford X tax. To address environmental externalities in a more cost‐effective and market‐based manner, energy subsidies, tax credits, and regulations would be replaced by a carbon tax.

But the AEI team also notes that such a tax plan would more than likely boost growth:

Economic simulations have repeatedly indicated that replacing the income tax system with a consumption tax can boost economic growth, although the magnitude of the gains depends on the assumptions that are made and on the detailed provisions of the consumption tax. One widely cited study estimates a 6.4 percent gain in long‐run output from the adoption of an X tax.

Our plan also reduces transfer payments to the elderly, which should further increase private saving and long‐run growth. These growth effects have not been taken into account in the estimation of our plan. Accounting for them suggests that actual revenue requirements are lower than those stated above. For example, if our plan increases long‐run output by even 5 percent and if government spending does not increase in response to the expansion of output, then the actual long‐run revenue requirement will be 19.0, rather than 19.9, percent of GDP.

Revenue of 19.0 percent of GDP happens to be the same revenue requirement of Rep. Paul Ryan’s Path to Prosperity debt-reduction plan. And tax reform isn’t the only thing that can boost economic growth. Increasing high-skill immigration, implementing regulatory reform, and raisng productivity in education, government and healthcare could pump up economy-wide  GDP growth by at least a full percentage point, according to McKinsey Global Insitute.

Bottom line: Higher taxes would hurt the economy, wouldn’t solve the debt problem and aren’t really needed anyway.

 

COMMENT

“1. The last thing the economy needs is a tax hike.”

Au Contraire.

Raising taxes on the Rich & Corporate worked like a charm for both Presidents FDR and WJC. It all depends what you do with the money.

The periods of greatest economic prosperity in this country occurred when the top federal personal income tax BRACKETS were at 81%, 85%, and even 91%, while the top corporate federal income tax BRACKET was at 50%, AND after the top federal income tax brackets were raised on the Rich & Corporate.

~

“2. Tax revenue isn’t the problem. Spending is.”

Wrong.

According to the independent non-partisan Congressional Budget Office, the vast overwhelming majority of our current federal deficits and debt, as well as our medium-term projected future federal deficits and debt, are from the massive drop in federal income tax revenue as a direct result of the numerous rounds of massive tax cuts for the Rich & Corporate enacted during the previous administration.

Not even close.

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Why we need a tax holiday for overseas earnings

Jun 20, 2011 16:05 UTC

U.S. companies have huge profits sitting offshore, and some in Congress want to give them a tax break as incentive to bring nearly $1 trillion back to America. The New York Times describes the plan this way:

Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent. In the short term, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad, and it could help ease the huge budget deficit.

Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus” at a conference last Wednesday in Washington.

But the story — reflecting the agenda of the Obama White House and liberal think tanks —  is skeptical about the whole idea. It highlights research that shows when companies got tax amnesty in 2005, 92% of the $312 billion brought back was used for dividends and share buybacks — not directly hiring workers, boosting salaries or purchasing equipment.

Economist Douglas Holtz-Eakin is working on a study for the U.S. Chamber of Commerce that supports a tax holiday. I chatted with him briefly this morning and here is the thrust of what he told me:

I am strong believer in a territorial tax system period, and this is a step toward fundamental tax reform. Now it’s short of fundamental tax reform in two ways: Number one, the rate’s not zero and, number two, it’s not permanent.

I would go for zero and permanent in a heartbeat if that was on the legislative agenda, but it’s not. I also think it would have substantial near-term beneficial economic impacts.

If you think of it this way: There’s over a $1 trillion out there, so let’s suppose something like $830 billion came back, which I chose specifically to match exactly what [President Obama's American Recovery and Reinvestment Act] was. Like the [ARRA], this would flow into the economy and go into corporations first, but they would then either make real purchases with it – salaries, payroll, capital investment, R&D and that would would further flow into the economy – or they would change their financial structure: share repurchases, debt reduction, dividends.

And in each case, that would flow to someone else. So on a cash-flow basis, it’s the same model. … And those balance-sheet effects would drive consumption further because of the wealth effects. That’s got to be at the heart of any response to any wealth-destroying bubble. We need pro-wealth creation policies. This is one of them.

Holtz-Eakin says his study will highlight these broader macroeconomic impacts. But his major point echoes what I wrote last March:

Treasury is stretching a point in assuming the government would somehow lose revenue by taxing repatriated income at a sharply lower rate. In reality, without the reduction most of the money will remain offshore.

And even if all the cash returning to the United States went to companies’ shareholders, that could still generate more consumption, growth and jobs, a knock-on effect Treasury ignores. Yet this so-called wealth effect is explicitly part of the rationale behind the Fed’s second round of quantitative easing. Some economists dispute the linkages, but not the ones that work for Obama. So despite some political risks, it might be time go on holiday — as long Washington also continues the work of reform.

COMMENT

That’s one of the reasons I like Cain. He is a businessman nor a politician.

Posted by Texan4Cain | Report as abusive

Digging down into America’s weak labor market

Jun 20, 2011 14:49 UTC

The main reason the unemployment rate is so high is that the recession was so deep and the economic “recovery” is so anemic. But part of the problem may be a mismatch between job opening and the skills of unemployed workers. Here is WaPo’s Robert Samuelson:

Economist Harry Holzer of Georgetown University thinks the unemployment rate might be closer to 8 percent than today’s 9.1 percent if most of these jobs were filled. That implies up to 1.5 million more jobs. Economist Prakash Loungani of the International Monetary Fund estimates that 25 percent of unemployment is structural; that’s more than 3 million jobs. A recent survey of 2,000 firms by the McKinsey Global Institute, a research group, found that 40 percent had positions open at least six months because they couldn’t find suitable candidates.

Samuelson partly finds fault in high schools and businesses offering less training, while community colleges aren’t in sync with local job markets. I also suspect that college graduates are majoring in the wrong subjects. Too many history and business majors, two few engineers. More from Samuelson:

In any dynamic economy, constant changes in technologies, products and companies naturally create gaps between skills available and skills wanted. But today’s gaps seem to transcend this. A survey for the National Association of Manufacturers in 2009, near the recession’s nadir, found that a third of companies still faced shortages. These were largest for engineers and scientists and among aerospace, defense and biotechnology firms.

This may also be a huge problem going forward: Here is the McKinsey Global Institute:

For example, MGI estimates that the United States may face a shortfall of almost two million technical and analytical workers and a shortage of several hundred thousand nurses and as many as 100,000 physicians over the next ten years. In aerospace, 60 percent of the workforce is aged over 45 years old compared with 40 percent in the overall economy.

COMMENT

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5% or bust: more on America’s growth potential

Jun 17, 2011 15:30 UTC

So typical. The WaPo’s Ezra Klein quotes a bunch of people saying that there is no way, no how the economy can grow at 5 percent for a decade,  the “aspirational” economic goal of Tim Pawlenty.

Hey, I can quote people, too! Like economist John Taylor of Stanford:

First, look at employment growth. Given the dismal jobs situation, that’s the highest priority. Currently the percentage of the working-age population (age 16 and over) that is actually working is very low at 58.4 percent. In the year 2000 it reached 64.7 percent, so that is at least a feasible number. Raising the employment-to-population ratio to 64.7 means an employment increase of 10.8 percent (64.7-58.4/58.4 = .108) or about 1 percent per year over 10 years, even without any growth of the population. Adding in about 1 percent for population growth (from Census projections), gives employment growth of 2 percent per year.

Now consider productivity growth. Since the productivity resurgence began around 1996, productivity growth in the United States has averaged 2.7 percent according to the Bureau of Labor Statistics. So numbers in that range are not pie in the sky. As Harvard economist Dale Jorgenson and his colleagues have shown, the IT revolution is part of the explanation for the productivity growth, and, if not stifled, is likely to continue, as is pretty clear to me as I sit a few hundred yards from Facebook and other high-tech firms.

Now if we add the 2.7 percent productivity growth to the 2 percent employment growth, we get 4.7 percent economic growth, which is within reaching distance of—or simply rounds up to—the 5 percent target set by Governor Pawlenty. Thus, five percent growth is a good goal to aspire to, whereas 3 or 4 percent would be too little and 6 or 7 percent too much

Is Taylor correct? Well, Don Marron of the Tax Policy Center (and formerly of the Bush WH) puts it this way:

Taylor’s scenario thus assumes that everything breaks right for the U.S. economy for a full decade, with remarkable job growth and remarkable productivity growth in the economy as a whole. Not impossible but, unfortunately, not likely either.

Marron thinks Taylor’s population and productivity numbers are fine. But he does have three problems:

1) Taylor uses a very optimistic assumption about how much employment growth can exceed population growth. Today, about 58% of the working age population has a job. That woefully low level ought to rise as the Great Recession recedes. Taylor assumes that we can boost that ratio back to its 2000 level of almost 65%. But 2000 was the tail end of a technology boom that lifted America’s employment-to-population ratio to record heights. Since then, the working population has aged, so the employment-to-population ratio will be persistently lower even in good times. CEA thus forecasts that labor force changes will trim about 0.3% annually from potential growth in coming years. Getting the employment-to-population ratio back up to 65% thus won’t happen unless we have an even bigger boom than the late 1990s delivered.

2) Taylor assumes that workers will keep working the same number of hours that they do today. That sounds innocuous except for one thing: average hours have been declining. CEA estimates that trimmed 0.3% per year from potential economic growth from 1958 to 2007 and will trim another 0.1% per year from 2010 through 2021.

3) Taylor assumes that the rest of the economy will enjoy the same productivity growth as the nonfarm business sector. In reality, the other parts of the economy – most notably government – are lagging behind. CEA estimates that slower productivity growth outside the nonfarm business sector trimmed 0.2% from potential economic growth from 1958 to 2007 and sees an even bigger bite, 0.4% annually, in the coming decade.

I still like the 5 percent target, even though I think 3.5 -4.0 percent is more realistic.  And Pawlenty’s basic path for getting there — tax policy that rewards saving, reducing regulation and cutting the share of our economy gobbled up by government — is sound as far as it goes.  I would also like to see more on immigration and education policy, as well approaching  basic research and infrastructure spending in a market-friendly way.

 

 

 

COMMENT

Education can add billions to our economy as it would stop giving company excuses for off-shoring jobs. The current trend is to actually bring the jobs back, but education would at least allow Americans to off-shore themselves to find work if they have to (I work for a japanese company in China until jobs come back to the US.). Infrastructure is a must as the US is decaying in this area. The Obama-haters need to realize this simple fact. But it should be done efficiently, but not the chinese style of efficiency which means fast and corrupt. The biggest thing that will keep our economy growing is to reduce imports and increase exports. The US needs to change its export laws to allow more high tech exports, because most of those restrictions are just laughable. Of course we have to keep restrictions on certain military equipment, but come one. Also, we need to reduce the oil imports, which account for the largest chunk of US imports. Alternative fuels, energy efficient technology, and domestic oil production is the key. One last thing; buy american. I live in China and still have the opportunity to buy American goods at local import stores. Those who complain about the US economy but still buy imports are missing the big picture.

Posted by hellomyman | Report as abusive

Obama 2012, the dollar and the stink of instability

Apr 21, 2011 10:03 UTC

President Obama’s approval/disapproval ratings are now an upside-down 45 percent/50 percent, according to the RealClearPolitics average. If those numbers were to hold until Election Day 2012, Obama would be a decided underdog for a second term, at least that is what statistical  modeling tells:

Mr. Obama’s approval ratings have been varying in recent months: between about 45 and about 50 percent. If Mr. Obama’s approval rating is at the top of that range, 50 percent, on Nov. 6, 2012 — about where it is now — the model figures that his chances of winning re-election will be greater than 80 percent. But if his approval rating is at the bottom of the range instead, at 45 percent, his chances for a second term will be only about one in three, and he’ll have to hope that the Republican nominee is a weak one.

And here are Obama numbers in chart form:

rcpapril

Almost as worrisome for the White House is this chart looking at the direction of the country:

track

I think what’s at play here is more than just gas prices, though that’s a big part of it. You also have the sliding dollar, S&P’s debt warning, high unemployment, flat or falling incomes, a depressed housing sector. Obama may have won in 2008 even without the financial crisis, but it was that meltdown that allowed him to crush John McCain. And since then, he keeps repeating how his policies have pulled America out of the ditch, like in a speech last year in New York:

“After they drove the car into the ditch, made it as difficult as possible for us to pull it back, now they want the keys back. “No! You can’t drive. We don’t want to have to go back into the ditch. We just got the car out.”

But the recovery feels both weak and unsustainable, like nothing has been fixed since 2008. Do Americans feel like the nation is on the verge of another 25-year boom or like it’s on the precipice? Right along with the slide in Obama’s approval ratings and this latest downturn in public confidence has been the decline in the dollar. Just look at the US Dollar Index:

dollar

COMMENT

With President Clinton holding a jobs summit in America and addressing corporate America, and President Obama investigating gas and oil manipulations, things will probably start to turn sometime in the near future.
Of course we’ll have to worry that special interest and the military industrial complex doesn’t make something happen to change the world condition or cause oil to go up?? Anythings possible when it comes down to billions of dollars, big oil and special interest.

Posted by cocostar | Report as abusive

Just how worrisome is the U.S. growth slowdown?

Apr 12, 2011 18:07 UTC

After taking a look at the new trade numbers, Wall Street firms are slashing their GDP growth forecasts for the first quarter of this year. Both Macroeconomic Advisers and Morgan Stanley now think growth will be just 1.5 percent. We are getting into dangerous territory, so says the Dallas Fed:

Does the slow growth necessarily foretell a double dip? Just as a bicycle requires momentum to stay upright, history tells us that once the economy slows to a sluggish growth rate, it will likely fall into a recession. This “stall speed” appears to be 2 percent annual real GDP growth. Every recession since 1970 has been preceded by expansion of less than 2 percent, though there was a false alarm in 1995. The second estimate of third-quarter GDP shows real output rising 3.2 percent over the past year.

And a chart illustrating the same point:

dallasfed

Incomes, not jobs, could sink Obama re-election

Apr 3, 2011 00:35 UTC

The Obama 2012 presidential campaign, which has now officially sprung to life, confronts a vexing political puzzle. The unemployment rate is plummeting. After the March jobs report release, White House economic adviser Austan Goolsbee pointedly noted that the full percentage-point decline over the past four months is the largest such drop since 1984.

That statistical coincidence dovetails neatly with this David Axelrod-endorsed narrative: Just as Ronald Reagan bounced back from a nasty first-term recession to win re-election in 1984, a jobs rebound will mean four more years for Barack Obama. Got that, MSM? Obama 2012 = Reagan 1984. Now shut your laptops and run along.

But as the Obama political shop has surely noticed, the unemployment rate isn’t the only politically important number on the decline. Simultaneously, their boss’s approval rating has fallen from 51.0 percent on Jan. 24 to 47.4 percent today, according to the RealClearPolitics poll average. A large-sample Quinnipiac survey out last week had Obama at 42 percent. And a recent Reuters-Ipsos poll found that Americans’ confidence in the way the country is going has slumped to its lowest point of Obama’s presidency with 64 percent believing the nation is on the wrong track. Even as more jobs are being created, so are doubts about Obama.

Keep in mind that forecasting models suggest a president with a 50 percent approval rating on Election Day has an 80 percent chance at re-election vs. just a one-in-three chance for an incumbent with a 45 percent rating. And polling analyst Nate Silver notes that every incumbent with an approval rating of 49 percent or higher since World War Two won re-election, while every candidate with a rating of 48 percent or lower lost.

Morning in America 2.0, Mr. Axelrod? More like Threat Level: Midnight. And here’s why: While jobs are growing, incomes are not. And income growth — or the lack of it — political scientists agree, is the economic variable with the most impact on national elections. Strong growth in real disposable personal income led to huge victories for Reagan in 1984, Richard Nixon in 1972 and Lyndon Johnson in 1964. Weak or negative growth doomed Jimmy Carter in 1980, George Bush in 1992 and John McCain in 2008.

Real disposable personal income fell 0.1 percent in February. Average hourly wages were flat in March, and have grown at a 1.8 percent annualized rate over the past three months, according to the Economic Policy Institute. With inflation running around 2 percent, this means the average American is falling behind, his standard of living dropping. As the Brooking Institution figures things, between October 2010 and February 2011, real hourly and weekly earnings in the private sector fell 1.1 percent.

Even Goolsbee knows those numbers won’t improve a whole lot unless the unemployment rate moves sharply lower. Yet the official White House economic forecast has unemployment averaging 8.6 percent in 2012, not much below the current 8.8 percent rate. (The broader U-6 rate, which includes discouraged workers and part-timers who want full-time gigs, is a sickening 15.7 percent.) JPMorgan economist Michael Feroli thinks a combination of so-so economic growth, a vast pool of unemployed, higher energy prices and the expiration of the 2011 payroll tax cuts means income growth will likely remain “tepid” going forward.

So for now, consider Obama a favorite to win a second term — most presidential incumbents do — but only by the narrowest of margins. If incomes stay stagnant — and if Republicans can nominate someone with a strong, passionate and specific pro-growth economic message — Election Night 2012 could be a long one.

COMMENT

I work at a very big software company that all of you have heard of — there is only one reason why this company hires Indian IT firms — PRICE!!!!! In India and China, there is plenty of SLAVE LABOR and the U.S. Govt. has decided to equalize U.S. JOBS and Salaries with these SLAVE LABOR conditions to do one thing: support a CEO to average worker pay gap of 400X (see below.) Don’t listen to anything else that the companies say, it’s about price. We could easily train Americans to develop these skills on the job in about three months. Price includes training and having to deal with workers who require health benefits and everything else that a person working should get.

There’s a big difference from the old days when American people cared about one another and nowadays where greed rules the day: while corporations have robbed pension funds that were committed to, banks have falsely appraised real estate for the past 10 years and aren’t held to account for the fraud when the borrowers are held to the falsely valued loans, and executives get paid 400 TIMES the average worker — see the following article:(http://www.opednews.com/article s/The-Wide-Divide–You-Are-B-by-Steve-Ell iott-080616-912.html), Americans continue to vote for the creators of these schemes: Republican schemers. It’s crazy how you are shooting yourself in the feet, ladies and gentlemen. Please get a clue. Yeah, Obama is not the best and is having a hard time, but if you think cutting more decent jobs is the answer, watch out because I can replace ANY U.S. Worker, and I mean any, (skilled or not, doctor, lawyer, IT, CEO, McDonald’s person, whatever) with a Chinese or Indian worker who will cost 5% of your total salary — want to compete with that? And I mean ANY job.

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