Q3 GDP Strengthens to 2%, But Is Held Down by Weak Business Investment
We think most scenarios for the U.S. election and Europe crisis lead to a global recession in 2013, though there are still some escape valves. Current Fed policy is contractionary by hurting savers, damaging markets and rechanneling capital from job-creating parts of the economy to the government, big banks, big corporations, foreign investment, gold and commodities. As the Fed has dramatically expanded its purchases and future commitments, U.S. growth has slowed from 2.4% in 2010 (fourth-over-fourth) to 2% in 2011 and only 1.7% in the first three quarters of 2012. Read full post...
Labor Outlook: Slow Growth
Consumption data improved a bit in September, but income growth, business investment and hiring have remained weak. We expect a 2% initial reading on third quarter GDP growth due October 26 versus the revised 1.3% rate in the second quarter. Under current economic policies, we expect weak GDP and job growth to continue into the fourth quarter, with downside risks in 2013 as the U.S. tax increase takes shape, the national debt burgeons and Europe extends its downturn. Read full post...
Brief Note on the 2001 Tax Cut vs. a 2013 Tax Cut
Late last month, Sahil Kapur of Talking Points Memo reported that the Romney campaign had pushed back against Kevin Hassett’s suggestion that a Romney administration would sacrifice rate cuts to preserve progressivity and revenue neutrality: Read full post...
Sorting Out Public Opinion on Medicare Reform
In seeking to limit the growth of federal spending, restraining Medicare’s growth is the top priority. Medicare is such a large program, and its enrollees are such an important component of the electorate, that policymakers are exceptionally wary of making the necessary changes. A reasoned policy debate on the issues is made even more difficult because public opinion is typically misinterpreted and the debate is accordingly poorly framed. Read full post...
New Info Explaining The Government War on Business
The staff on the Republican side of the Joint Economic Committee have been busy, as they’ve produced some great new material. First, an infographic showing the myriad ways Washington uses red tape to micromanage and control small businesses. Read full post...
The Post-SCOTUS CBO Report
The Congressional Budget Office released a new cost estimate for the Patient Protection and Affordable Care Act on Tuesday to account for the Supreme Court’s June 28th decision to uphold the law in part and strike down some of its Medicaid provisions. CBO determined that the law would now cost $84 billion less while covering 3 million fewer people. Read full post...
Revisiting The Myth of Big Government Europe
It is common for free-market commentators to lament our country’s descent into European-style socialism. The most astute of them note instead that we’re in truth already there. In Monday’s Wall Street Journal, AEI President Arthur Brooks makes that point in a column with the provocative title “America Already is Europe.” Read full post...
Key Variables in Coming Weeks
Late this week Europe is again faced with an EU-wide 27-country summit with no clear direction. The more positive tone of early June -- when Europe focused briefly on constructive ways to use the new ESM to add capital to Spain's banks – has faded. The euro-zone isn't making progress on creating a mechanism to share some of the periphery's huge legacy debt built up during euro-wide violations of the Maastricht deficit guidelines, and the periphery isn't taking the much-needed steps to downsize governments and government controls to allow private sector growth. Read full post...
Remembering Anna Schwartz
On Thursday, monetary policy legend Anna Schwartz passed away at the age of 96. Given the sad news, we’d like to highlight some of her work.
Read full post...Squeezing Greece's Cash Flow
Greece’s political impasse and the risk of contagion to euro deposits in Spain pushed markets down last week. We think those developments are serious but not necessarily fatal to the euro-zone. The downward pressure from the Facebook IPO and the disclosure of big, vulnerable JP Morgan long positions on corporate credit should fade, leaving U.S. and Chinese growth as key variables along with Greece and euro developments. We don’t think the June 30 wind down of the Fed’s operation twist (which was ineffective) or the fiscal cliff (open to compromise) are as important. Read full post...
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