Am I just crepe-hanging or when pundits start advising us that the economy is starting to kick into high gear and some are calling for new taxes does it make you think that the next downturn in the business cycle might be sooner than we might want?
Am I just crepe-hanging or when pundits start advising us that the economy is starting to kick into high gear and some are calling for new taxes does it make you think that the next downturn in the business cycle might be sooner than we might want?
The bulk of jobs created have been relatively low “wage intensity.”
Depending on how much you trust the data mills Q3 GDP was artificially boosted by out of period accounting for health care expenditures. It was further fueled disproportionately by consumers depleting savings and not just from wage growth.
In the orders-to-final-sales cycle, orders are coming in relatively weak. Two major categories, auto and housing have substantially rebounded and you have to ask how much further can they go, especially in light of their reliance on easy credit, which may (May?!?) be coming to an end.
That’s not robust and broad, it’s narrow to the point of being fragile. So switching gears, when you consider who has benefitted the most from the recovery due to QE and stock market effects, and who might even be able to withstand more tax increases (and remember, ObamaCare increased taxes on high income earners already) you run up against something those who describe themselves as progressive or liberal or whatever don’t like to come to terms with:
http://hotair.com/archives/2015/01/05/sacre-bleu-france-dumps-its-socialist-supertax/
It’s not hard to imagine we could shoot our dicks off while chanting to the tax and spend gods.
Tax & spend should be retired as a rhetorical device. So should borrow & spend. The truth is, there’s always going to be more spending, especially given current demographic trends.
Where Ben and I agree is that I’ve come to the tentative conclusion that we can continue to spend more than we tax just by extending credit without doing harm to our economy. So, for example, I think that a 2% deficit is okay as long as our historic 3% growth continues. Sadly, right now the deficit exceeds growth.
Where I think that he and I differ is in how large that deficit could be for how long. I think that there is some point at which confidence will be lost in the currency both domestically and internationally and that could happen very, very quickly and suddenly.
Judging the state of the economy seems based on ideological speculation, more than anything else. There are really no set markers in place that people can agree to use with some neutrality in place. Even GDP can be skewed, as was pointed out by Drew in his post. Numbers are malleable, even fickle depending on what side of the political spectrum is spouting them.
Furthermore, the benefits being derived from sinking fuel costs is illusionary, and hardly a by-product of Obama’s economic or energy policies (as he loves to indicate). It’s happening despite Obama, not because of him. But, in their wake are more EPA regulations and gasoline taxes on the horizon, which will have a negative latent impact once we get beyond the current gift of transient lower gas prices.
Then we have the world continuing to rock around as ISIS consolidates it’s power, Putin becomes more erratic as he is economically backed into a corner, and it’s seems only a coin-toss away from everything suddenly (and of course, “unexpectantly”) taking a turn for the worst.
I’m not very optimistic at the moment …..
As a added data point, notice the S&P and Dow slid sharply on oil at $50 per barrel. It’s finally dawning that low gas prices aren’t necessarily a good thing, not when the shale industry can’t cut back production (rhey have debt to service) and can’t remain profitable at such a low price.
Energy has been a big component of what growth we’ve seen in the last five years, if that comes to a halt it won’t be pretty.
Given the severity of the last downturn, I’ve (optimistically) been operating under the assumption that the next downturn will be quite modest, probably identified solely for the sake of maintaining the structure of the business cycle.
“So, for example, I think that a 2% deficit is okay as long as our historic 3% growth continues. ”
Essentially a concept of debt capacity.
Ice
That’s a policy choice, not a law. It gets to Dave’s query- how much, how long and truncated by what? Merrily, merrily down the stream while dreaming could result in sudden acceleration over the fall.
Drew, I don’t think it’s a policy choice or a law. Rather, I think it is a DEMAND by the American electorate for the government to spend more money than it can take in.
I don’t think it’s a demand so much as a foreseeable consequence of everyone at every step in the process acting according to the incentives they have. People don’t want to pay taxes. People do want to receive benefits. Politicians want to get re-elected.
It becomes a demand when someone’s favorite hobby-horses come under scrutiny. Hands off our Medicare! Cutting defense spending makes us weak! Food stamps for everybody! Tax cuts & credits for everyone!
Try cutting any of those & it becomes a demand.