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Don't Use the Market to Predict a Recession
Tweet Share on Facebook February 28, 2007 CommentDoes Wall Street's swoon mean there's a recession on the way? I think JPMorgan economist Jim Glassman summed up the current situation pretty well to me late yesterday: "The question is, does a recession seem a plausible scenario in the current circumstances ... with inflation near post-World War II lows, corporate profit margins at record highs, an unprecedented global awakening underway, financial signals [credit spreads] still at good-time lows? Please!"
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Did the Drudge Report Help Tank the Stock Market?
Tweet Share on Facebook February 27, 2007 Comment (1)Here's a headline sure to spook any investor or economist: "Greenspan warns of likely U.S. recession." That was the headline right near the top of the widely surfed Drudge Report yesterday afternoon and this morning, referring to a speech that former Federal Reserve Chairman Alan Greenspan made the other day via satellite to a business conference in Hong Kong. Many market watchers are blaming those comments– along with a weak durable goods report and the plunge in the Chinese stock market – for today's stock market sell-off. But despite the inflammatory Drudge headline– which, in all fairness, linked to an Associated Press story with that same title – the Maestro was hardly so definitive as Drudge made him out to be. Here is what Greenspan said, according to AP:
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What's Worse, the AMT or a Recession?
Tweet Share on Facebook February 26, 2007 Comment (1)Now this would hurt. If the politicians in Washington do nothing, 23 million Americans will get hit by the alternative minimum tax next year, up from 4 million this year. A temporary fix to the AMT will cost some $45 billion to $50 billion. Repealing the AMT, according to the Congressional Budget Office, would cost more than $600 billion over 10 years. Now under new pay-as-you-go rules in Congress, any fixes or repeals will have to be paid for through higher taxes or budget cuts. One payment possibility suggested by some on the left is to repeal the Bush 2001 and 2003 tax cuts, under the logic that many taxpayers will get caught by the AMT because the Bush tax cuts lowered their tax bill. (The biggest problem, though, is that the AMT is not indexed for inflation.)
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What if America Had an Innovation Czar?
Tweet Share on Facebook February 21, 2007 CommentThe global economies that will fare best this century are those that will be the most innovative and productive. Think-tank wonks and Wall Street economists give this topic a lot of thought. But smart guys outside the 212 and 202 area codes have just as many good ideas–probably more. So I decided to ask some of them via E-mail what they would do if they were appointed U.S. innovation czar. (Consider this a sneak preview of a larger story I am working on.)
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Will Bush Raise Taxes to Fix the AMT?
Tweet Share on Facebook February 20, 2007 CommentRecent news reports have hinted that President Bush might be willing to go along with tax increases on wealthier Americans to pay for a costly fix to the alternative minimum tax. One possibility raised by Democrats is raising taxes on those making $400,000 or more. But don't look for the White House to sign up for any plan that raises tax rates, a move that would reverse one of Bush's signature domestic policies. As one White House official put it, "I've heard no internal discussions on that approach and sense no appetite for that kind of a trade-off."
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Why the Pelosi Democrats Scare China
Tweet Share on Facebook February 16, 2007 Comment"She scares the hell out of them." That's the way an American businessman, one with strong ties to the Chinese elite and a frequent traveler to Beijing, described to me how that nation's leadership views Speaker of the House Nancy Pelosi. But Madam Speaker shouldn't take it too personally. She probably serves as symbolic shorthand for the Democratic-controlled Congress that took power partly based on a promise to get tough on China. And it sure looks as if it intends to. Earlier this week, Pelosi and other Democratic House leaders called upon President Bush "to present to Congress within 90 days a comprehensive plan to eliminate the surging trade deficits with these 'Big Three' economies [China, Japan, and the European Union] by tearing down market access barriers and eliminating unfair trading practices that have existed for years–in some cases, decades." Also this week, Democratic Sens. Byron Dorgan of North Dakota and Sherrod Brown of Ohio, along with Republican Lindsey Graham of South Carolina, said they were introducing legislation that would strip China of its permanent normal trade status with the United States, subjecting the trade relationship to an annual review by Congress. Brown said in a statement:
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Has Bernanke Blown It?
Tweet Share on Facebook February 15, 2007 CommentThe stock market sure seemed to love Ben Bernanke's optimistic testimony before a Senate panel yesterday, with the Dow Jones industrial average hitting a record high on the news and adding to its gains today. "There are some indications that inflation pressures are beginning to diminish," the chairman of the Federal Reserve said. At the same time, the Fed predicted that 2007 economic growth would come in somewhere between 2.5 percent and 3 percent, about a half point lower than its July forecast because of the housing slowdown. Overall, the Fed chief sees moderating inflation and moderate growth, obviously not a bad outlook as Wall Street sees it.
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Wall Street Democrats Try to Revive Clintonomics
Tweet Share on Facebook February 14, 2007 CommentThere is supposed to be a battle brewing in the Democratic Party–particularly over trade–between pro-growth centrists who want a return to Clintonomics (300 free-trade agreements, 23 million new jobs, a $6,200 increase in real median income) and spread-the-wealth neopopulists who argue that government needs to focus on stemming rising income inequality through higher taxes and nationalized healthcare.
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Bush's Secret Plan to Save Social Security
Tweet Share on Facebook February 13, 2007 CommentIs the Social Security solvency "crisis" really not a crisis at all? Maybe not, if Edward Lazear, chairman of President Bush's Council of Economic Advisers, has his numbers correct. Yesterday, Lazear held a media briefing about the 2007 Economic Report of the President. During the press conference, Lazear said the following about the future rate of productivity growth:
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Should Uncle Sam Take Oil Company Profits?
Tweet Share on Facebook February 12, 2007 Comment (12)How about a windfall profits tax on Google? It's an idea that came to me after watching a video of Sen. Hillary Clinton, speaking at the Democratic National Committee's winter wing-ding, apparently call for the confiscation of oil company profits. As the front-runner for the 2008 Democratic presidential nomination put it:
