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A Chat With McCain's Economic Brain, Douglas Holtz-Eakin
Tweet Share on Facebook July 28, 2008 Comment (2)I recently interviewed Douglas Holtz-Eakin, John McCain's economic guru, over at McCain HQ. Here is some of what he had to say about the weak economy, high gas prices, and the plunging housing market, with the best bits in boldface:
Me: Is the economy a "shambles" like Senator McCain's campaign commercials say it is?
Douglas Holtz-Eakin: It's fair to say that segments of the economy are in shambles. I think the economy has this sort of very interesting character right now. If you make something in America—except a house—you're hanging in there, and exports in particular are helping you tremendously. But if you finance something in America, you are in a world of hurt, and that's what's happening. So we have some regional distress because of the housing market, some sector distress, and we do have a lack of momentum that we would like to turn around.
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Are Americans Really Getting Poorer?
Tweet Share on Facebook July 25, 2008 Comment (5)Some fine research from the Tax Foundation provides a nice reality check on the claim that Americans are poorer now than in 2000. Depending on how you measure income, the median household income fell by 3.8 percent from 2000 to 2006...or it rose by 3.1 percent ...or it did something in between.
Then there is this: Is it fair to use the year 2000 as a baseline year when incomes were inflated by a stock market bubble? My pal Jared Bernstein, an economist over at the Economic Policy Institute and author of a book on the so-called middle-class squeeze, said the following in front of a congressional panel this week:
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Poll: Americans Don’t Want a New New Deal
Tweet Share on Facebook July 25, 2008 Comment (3)Presidential candidates, please focus on this: A Gallup Poll found that Americans overwhelmingly—by 84 percent to 13 percent—prefer that the "government focus on improving overall economic conditions and the jobs situation in the United States as opposed to taking steps to distribute wealth more evenly among Americans."
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Dude, Where’s My Recession? The Series
Tweet Share on Facebook July 25, 2008 Comment (1)From the brainiacs at Action Economics:
Today's U.S. economic reports provide a solid round of upside surprises, with 1) a robust June orders figure for durables ex-transportation that defied ongoing recession fears, 2) upward revisions to the new home sales data through Q2 that took the edge off the steep sales down-trend and raised hope of a potential bottoming in the sector, and 3) a sizable upward revision in the July Michigan sentiment figures that generally leaves what may be a June bottom in place for most measures of consumer confidence.
Me: While some folks may see America as beaten-down and rancid Gotham City, I see it as Metropolis, the City of Tomorrow. And right now the economic numbers continue to say "no recession."
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Romney: McCain Won't Pick Me as Veep
Tweet Share on Facebook July 25, 2008 Comment (60)High gas prices, rising unemployment, and tumbling home values may be lousy news for most Americans, but more and more our troubled economy looks like just the ticket for getting veep short-lister Mitt Romney on the bill with John McCain. Romney, my sources tell me, is insisting to top politicos in Boston and Washington that he does not think McCain will pick him. Problem is, few of these folks are buying the humble act. Here is what one conservative insider with Romney ties just told me in an E-mail:
My gut tells me he is going to choose Romney. He's vetted, he is credible on economic issues, he is acceptable to all three wings of the GOP conservative base (economic conservatives, social conservatives—except for strain of anti-mormonism in some southern states, national security conservatives), he is a proven vote getter in Michigan (also the Romney name is good in Wisconsin, where his dad opened up auto plants), there are a lot of mormons in CO, NM, NV—all key swing states, and he can provide a big boost to McCain's fundraising.
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Obama Vs. the Bond Market
Tweet Share on Facebook July 24, 2008 CommentBarack Obama has no intention of trying to balance the budget anytime soon. Here is what he will try to do (and this is straight from Team Obama): "Obama's plan pays for all proposals and cuts the deficit from its 2008 level and relative to what would happen if current policies were continued. He would like to balance the budget but with the tremendous economic and global uncertainty cannot make a specific promise about when that will happen."
In other words, 1) Obama's projections assume the Bush tax cuts don't expire even though they do at the end of 2010; 2) Obama isn't going to pull a Clinton and sacrifice his "investment agenda" to please budget hawks and the bond market. (And let me add a third point: I think Obama believes getting entitlements under control is more important than annual budget deficits. Just a guess.)
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4 Reasons (Yes, Just 4!) to Worry More About the Economy
Tweet Share on Facebook July 24, 2008 CommentMy guy Mike "Hate the economy, love the stock market" Darda, chief economist at MKM Partners, gives yet another sobering analysis (boldface mine) of the state of the world's largest and most productive economy:
1) Despite a multipronged monetary and fiscal effort to stop the hemorrhaging in housing and break the crisis of confidence in credit, the situation remains shaky.
2) Credit markets have not participated in the recent rally the financials have enjoyed—a red flag in our view. Mortgage spreads, swap spreads and lending standards are two standard deviations or more above historical norms. This will serve as a stiff headwind until or unless it reverses.
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Maybe We All Should Vote on the Housing Bill
Tweet Share on Facebook July 24, 2008 Comment (3)The great Arnold Kling provides some insight into the megagigantic housing bill, the bad boy that the New York Times describes as "a landmark shift in the government's role in the housing market, extending a helping hand to both Wall Street and Main Street...[ranking] in importance with the creation of the Home Owners' Loan Corporation to prevent foreclosures in the 1930s as part of the New Deal, and legislation in 1989 responding to the savings and loan crisis."
Mr. Kling:
Basically, the housing bill rewards everyone who participated in the excesses of the housing market and punishes the rest of us. Lately, I've been reading a lot about Switzerland. There, just about any legislation is subject to veto by a popular referendum. This is an instance in which I wish we had a referendum in this country. I doubt that this housing bill would win more than 20 percent of the vote.
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How We Turned the American Dream Into a Nightmare
Tweet Share on Facebook July 23, 2008 Comment (6)Just as I was getting my noodle around the idea—suggested by some economists and Wall Street guys—that the government should flat out buy $500 billion in mortgage-backed securities from banks to end the credit crisis, economist Nouriel Roubini goes and ups the ante.
Roubini, the Official Doomsayer of the 21st-Century Housing Crisis, thinks Uncle Sam is going to de facto nationalize U.S. housing via a $1 trillion housing-mortgage bailout. That would be in addition to, I would guess, a complete takeover of Fannie Mae and Freddie Mac. (If he's right, the government had better be careful, or there won't be enough dough left over to bail out GM and Ford, as well as pay for Al Gore's $5 trillion energy plan.)
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Economic Model Predicts an Obama Landslide
Tweet Share on Facebook July 23, 2008 Comment (9)This from Macroeconomic Advisers, the well-known economic consulting firm, using the forecasting model of Yale University political scientist Ray Fair:
The Macroeconomic Advisers, LLC (MA) Presidential election model predicts that Democratic presidential candidate Senator Barack Obama will win 54.8 percent of the two-party popular vote and Republican presidential candidate Senator John McCain will receive 45.2 percent in the November election, given economic conditions expected through the fall.... The Presidential election model relies upon four political factors—candidate of the incumbent party, approval rating of the incumbent candidate (if running), party, and incumbent party's term in office—and three economic factors—real income growth, the unemployment rate, and the change in energy prices. Together, these seven factors predict the share of the two-party popular vote garnered by the incumbent party. This model has correctly predicted the winning party 12 out of 14 times in our sample, and predicted the popular vote better than the original model developed by Ray Fair.... According to this model, an expected 47% increase in the price of oil (WTI) in the three quarters leading up to the election would reduce Senator McCain's vote tally by 2.9 percentage points, while weak real disposable personal income growth over the same period would reduce it by 3.3 percentage points.
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