Where is the US economy headed?

@parados,

2011 GDP growth is the trivial part. Avoiding a repeat of the "stagflation" of the Carter years in 2012 will be the real trick -- as the stimulus bailouts to states run out (ostensibly for infrastructure projects, but in fact used to keep overpaid and unproductive state employees on the payroll) , and cash-strapped state governments fall into crisis; the Fed starts squeezing liquidity out of the system to limit inflation; and the Federal government keeps on borrowing.

1 Reply

@georgeob1,

And as long as we are making dire predictions, Georgeob, I can foresee China's economy imploding in the next year or two due to excessive speculation and social issues. Europe (the EU) will have big problems with the haves vs the have nots. The U.S. will come out, perhaps, less bruised. But damaged.
It strikes me as extremely naive for folks anywhere to think that using, for example, tariffs, countries can somehow divorce themselves from what is going on in the rest of the world. The world economies are now so intertwined. It seems to me as being dumb to think otherwise.
But what do I know?

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@realjohnboy,

Quote:

And as long as we are making dire predictions, Georgeob, I can foresee China's economy imploding in the next year or two due to excessive speculation and social issues. Europe (the EU) will have big problems with the haves vs the have nots. The U.S. will come out, perhaps, less bruised. But damaged.
It strikes me as extremely naive for folks anywhere to think that using, for example, tariffs, countries can somehow divorce themselves from what is going on in the rest of the world. The world economies are now so intertwined. It seems to me as being dumb to think otherwise.
But what do I know?

the iron clad linkage of all the major economies is another manifestation of the problem that caused the Great Recession.....the absurdly overly optimistic appraisal of risk. We raised a generation into middle age who had never known economic or military calamity, and we got stupid.

It cant be fixed now, now we pay for our mistake, and through the pain teach the kids so they dont make the same mistake. They will be prudent, they will take decisions seriously.

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@realjohnboy,

I think history has fairly clearly demolished the illusion of tariff advocates. However new crops of the ignorant and ill informed keep popping up.

I always hesitate to make specific predictions, though trends can usually be noted with confidence. China will likely at some point find a collision between an authoritarian government and the growing aspirations of an increasingly prosperous and well-informed population. I also agree that they are not immune from the boom/bust cycle that plagues other market economies.

Europe is headed towards a largely unavoidable demographic collapse. They don't assimilate (or accept) many immigrants and they aren't having babies. Every year a smaller and smaller cadre of workers are asked to shoulder the burden of an ever growing cadre of retirees. It is like a Disney theme park now, but it can't last.

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@georgeob1,

Quote:

I think history has fairly clearly demolished the illusion of tariff advocates.

I think that we are well on our way to demolishing the illusion of free trade being good for anyone.

Regulated trade, and a part of that should be regulated tariffs.

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@hawkeye10,

Tariffs have never been shown to work very well if at all, hawkeye, have they?

I think a far better solution to our trade imbalance would be the total elimination of all income tax in this country, which could do more to revitalize industries here than anything. Combine that with a Retail Sales Tax to provide the necessary tax revenues, and we would then have a level playing field for products sold here in this country. True, the sales tax rate would be severe, but people would have more jobs and more money in their pockets, plus the products and services would not be as expensive as they are now before the tax is added.

By the way, new jobless claims rise.
http://www.google.com/hostednews/ap/article/ALeqM5gsU_mJONWPn1wElyi0bWwOlG6a8gD9DUKMJG0
"Jobless claims rise unexpectedly"

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Stimulus meets red tape.

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@realjohnboy,

realjohnboy wrote:

And as long as we are making dire predictions, Georgeob, I can foresee China's economy imploding in the next year or two due to excessive speculation and social issues.

I've been predicting this for about a year and a half on the assumption their accounting was as reliable as their milk products and reporting of HIV and Sudden Respiratory Syndrom. Right now, they are about a year overdue according to my best guess.

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@parados,

Parados, a major component of the GDP is Federal Government Outlays. For that reason, I bet you are right. GDP will grow in 2010--and after.

Quote:

http://www.whitehouse.gov/omb/budget/fy2008/pdf/hist.pdf
Year.......$FEDERAL OUTLAYS
…
1977…...….409,218,000 [CARTER 1977-1981]
...
2006......2,655,435,000
2007......2,730,241,000
2008......2,931,222,000
2009......3,107,355,000 [OBAMA 2009 - ?]

I care far more about the growth of total civil employed in 2010 and beyond. Do you want to make a wager about that?

Quote:

ftp://ftp.bls.gov/pub/suppl/empsit.cpseea1.txt
Year USA Total Civil Employed
1977................92,017,000 [CARTER 1977-1981]
...
2006……..........144,427,000
2007...............146,047,000
2008...............145,362,000
2009...............139,959,000 [OBAMA 2009 TO ?]

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Stupid idea, but I can understand the sentiment behind it...

http://www.wlwt.com/news/22600154/detail.html

Quote:

MOSCOW, Ohio --
Like many people, Terry Hoskins has had troubles with his bank. But his solution to foreclosure might be unique.

Hoskins said he's been in a struggle with RiverHills Bank over his Clermont County home for nearly a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $350,000 home.

Quote:

Hoskins told News 5's Courtis Fuller that he issued the bank an ultimatum.

"I'll tear it down before I let you take it," Hoskins told them.

And that's exactly what Hoskins did.

Man Says Actions Intended To Send Message To Banks

The Moscow man used a bulldozer two weeks ago to level the home he'd built, and the sprawling country home is now rubble, buried under a coating of snow

I wonder what would happen if more people facing foreclosure did this.

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@mysteryman,

He strikes me as a man that never grew up, and is still throwing temper tantrums in adulthood, as a result of not having his way. A couple of questions come to mind, was it his bulldozer and if so, why not sell it to generate some money to pay on his mortgage, and if it was somebody else's, how does he pay for the bulldozer? Another question, can he be charged with a crime for destroying property that is under lien, that he did not own outright? In short, I do not think this is something that other intelligent,law abiding, and ethical citizens should use as an example of what to do. And finally, if he could not afford it, why did he borrow the money to build that expensive of a home, he could have built one for half that.

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@ican711nm,

Quote:

Parados, a major component of the GDP is Federal Government Outlays. For that reason, I bet you are right. GDP will grow in 2010--and after.

Yes, Federal expenditures do contribute to GDP which is why deficit spending can turn around an economy.

Quote:

I care far more about the growth of total civil employed in 2010 and beyond. Do you want to make a wager about that?

Sure.. happy to... I will bet you $1000 that the BLS figures will report MORE people employed in 2012 than you presently list from them for 2009. I am also willing to bet that the figures for 2011 will be higher than your 2009 figure.

I will also bet $1000 that the employment figure for December of 2010 will be higher than your figure for 2009.

There you go ican.. your chance to win $3000 on 3 easy bets you must think you will win if you believe your own argument.

1 Reply

@parados,

parados wrote:

Yes, Federal expenditures do contribute to GDP which is why deficit spending can turn around an economy.

Silly statement, Parados. That is akin to throwing money down a rat hole, so that some of it can be fished back out. Sure, some can be fished back out in the form of gdp, but one would be far wiser to never throw it down the rathole in the first place, and instead be able to benefit from far greater economic production or gdp. To further understand this, you might wish to compare the gdp of North Korea to South Korea. It has been proven over and over that the private sector is a much more efficient driver of wealth and economic production. The government only serves as a dampening filter to the economic production, as much of the wealth is skimmed off and lost or wasted in the bureaucratic filter through which the wealth must pass in order to return to the economic benefit or wealth back to the people.

The government spending money to stimulate the economy did not work well for FDR, now will it work for Obama.

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@okie,

Quote:

The government spending money to stimulate the economy did not work well for FDR, now will it work for Obama.

What do you think causes the turn around under FDR then?

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Quote:

NEW YORK (CNNMoney.com) -- Just as they are contending with massive gaps in their operating budgets, states and localities must also deal with a $1 trillion deficit in public employees' retirement benefits' funds, a new report found.

The shortfall amounts to more than $8,800 for every household in the nation, according to the Pew Center on the States, which published its findings Thursday.

States largely got themselves into this mess by failing to make annual contributions while also enhancing benefits, the study found. Now, they are behind by a total $452 billion in their pension accounts and $555 billion in their retiree health funds, as of the end of fiscal 2008, which ended June 30 for most states.

The deficit is likely even more severe because the report did not take into account the crumbling of the stock market in the latter half of 2008. The typical pension plan lost 25% of its value in 2008.

http://money.cnn.com/2010/02/18/news/economy/public_pension_gap/index.htm?source=cnn_bin&hpt=Sbin

CI and I have talked about this several times, but generally the problem has not been on the radar of a2k members nor the American citizens.

Nice to see that the problem has now at least been documented. This is progress.

1 Reply

@parados,

parados wrote:

Quote:

The government spending money to stimulate the economy did not work well for FDR, now will it work for Obama.

What do you think causes the turn around under FDR then?

I do not believe it was the New Deal. The economy was still lousy by the time the war arrived, and so I believe there is little proof that the New Deal turned things around in any lasting fashion. One of the most significant first helps to the economy was the cranking up the factories to produce war material to sell to Great Britain, and later to Russia. Also, when we entered the war, obviously high numbers became part of the military and were no longer subject to unemployment, and the population left behind became even more involved in turning out war material not only for our allies, but for us. And the full effects of how the war helped us longterm cannot be analyzed without the recognition that economic ability was largely destroyed in many countries that would have been our competition following the war. In contrast with the rest of the world, the American ability to produce goods was very much poised to take advantage of the pent up demand and consumer appetites in the market follwing the war. So, when I say I believe the war brought us the recovery, the full story of how that happened is not complete by simply talking about producing war material but also by talking about the conditions at the end of the war and following the war.

I do not believe at all that the New Deal by itself would have accomplished anything close to the long term recovery that occurred, and I think very few economists would believe that either. If you believe it, Parados, I think that places you into a very small minority. I am posting the following graph which clearly illustrates the unemployment continuing to the beginning of the war, so the New Deal had accomplished little to nothing for several years. In fact unemployment still topped 25% in 1938. It took something more than the New Deal or perhaps better termed the "Raw Deal," beginning in 38 and 39 with cranking up production of war materials, and continuing with all the cirumstances that I mentioned above through World War II and following..

http://blog.heritage.org/wp-content/uploads/2009/01/newdealunemploy.jpg

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@okie,

Okie,
Here's another source that provides evidence that supports your evidence that the New Deal was a bum deal.

Quote:

http://www.infoplease.com/ipa/A0104719.html
AVERAGE ANNUAL UNEMPLOYMENT RATES 1920 TO 2008
YEAR….. %RATE | YEAR….. %RATE | YEAR….. %RATE | YEAR….. %RATE | YEAR….. %RATE |
1920……… 5.2….|1928….…. 4.2…...|1930….…. 8.7…...|1932…… 23.6 ….|1934…... 21.7…...|
1936……… 16.9 |1938….…. 19.0....|1940….…. 14.6....|1942….…. 4.7…..|1944….…. 1.2.…..|
1946……… 3.9….|1948….…. 3.8…...|1950….…. 5.3…...|1952….…. 3.0…..|1954….…. 5.5…..|
1956……… 4.1….|1958….…. 6.8…...|1960….…. 5.5…...|1962.……. 5.5…..|1964….…. 5.2…..|
1966……… 3.8….|1968….…. 3.6…...|1970….…. 4.9…...|1972….…. 5.6…..|1974….…. 5.6…..|
1976……… 7.7….|1978….…. 6.1…...|1980….…. 7.1…...|1982….…. 9.7…..|1984….…. 7.5…..|
1986……… 7.0….|1987….…. 6.2…...|1988….…. 5.5…...|1989….…. 5.3…..|1990….…. 5.6…..|
1991……… 6.8….|1992….…. 7.5…...|1993….…. 6.9…...|1994….…. 6.1…..|1995….…. 5.6…..|
1996……… 5.4….|1997….…. 4.9…...|1998….…. 4.5…...|1999….…. 4.2…..|2000….…. 4.0…..|
2001……… 4.7….|2002….…. 5.8…...|2003….…. 6.0…...|2004….…. 5.5…..|2005….…. 5.1…..|
2006……… 4.6….|2007….…. 4.6…...|2008….…. 5.8…...|2009…….. 9.0….|2010……... ???…..|

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@okie,

Quote:

I do not believe it was the New Deal. The economy was still lousy by the time the war arrived, and so I believe there is little proof that the New Deal turned things around in any lasting fashion. One of the most significant first helps to the economy was the cranking up the factories to produce war material to sell to Great Britain, and later to Russia

Wow... You do realize that the war effort was paid for by HUGE deficit spending, don't you okie? The government spent money, TONS of money it didn't have. In fact the government spent almost 45% of GDP for the war effort. That deficit spending stimulated the economy and was far more than was ever spent prior to the war.

It amazes me how you can argue that the factories were cranked up with private money. It was deficit spending okie.

In 1942, the deficit spending was 14.2% of the economy.
In 1943, the government spent 43.6% of the GDP and the deficit was 30% of GDP.

To somehow claim the increases in employment in 1939 were only due to the war effort ignores the reality of government spending
In 1938 the government spent 6,840
In 1939 the government spent 9141
The deficit in 1938 was 89 million
In 1940 it was 2,846 million
The government deficit spending increased by almost 3200% from 1938 to 1939. But somehow we are supposed to pretend that never happened?

Source - table 1.1 of US budget historical documents.
http://www.gpoaccess.gov/usbudget/fy11/pdf/hist.pdf

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@ican711nm,

1938 -
You will notice that unemployment INCREASED that year.
1938 is also the year that the government almost completely stopped deficit spending.

1939 - The government increased deficit spending and the unemployment DROPPED by 4.5 points by 1940
And you guys want to argue that proves that deficit spending can't help the economy? Geez, it's right there in black and white

year ----- deficit ------ unemployment
1936 -------4309 --------- 16.9
1938 ------- 89 -------------- 19
1940 -------2920 ------------- 14.6

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@parados,

Parados, I would suspect that even you would admit that waging war and/or massive government spending is not the way to economic prosperity. If World War II had continued unabated for another decade or two, we would obviously be broke several times over. A war by itself does not fix the economy, it only served as a catalyst for later conditions that were more favorable. The same thing with the New Deal, government spending by itself does not fix the economy, and the record shows that it did not during the 30's. I happen to think the aftermath of the war was the primary positive economic effect of the war. Also, you need to recognize that some of the war materials produced were sold, it was not merely directed into our own efforts to be spent and used.

1 Reply

Where is the US economy headed?

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