Arthur Laffer Says We Are Headed For A Double Dip Recession

[Perchoutofwater]

IAnd for the record again, I think people are too concerned about the current budget deficit than makes sense. Yes, the deficit needs to be addressed in the near future, but the time to freak out about it is not now.

 

Wow, this from the guy that blasted Shrub for his much smaller deficits.

[wiegie]

Wow, this from the guy that blasted Shrub for his much smaller deficits.

For about the 1 billionth time--do you just find it impossible to understand that there is a difference between deficits during normal economic times and deficits during severe recessions???

[Perchoutofwater]

For about the 1 billionth time--do you just find it impossible to understand that there is a difference between deficits during normal economic times and deficits during severe recessions???

 

Are you saying we didn't have an economic crisis after the tech bubble, and 911?

[Azazello1313]

For about the 1 billionth time--do you just find it impossible to understand that there is a difference between deficits during normal economic times and deficits during severe recessions???

 

well, and for the billion-and-1th time, the real problem isn't that there are $1.5 T or whatever deficits in 2009 and 2010, it's that there are still massive deficits hanging out there long after an assumed recovery. there's the short-term stimulus/bailout money, but then permanent spending has also been seriously ramped up in almost every way. old entitlements have been expanded, new entitlements have been created, baseline discretionary federal spending has been increasing way past inflation.

 

not to mention, we are watching states and countries who are further down the same path end up dead f'ing broke.

 

I know your attitude is, let's get a robust, sustainable recovery, THEN we can worry about the deficit. but have you considered the possibility that one of the major obstacles to a robust, sustained recovery is a complete lack of demonstrated seriousness about the deficit? people with skin in the game are worried about the long term. they are worried about the future tax rates needed to sustain the debt financing and permanent spending we are putting in place. people see a profiligate government, and it makes them uneasy. I really think some sober belt-tightening now would improve the economic mood of the country enormously.

Edited June 21, 2010 by Azazello1313

[CaP'N GRuNGe]

well, and for the billion-and-1th time, the real problem isn't that there are $1.5 T or whatever deficits in 2009 and 2010, it's that there are still massive deficits hanging out there long after an assumed recovery. there's the short-term stimulus/bailout money, but then permanent spending has also been seriously ramped up in almost every way. old entitlements have been expanded, new entitlements have been created, baseline discretionary federal spending has been increasing way past inflation.

 

not to mention, we are watching states and countries who are further down the same path end up dead f'ing broke.

 

I know your attitude is, let's get a robust, sustainable recovery, THEN we can worry about the deficit. but have you considered the possibility that one of the major obstacles to a robust, sustained recovery is a complete lack of demonstrated seriousness about the deficit? people with skin in the game are worried about the long term. they are worried about the future tax rates needed to sustain the debt financing and permanent spending we are putting in place. people see a profiligate government, and it makes them uneasy. I really think some sober belt-tightening now would improve the economic mood of the country enormously.

 

Anything done now needs to be very incremental. I do agree that we should have a road map, to steal the term from Rep Ryan, that lays out a path to fiscal sustainability to relieve the uncertainty. Didn't we start cutting spending, etc back in the great depression when we were worried about inflation and deficits and didn't that throw us into a worse deflationary cycle?

[CaP'N GRuNGe]

http://www.nytimes.com/2010/06/21/opinion/21krugman.html?hp

 

Now and Later

By PAUL KRUGMAN

Published: June 20, 2010

 

Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?

 

Very hard, if the current state of political debate is any indication. All around the world, politicians seem determined to do the reverse. They’re eager to shortchange the economy when it needs help, even as they balk at dealing with long-run budget problems.

 

But maybe a clear explanation of the issues can change some minds. So let’s talk about the long and the short of budget deficits. I’ll focus on the U.S. position, but a similar story can be told for other nations.

 

At the moment, as you may have noticed, the U.S. government is running a large budget deficit. Much of this deficit, however, is the result of the ongoing economic crisis, which has depressed revenues and required extraordinary expenditures to rescue the financial system. As the crisis abates, things will improve. The Congressional Budget Office, in its analysis of President Obama’s budget proposals, predicts that economic recovery will reduce the annual budget deficit from about 10 percent of G.D.P. this year to about 4 percent of G.D.P. in 2014.

 

Unfortunately, that’s not enough. Even if the government’s annual borrowing were to stabilize at 4 percent of G.D.P., its total debt would continue to grow faster than its revenues. Furthermore, the budget office predicts that after bottoming out in 2014, the deficit will start rising again, largely because of rising health care costs.

 

So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control — without that, nothing will work. It will also require finding additional revenues and/or spending cuts. As an economic matter, this shouldn’t be hard — in particular, a modest value-added tax, say at a 5 percent rate, would go a long way toward closing the gap, while leaving overall U.S. taxes among the lowest in the advanced world.

 

But if we need to raise taxes and cut spending eventually, shouldn’t we start now? No, we shouldn’t.

 

Right now, we have a severely depressed economy — and that depressed economy is inflicting long-run damage. Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there are job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives. And with each passing month we drift closer to a Japanese-style deflationary trap.

 

Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.

 

So now is not the time for fiscal austerity. How will we know when that time has come? The answer is that the budget deficit should become a priority when, and only when, the Federal Reserve has regained some traction over the economy, so that it can offset the negative effects of tax increases and spending cuts by reducing interest rates.

 

Currently, the Fed can’t do that, because the interest rates it can control are near zero, and can’t go any lower. Eventually, however, as unemployment falls — probably when it goes below 7 percent or less — the Fed will want to raise rates to head off possible inflation. At that point we can make a deal: the government starts cutting back, and the Fed holds off on rate hikes so that these cutbacks don’t tip the economy back into a slump.

 

But the time for such a deal is a long way off — probably two years or more. The responsible thing, then, is to spend now, while planning to save later.

 

As I said, many politicians seem determined to do the reverse. Many members of Congress, in particular, oppose aid to the long-term unemployed, let alone to hard-pressed state and local governments, on the grounds that we can’t afford it. In so doing, they are undermining spending at a time when we really need it, and endangering the recovery. Yet efforts to control health costs were met with cries of “death panels.”

 

And some of the most vocal deficit scolds in Congress are working hard to reduce taxes for the handful of lucky Americans who are heirs to multimillion-dollar estates. This would do nothing for the economy now, but it would reduce revenues by billions of dollars a year, permanently.

 

But some politicians must be sincere about being fiscally responsible. And to them I say, please get your timing right. Yes, we need to fix our long-run budget problems — but not by refusing to help our economy in its hour of need.

[CaP'N GRuNGe]

You want cuts? Well...

 

From Today's WSJ: Countries with highest military expenditures in 2009, in billions of US dollars:

 

US 661.0

.

.

.

.

.

China 100.0

France 63.9

UK 58.3

Russia 53.3

Japan 51.0

Germany 45.6

Saudi Arabia 41.2

(Subtotal 413.3)

 

World governments are spending more on guns and bombs than ever. Global military expenditures in 2009 topped $1.53 trillion - 2.7% of global GDP, up 6% in real terms from 2008 and 49% since 2000. The US spent $661 billion - 4.3% of GDP, accounting for 43% of the world total. China followed with an estimated $100 billion - 2% of GDP and 217% more than 2000.

[Azazello1313]

You want cuts? Well...

 

here is the projected 2020 budget in one picture. and you think we need to focus our cuts on defense?

[Ursa Majoris]

Anything done now needs to be very incremental. I do agree that we should have a road map, to steal the term from Rep Ryan, that lays out a path to fiscal sustainability to relieve the uncertainty.

I agree that it needs to be incremental. Crash diets are dangerous. However, I do want to see spending cut where it can be. I still maintain that running a national budget isn't massively different to running a household budget and I don't care who says that's simplistic.

 

I also maintain that most of the problems that loom in front of us are far from insurmountable.

[SEC=UGA]

You want cuts? Well...

 

From Today's WSJ: Countries with highest military expenditures in 2009, in billions of US dollars:

 

US 661.0

.

.

.

.

.

China 100.0

France 63.9

UK 58.3

Russia 53.3

Japan 51.0

Germany 45.6

Saudi Arabia 41.2

(Subtotal 413.3)

 

World governments are spending more on guns and bombs than ever. Global military expenditures in 2009 topped $1.53 trillion - 2.7% of global GDP, up 6% in real terms from 2008 and 49% since 2000. The US spent $661 billion - 4.3% of GDP, accounting for 43% of the world total. China followed with an estimated $100 billion - 2% of GDP and 217% more than 2000.

 

Well, if we were to cut our military spending in half right now, how many more people would be unemployed? Bad time for military cuts.

[Ursa Majoris]

here is the projected 2020 budget in one picture. and you think we need to focus our cuts on defense?

Not defense alone but, yes, we do need to cut it. Spending over six times as much as the next nearest nation is beyond ridiculous.

 

IMO, the one that would give greatest benefit is the 14% spent on servicing the debt.

[CaP'N GRuNGe]

Not defense alone but, yes, we do need to cut it. Spending over six times as much as the next nearest nation is beyond ridiculous.

 

IMO, the one that would give greatest benefit is the 14% spent on servicing the debt.

 

I know, let's just default on the debt.

[CaP'N GRuNGe]

here is the projected 2020 budget in one picture. and you think we need to focus our cuts on defense?

 

I didn't say focus there, just pointing out the massive spending binge compared to our neighbors.

[Ursa Majoris]

I know, let's just default on the debt.

There's a thought. Knock 14% off the spending bill in a stroke. Yer a genius!

[WaterMan]

Well, if we were to cut our military spending in half right now, how many more people would be unemployed? Bad time for military cuts.

 

The number of people in the military isn't the problem. The problem with the military is all the money that goes into technology. They could keep the soldiers but cut the toys.

 

As I said, many politicians seem determined to do the reverse. Many members of Congress, in particular, oppose aid to the long-term unemployed, let alone to hard-pressed state and local governments, on the grounds that we can’t afford it. In so doing, they are undermining spending at a time when we really need it, and endangering the recovery. Yet efforts to control health costs were met with cries of “death panels.”

 

And some of the most vocal deficit scolds in Congress are working hard to reduce taxes for the handful of lucky Americans who are heirs to multimillion-dollar estates. This would do nothing for the economy now, but it would reduce revenues by billions of dollars a year, permanently.

 

But some politicians must be sincere about being fiscally responsible. And to them I say, please get your timing right. Yes, we need to fix our long-run budget problems — but not by refusing to help our economy in its hour of need.

 

Well said. Let's cut taxes on the rich and forget about the new class of Americans that are stacking up at the bottom. Now where's my money so I can vote this way?

[SEC=UGA]

The number of people in the military isn't the problem. The problem with the military is all the money that goes into technology. They could keep the soldiers but cut the toys.

 

 

 

Well said. Let's cut taxes on the rich and forget about the new class of Americans that are stacking up at the bottom. Now where's my money so I can vote this way?

 

 

Tell those people stacking up at the bottom to get some marketable skills.

[Jackass]

I agree that it needs to be incremental. Crash diets are dangerous. However, I do want to see spending cut where it can be. I still maintain that running a national budget isn't massively different to running a household budget and I don't care who says that's simplistic.

 

that's simplistic.

[Jimmy Neutron]

However, I do want to see spending cut where it can be. I still maintain that running a national budget isn't massively different to running a household budget and I don't care who says that's simplistic.

 

Wurd.

 

I also maintain that most of the problems that loom in front of us are far from insurmountable.

 

Maybe, but at some point in time people need to accept the nature and scale of the problems we face if they are ever to actually be addressed. I see no evidence that this is even beginning to happen... it seems we're facing a track full of hurdles and we're skipping down multiple lanes backwards, pounding Bic Macs with both hands...

[WaterMan]

Tell those people stacking up at the bottom to get some marketable skills.

 

That would be great if jobs hired based on skills. Employers currently cherry pick based on experience.

[Perchoutofwater]

New home sales at record low as tax credit expires

reuters

 

On Wednesday June 23, 2010, 10:33 am EDT

 

WASHINGTON (Reuters) - Sales of new homes dropped a record 32.7 percent in May to the lowest level in at least four decades as the boost from a popular tax credit faded, adding to worries of a slowing economic recovery.

 

The Commerce Department said on Wednesday single-family home sales tumbled to a 300,000 unit annual rate, the lowest level since the series started in 1963.

 

In addition, April and March sales figure was revised down to 446,000 units and 389,000 units respectively. The drop in sales in May unwound two months of gains, which had been inspired by a government tax credit for home buyers.

 

Prospective home owners had to sign contracts by April 30 to qualify for the tax credit. Analysts polled by Reuters had forecast new home sales sliding to a 410,000 unit-pace. New home sales are measured at contract signing.

 

"The previous two months were revised down, so the lift from the tax credit was less than we previously realized. We are getting a little nervous," said David Sloan, an economist at 4Cast in New York.

 

U.S. stocks fell after new home sales data, and the major indexes turned negative. In addition, the S&P home builders ETF (Pacific:XHB - News) fell 1.6 percent. U.S. government debt prices added to gains.

 

The report was the latest in a series to suggest that the economy's recovery from the worst downturn since the 1930s might be losing strength.

 

It also came as Federal Reserve policymakers gathered for a two-day meeting at which they were expected to extend their pledge to hold overnight interest rates ultra low for "an extended period" to aid the still fragile economic recovery.

 

The U.S. central bank is not seen lifting rates, currently near zero, until next year.

 

A report on Tuesday showed sales of previously owned homes, which are recorded at contract closing, fell unexpectedly in May.

 

The expiry of the tax incentive has also resulted in a decline in new home construction and demand for home loans applications for loans to buy homes fell last week, staying near 13-year lows.

 

Last month's weak sales pace saw the supply of homes available for sale jumping a record 46.6 percent to 8.5 months' worth, the highest in nearly a year, from 5.8 months' worth in April. However, the number of new homes on the market dipped 0.5 percent to 213,000 units, the lowest since November 1970.

 

The median sale price for a new home fell 1 percent in May from April to $200,900. In the 12 months to May, prices fell 9.6 percent, the largest decline since July 2009.

 

Link

[bpwallace49]

The number of people in the military isn't the problem. The problem with the military is all the money that goes into technology. They could keep the soldiers but cut the toys.

 

The problem is that the toys are also manufactured in the US, so it would unemploy those industries . . . or slow them down.

[TimC]

Link

 

Seriously, is there any good news? I thought there was some hope with that hope and change.

[peepinmofo]

Seriously, is there any good news? I thought there was some hope with that hope and change.

The only change is white to black.

Edited June 23, 2010 by peepinmofo

[gbpfan1231]

That would be great if jobs hired based on skills. Employers currently cherry pick based on experience.

Idiot

[dmarc117]

whats gonna stop lawmakers down the road 20y from now from taxing these accounts when the well is dry.

 

 

http://finance.yahoo.com/focus-retirement/...-managingwealth