The Economist sets the bar much too low. The question that should be asked is not, "Will the U.S. economy grow in 2003?" The question that should be asked is, "Will the economy grow fast enough in 2003 to reduce the U.S. unemployment rate?"
And the answer to this second question looks to me to be "No."
Posted by DeLong at January 28, 2003 03:04 PM | TrackbackEconomist.com: Yet perhaps some sense of perspective is called for. Growth in American GDP has been higher than the pessimists seem to recognise?America has actually been growing significantly faster than most other industrial economies: it grew at an annual rate of 4% in the third quarter of the year. And even making some allowances for unreasonable optimism, The Economist's poll of private forecasts suggests that growth will be comfortably positive in America in 2003...
If they don't want to work at the prevailing wage rate, let them eat cake! Could it be that consumer confidence is at a nine year low partly because some people are more worried about the labor market than about dividend and capital gain rebates?
Posted by: Jean-Philippe Stijns on January 28, 2003 04:15 PMI thought Professor Krugman laid out the case for the double dip recession well, although he did not include the specifics. The federal deficit looks to be in the ca. 3% GDP range. Now add in a $100B war with Iraq, $70B/year for tax cuts, $170B/year to occupy Iraq and the costs of actually doing the sweet things promised in the SOTU (especially the $40B/year promised for Medicare and the added Homeland Security and defense expenditures). The math suggests that the federal deficit should rise to at least 6-7% per year, and probably higher if the Congress wants to be re-elected. Deficits of that size are almost certain to force interest rates to rise, choking off recovery.
Number 43 appears to be on exactly the same economic road that 41 led this nation down.
Posted by: Charles Utwater II on January 28, 2003 10:57 PMI thought Krugman laid out the case for the double dip recession well, although he did not include the specifics. The federal deficit looks to be in the ca. 3% GDP range. Now add in a $100B war with Iraq, $70B/year for tax cuts, $170B/year to occupy Iraq and the costs of actually doing the sweet things promised in the SOTU (especially the $40B/year promised for Medicare and the added Homeland Security and defense expenditures). The math suggests that the federal deficit should rise to at least 6-7% per year, and probably higher if the Congress wants to be re-elected. Deficits of that size are almost certain to force interest rates to rise, choking off recovery.
Number 43 appears to be on exactly the same economic road that 41 led this nation down.
Posted by: Charles Utwater II on January 28, 2003 10:59 PMI thought Professor Krugman laid out the case for the double dip recession well, although he did not include the specifics. The federal deficit looks to be in the ca. 3% GDP range. Now add in a $100B war with Iraq, $70B/year for tax cuts, $170B/year to occupy Iraq and the costs of actually doing the sweet things promised in the SOTU (especially the $40B/year promised for Medicare and the added Homeland Security and defense expenditures). The math suggests that the federal deficit should rise to at least 6-7% per year, and probably higher if the Congress wants to be re-elected. Deficits of that size are almost certain to force interest rates to rise, choking off recovery.
Number 43 appears to be on exactly the same economic road that 41 led this nation down.
Posted by: Charles Utwater II on January 28, 2003 10:59 PMI don't know where else to put this so I'll put it here.
Friday, January 31, 2003
Fed urged to buy Treasury debt
Doing so could cut risk of deflation, Pimco's Paul McCulley says.
Bloomberg News
NEWPORT BEACH – The Federal Reserve should buy Treasury debt as a way to pump more money into the
banking system and help reduce the risk of deflation, said Paul McCulley, who oversees about $90 billion at
Pacific Investment Management Co.
Snip
The central bank can buy the Treasury debt needed to finance
the higher spending, boosting money supply and reflating the
economy, he wrote. If needed, the Fed may expand its
bond-purchasing program to include corporate bonds,
effectively giving "an explicit reflationary promise beneath private sector debtors heavy wings," McCulley wrote.