Now, now Rand, if you read yesterday’s NY Times, you’d realize that the reason for the slow recovery is a total mystery.
Pay no attention to the man behind the curtain.
you’d realize that the reason for the slow recovery is a total mystery.
If the press had done their jobs in 2008 he wouldn’t be.
What’s Slowing The Economy
The price of oil, it’s slowed the global economy, not just the US.
Huh? Oil prices are 20% lower than about 5 years ago and roughly flat with a ceiling of $100/bbl for the last 2 years. Or are you talking about increased taxes on oil, such as carbon taxes?
No, I’m talking about the slow US and global economy of the last 5 years, ever since oils been over $80.
I guess the US economy must be even slower than slow now?
Ok, so you’re talking about it. What does a moderately high price of oil have to do with the recession? Especially, since a good portion of the numerical price increase is due to inflation?
7 out of the 8 postwar U.S. recessions had been preceded by a sharp increase in the price of crude petroleum. Iraq’s invasion of Kuwait in August 1990 led to a doubling in the price of oil in the fall of 1990 and was followed by the ninth postwar recession in 1990-91.
The price of oil more than doubled again in 1999-2000, with the tenth postwar recession coming in 2001. Yet another doubling in the price of oil in 2007-2008 accompanied the beginning of recession number 11, the most recent and frightening of the postwar economic downturns.
So the count today stands at 10 out of 11, the sole exception being the mild recession of 1960-61 for which there was no preceding rise in oil prices.
Here you can see recent oil prices compared to historical prices, even in real terms the average price over the last 5 years is way higher than prices were prior to 2008. http://en.wikipedia.org/wiki/Price_of_petroleum
If oil prices were to drop to half of what they are now, do you seriously believe that that wouldn’t considerably lift the economy?
The charts there are 2 years old and suggest oil prices are over $110. Prices are $96/bbl today. That’s nearly a 15% drop, so if your theory holds, the economy should not be slowing this year.
Lower oil prices would have an effect on shipping and gasoline used by regular people for vacations and day trips. A lot of people have had to cut back on outdoor activities.
Then there are the effects on manufacturing.
But would prices drop or would businesses keep the same prices?
7 out of the 8 postwar U.S. recessions had been preceded by a sharp increase in the price of crude petroleum.
I see a problem already. According to Wikipedia, there were five post-war recessions prior to the end of stable oil prices in the mid 70s. They can’t have been created by high oil prices, because that didn’t start till 1974 roughly. There have been six since. I’d have to say that the premise is in error.
More like both. Plus what Andrew said. In the 1990s low oil prices boosted the world economy. Today oil prices are much higher and this has been grinding things down.
Next to the housing bubble I expect a stock market bubble. Most of the money being printed has been funneled there but eventually something has got to give. One example of how wrong the situation is: the ludicrous Apple stock buyback scheme where Apple asked for a loan (interest rates are ridiculously low) to buyback their stock instead of using their own large cash reserves to avoid a 15% tax on repatriating their cash from abroad.
One example of how wrong the situation is: the ludicrous Apple stock buyback scheme where Apple asked for a loan (interest rates are ridiculously low) to buyback their stock instead of using their own large cash reserves to avoid a 15% tax on repatriating their cash from abroad.
What’s ludicrous about it? That it would work? The private world works around obstacles like those taxes all the time.
The corporate tax rate in question is 35%, not 15%.
Wait. I thought the story was Clinton was responsible for his boom (that wasn’t a sex reference.)
There is a limit to the role any government will play in a market economy. When Clinton was US President several policies were made which helped the boom pick up steam. Reducing military expenditures after the Cold War certainly helped. But the abundance of cheap oil and natural gas was certainly a major factor in the boom.
Neither, it’s regulations.
Tax hikes and regulation both raise the cost of doing business, which has the effect of discouraging people and businesses from spending as freely as they used to. Outcome: recession.
A note about tense:
The excess fiscal drag on the horizon comes almost entirely from rising taxes.
This is a projection about the future, not a statement of what is slowing the economy today, as the following sentences make clear:
As Panel B shows, at the end of 2012, taxes as a share of GDP were below both their historical norm in relation to the business cycle and their long-run average of about 18%. However, over the next three years, they are projected to rise much faster than our estimate of the usual cyclical pattern would indicate.
A $17,000,000,000,000 debt is a fiscal drag now — regardless of whether Wall Street and official Washington act like it.
There are a lot of factors effecting GDP measurements, like printing money. Using a ratio of tax revenues to GDP isn’t a very good indicator of anything without a detailed examination of what is going on with the GDP and it doesn’t speak to the % tax that individual companies pay.
I expect spending/GDP is a better measure for economic drag than taxes/GDP. Every dollar spent empowers the recipient to claim one dollars worth from the economy. How tax collection is distributed also matters, highly “progressive” tax policies having a higher drag than flat rate policies.
This is a projection about the future, not a statement of what is slowing the economy today…
Wrong. Today’s rates affect today’s behavior. The results happen in the future.
Jim doesn’t understand planning.
I agree with McGehee up above, it is taxes and the increase in regualtions. You could throw in the anti business rhetoric and Democrat protest groups like OWS trying to start a communist revolution. Also, the government granting favors to its friends and attacking its enemies.
Wrong. Today’s rates affect today’s behavior.
I was making a statement about the study’s claims. The study is projecting fiscal drag that will happen in the future. It is not making claims about the cause of slowness in the economy today.
Today’s rates
Some of the projected fiscal drag is forecast to come from taxes that don’t take effect until 2014, or even later. So, to be precise, it’s about tomorrow’s rates.
People here have plenty ideas about what has caused our sluggish economy, ideas that unsurprisingly align closely with their policy preferences, but that don’t have much to do with the specific claims of this study.
But it has nothing to do with Obama and his policies. Besides we aren’t in an economic slump. We’re in a really, really, really, really slow recovery and it’s all because they haven’t made Obama dictator for life yet.
Some of the projected fiscal drag is forecast to come from taxes that don’t take effect until 2014, or even later. So, to be precise, it’s about tomorrow’s rates.
So you think companies will not respond to tax changes until the moment they start? As wodun states, you don’t understand planning.
As Jim says, the Examiner article is fundamentally wrong: the SF Fed’s paper does *not* claim that tax hikes are to blame for the slowness of the recovery to date. In fact, the Fed paper specifically cites reduced spending as the major factor slowing growth in the last couple of years.
I hope Transterrestrial will correct the present post.
The Fed paper *does* suggest that from about 2014 onward, taxes will be a larger drag on the economy than budget cuts.
May I suggest that people read the paper. it’s only three pages long.
Look at the comments about the article on the Examiner’s website. In the entire first page of comments, not a single one points out that the article fundamentally misrepresents the SF Fed paper. Apparently, few if any Examiner readers have bothered to read the paper even though it’s only a click away. That’s not a positive reflection on the Examiner’s readership.
Now, now Rand, if you read yesterday’s NY Times, you’d realize that the reason for the slow recovery is a total mystery.
Pay no attention to the man behind the curtain.
If the press had done their jobs in 2008 he wouldn’t be.
What’s Slowing The Economy
The price of oil, it’s slowed the global economy, not just the US.
Huh? Oil prices are 20% lower than about 5 years ago and roughly flat with a ceiling of $100/bbl for the last 2 years. Or are you talking about increased taxes on oil, such as carbon taxes?
No, I’m talking about the slow US and global economy of the last 5 years, ever since oils been over $80.
I guess the US economy must be even slower than slow now?
Ok, so you’re talking about it. What does a moderately high price of oil have to do with the recession? Especially, since a good portion of the numerical price increase is due to inflation?
http://dss.ucsd.edu/~jhamilto/oil_nonlinear_macro_dyn.pdf
7 out of the 8 postwar U.S. recessions had been preceded by a sharp increase in the price of crude petroleum. Iraq’s invasion of Kuwait in August 1990 led to a doubling in the price of oil in the fall of 1990 and was followed by the ninth postwar recession in 1990-91.
The price of oil more than doubled again in 1999-2000, with the tenth postwar recession coming in 2001. Yet another doubling in the price of oil in 2007-2008 accompanied the beginning of recession number 11, the most recent and frightening of the postwar economic downturns.
So the count today stands at 10 out of 11, the sole exception being the mild recession of 1960-61 for which there was no preceding rise in oil prices.
Here you can see recent oil prices compared to historical prices, even in real terms the average price over the last 5 years is way higher than prices were prior to 2008.
http://en.wikipedia.org/wiki/Price_of_petroleum
If oil prices were to drop to half of what they are now, do you seriously believe that that wouldn’t considerably lift the economy?
The charts there are 2 years old and suggest oil prices are over $110. Prices are $96/bbl today. That’s nearly a 15% drop, so if your theory holds, the economy should not be slowing this year.
Lower oil prices would have an effect on shipping and gasoline used by regular people for vacations and day trips. A lot of people have had to cut back on outdoor activities.
Then there are the effects on manufacturing.
But would prices drop or would businesses keep the same prices?
7 out of the 8 postwar U.S. recessions had been preceded by a sharp increase in the price of crude petroleum.
I see a problem already. According to Wikipedia, there were five post-war recessions prior to the end of stable oil prices in the mid 70s. They can’t have been created by high oil prices, because that didn’t start till 1974 roughly. There have been six since. I’d have to say that the premise is in error.
More like both. Plus what Andrew said. In the 1990s low oil prices boosted the world economy. Today oil prices are much higher and this has been grinding things down.
Next to the housing bubble I expect a stock market bubble. Most of the money being printed has been funneled there but eventually something has got to give. One example of how wrong the situation is: the ludicrous Apple stock buyback scheme where Apple asked for a loan (interest rates are ridiculously low) to buyback their stock instead of using their own large cash reserves to avoid a 15% tax on repatriating their cash from abroad.
One example of how wrong the situation is: the ludicrous Apple stock buyback scheme where Apple asked for a loan (interest rates are ridiculously low) to buyback their stock instead of using their own large cash reserves to avoid a 15% tax on repatriating their cash from abroad.
What’s ludicrous about it? That it would work? The private world works around obstacles like those taxes all the time.
The corporate tax rate in question is 35%, not 15%.
Wait. I thought the story was Clinton was responsible for his boom (that wasn’t a sex reference.)
There is a limit to the role any government will play in a market economy. When Clinton was US President several policies were made which helped the boom pick up steam. Reducing military expenditures after the Cold War certainly helped. But the abundance of cheap oil and natural gas was certainly a major factor in the boom.
Neither, it’s regulations.
Tax hikes and regulation both raise the cost of doing business, which has the effect of discouraging people and businesses from spending as freely as they used to. Outcome: recession.
A note about tense:
The excess fiscal drag on the horizon comes almost entirely from rising taxes.
This is a projection about the future, not a statement of what is slowing the economy today, as the following sentences make clear:
As Panel B shows, at the end of 2012, taxes as a share of GDP were below both their historical norm in relation to the business cycle and their long-run average of about 18%. However, over the next three years, they are projected to rise much faster than our estimate of the usual cyclical pattern would indicate.
A $17,000,000,000,000 debt is a fiscal drag now — regardless of whether Wall Street and official Washington act like it.
There are a lot of factors effecting GDP measurements, like printing money. Using a ratio of tax revenues to GDP isn’t a very good indicator of anything without a detailed examination of what is going on with the GDP and it doesn’t speak to the % tax that individual companies pay.
I expect spending/GDP is a better measure for economic drag than taxes/GDP. Every dollar spent empowers the recipient to claim one dollars worth from the economy. How tax collection is distributed also matters, highly “progressive” tax policies having a higher drag than flat rate policies.
This is a projection about the future, not a statement of what is slowing the economy today…
Wrong. Today’s rates affect today’s behavior. The results happen in the future.
Jim doesn’t understand planning.
I agree with McGehee up above, it is taxes and the increase in regualtions. You could throw in the anti business rhetoric and Democrat protest groups like OWS trying to start a communist revolution. Also, the government granting favors to its friends and attacking its enemies.
Wrong. Today’s rates affect today’s behavior.
I was making a statement about the study’s claims. The study is projecting fiscal drag that will happen in the future. It is not making claims about the cause of slowness in the economy today.
Today’s rates
Some of the projected fiscal drag is forecast to come from taxes that don’t take effect until 2014, or even later. So, to be precise, it’s about tomorrow’s rates.
People here have plenty ideas about what has caused our sluggish economy, ideas that unsurprisingly align closely with their policy preferences, but that don’t have much to do with the specific claims of this study.
But it has nothing to do with Obama and his policies. Besides we aren’t in an economic slump. We’re in a really, really, really, really slow recovery and it’s all because they haven’t made Obama dictator for life yet.
Some of the projected fiscal drag is forecast to come from taxes that don’t take effect until 2014, or even later. So, to be precise, it’s about tomorrow’s rates.
So you think companies will not respond to tax changes until the moment they start? As wodun states, you don’t understand planning.
As Jim says, the Examiner article is fundamentally wrong: the SF Fed’s paper does *not* claim that tax hikes are to blame for the slowness of the recovery to date. In fact, the Fed paper specifically cites reduced spending as the major factor slowing growth in the last couple of years.
I hope Transterrestrial will correct the present post.
The Fed paper *does* suggest that from about 2014 onward, taxes will be a larger drag on the economy than budget cuts.
May I suggest that people read the paper. it’s only three pages long.
Look at the comments about the article on the Examiner’s website. In the entire first page of comments, not a single one points out that the article fundamentally misrepresents the SF Fed paper. Apparently, few if any Examiner readers have bothered to read the paper even though it’s only a click away. That’s not a positive reflection on the Examiner’s readership.