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February 4, 2013

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 03 Jan 2013 12:24 AM PST
Tim Duy:
Manufacturing - Down, But Not Out, by Tim Duy: As usual, the first major release of the month is the ISM manufacturing report. The headline number edged up:
Ism1
That said, I really can't get terribly excited by this improvement - looks to me that it continues to hover around the 50 mark. Good only in the sense that the bottom hasn't dropped out from under manufacturing, which I didn't expect at this point. Aggregate new orders were also not exciting, flat at 50.3:
Ism2
New export and import orders, however, both improved:
Ism3
Ism4
In neither case, however, would I say the downtrend of recent months has been broken. A similar story holds for the employment subindex:
Ism5

Altogether, the ISM data continues to suggest that manufacturing hit a slow patch - unsurprising, given global news and the uncertainty surrounding the path of US fiscal policy - but fears of recession remain premature. Indeed, I still believe that absent a more significant fiscal contraction, it is difficult to envision a recession when the housing market and auto sales continue to improve. Along those lines, some of the anecdotal comments from ISM:
"The election is over; unemployment is dropping; consumer confidence is increasing as are home sales prices. We seem to be turning the corner. New car sales are increasing, which affects our customers." (Fabricated Metal Products)
"Business is strengthening." (Furniture & Related Products)
"Prices and orders are staying stronger than normal for December — a pleasant surprise." (Wood Products)
I am not saying the future is all sunny skies - I not thrilled with fiscal austerity in the face of what I believed to be relatively slow growth in the first place - but for now the cyclical dynamics continue to carry the economy generally upward.
Bottom Line: The ISM data continue to point toward slow growth in manufacturing, but fall short of a more ominous story.
Posted: 03 Jan 2013 12:06 AM PST
Posted: 02 Jan 2013 11:27 AM PST
Dartmouth's Andrew Samwick (he was the chief economist for the President's Council of Economic Advisors in 2003):
So Who Won the Fiscal Cliff Fight?: Obviously, former President George W. Bush. Despite how much he has been vilified in the years since his departure from office, the Congress and the President yesterday decided to ratify almost all of his tax policy agenda. As Joe Wiesenthal of Business Insider noted, "The difference between the Obama Tax Cuts and the Bush Tax Cuts?  Obama's are permanent*." Joe also pointed out, quite astutely, that even if top marginal tax rates are not lower than in the Clinton years, taxpayers with the highest incomes are still paying lower taxes because all the tax rates below the top are lower. Who's laughing now?

Not me. In over eight years of blogging, you won't find a single word of praise for the Bush-Obama tax cuts. As a matter of revenue, we now permanently have a tax system that will not raise enough revenue to cover our expenditures. As a matter of policy, we continued to constrain our choices based on whether some portion of legislation that wasn't popular enough to pass initially without explicit sunsets should be continued or not. The proper course of action for President Obama was to allow all the sunsets to occur and then to force the Republicans to propose legislation to achieve their political objectives. Instead, he surrendered his political advantages and handed it to them without a fight. What an abject failure of leadership. I am reminded this year, as I was last, of a statement by Paul Tsongas in his Call to Economic Arms, "It takes toughness to lead a people toward their preservation no matter how disquieting the journey may be."

Maybe the next step is as Brad DeLong suggests -- they are now Obama's tax cuts, so he has to find a way to fund them. A large carbon tax to recover much of the revenue would complete the "Green Tax Swap" that I have long wanted to see. An economist can hope, can't he?

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