At Supply-Side Forum, Ed Breen critiques the Romney tax plan.
The WSJ notes the Fed is weighing sterilized bond purchases (h/t: Larry Kudlow).
Reuters reports China refuses to bow to US pressure to appreciate the yuan (h/t: Bretton Woods Research).
On The Kudlow Report, former RNC Chairman Ed Gillespie suggests Obamacare should be central to the 2012 campaign:
IBD rebuts Paul Krugman's claim that President Reagan was a better Keynesian than President Obama.
From First Trust, Brian Wesbury highlights the French proposal to raise the top tax rate to 75%.
In IBD, James Carter and Jason Fichtner advocate the corporate tax becoming a major campaign issue.
At CNBC, John Carney contrasts Austrian economics with Modern Monetary Theory.
In Forbes, Richard Salsman advocates positive financial reforms.
At TGSN, Ralph Benko notes the monetary difficulties following abolition of the First National Bank.
The Federation for American Immigration Reform argues against legal immigration. H/t Bruce Bartlett: “As I have long said, those that are opposed to illegal immigration are really opposed to legal immigration as well.”
Businessweek reports cigarettes are the most stable international currency.
On Modeled Behavior, Karl Smith agrees with Paul Krugman that opponents of demand-side solutions to the 2008 financial crisis destructively undermined a helpful consensus.
Showing posts with label Bretton Woods Research. Show all posts
Showing posts with label Bretton Woods Research. Show all posts
Sunday, March 11, 2012
Wednesday, February 8, 2012
BWR: Why Rick Santorum?
Courtesy of our friends at Bretton Woods Research.
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Rick Santorum swept Colorado, Missouri and Minnesota yesterday because the Republican electorate is continuing to send Mitt Romney the message that he must improve his growth platform. With Newt Gingrich periodically stumbling against Romney, Santorum's tax plan is the next best thing. As we explained in early January, Santorum wants two personal income tax rates, 10% and 28%, a 17.5% corporate tax rate, a 12% capital gains tax rate and a complete elimination of the corporate tax for manufacturing companies.
According to Intrade, Mitt Romney's chances today of winning the GOP nomination are nearly 82%, almost double what they were in mid-December. But, importantly, as his chances of capturing the nomination have improved, President Obama's chances of being re-elected have improved during the same period from roughly 50% to 60%.
There is a glaring weakness in the Romney candidacy. He doesn't have the right model to create growth.
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Rick Santorum swept Colorado, Missouri and Minnesota yesterday because the Republican electorate is continuing to send Mitt Romney the message that he must improve his growth platform. With Newt Gingrich periodically stumbling against Romney, Santorum's tax plan is the next best thing. As we explained in early January, Santorum wants two personal income tax rates, 10% and 28%, a 17.5% corporate tax rate, a 12% capital gains tax rate and a complete elimination of the corporate tax for manufacturing companies.
According to Intrade, Mitt Romney's chances today of winning the GOP nomination are nearly 82%, almost double what they were in mid-December. But, importantly, as his chances of capturing the nomination have improved, President Obama's chances of being re-elected have improved during the same period from roughly 50% to 60%.
There is a glaring weakness in the Romney candidacy. He doesn't have the right model to create growth.
Tuesday, January 24, 2012
BWR on Gingrich.
Great analysis from our friends at Bretton Woods Research.
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Democrats Worried About Gingrich
As global leaders prepare to meet in Davos, Larry Summers writes in the Washington Post today that increasing demand and certainty should be the top economic priority, particularly because this is the best way to reduce government deficits. In other words, the demand-siders coalescing in Switzerland will be focusing on ways to reignite economic growth.
This shift in focus is the consequence of three things: 1) the failure of the massive Keynesian stimulus bills in 2009, 2) the failure of austerian policy to resolve the European sovereign debt crisis, and 3) most importantly, the U.S. presidential election, which will pit President Obama's demand-side model against a Republican model that is becoming increasingly pro-growth due to the recent surge by Newt Gingrich.
Certainly, the economic model of the U.S. President in 2013 will have a major influence around the world on how to deal with the global malaise. As a result, demand-siders and Democrats, tied to Obama, are fighting for their political lives. Their emerging economic strategy is to emphasize more stimulus or 'shovel-ready projects', and some tax cuts for lower and middle-class Americans while raising taxes on the wealthiest.
Romney has been stumbling in recent weeks because he continues to be identified as a Republican-In-Name-Only (RINO) and refuses to improve his economic plan. At the same time, Gingrich is surging because he has highlighted his hard money position, which is the perfect complement to his across-the-board tax cuts. His call for a Gold Commission was, without a doubt, the primary reason for his come-from-behind victory in South Carolina. If Gingrich sticks with his emphasis on low taxes and hard money, he will win the nomination.
To be sure, the conventional notion that Romney is the biggest threat to Obama is wrong. Gingrich is the biggest threat.
As we think about the political marketplace and debate a few steps in advance, a Gingrich nomination would likely cause demand-siders and Democrats to pursue another strategy because their 'growth plan' wouldn't grow the economy and it will not win over the electorate.
Look for them to attack Gingrich as a budget-balancing austerian. In so doing, they'll be trying to bait Gingrich into explaining how he would cut the deficit and defending why many government programs must be cut. Republican austerianism is usually a major political loser. But given Gingrich's experience in 1995-1996, we expect that he'll keep the focus on growth as the best means to shrink the deficit. Even Larry Summers would agree with that.
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Democrats Worried About Gingrich
As global leaders prepare to meet in Davos, Larry Summers writes in the Washington Post today that increasing demand and certainty should be the top economic priority, particularly because this is the best way to reduce government deficits. In other words, the demand-siders coalescing in Switzerland will be focusing on ways to reignite economic growth.
This shift in focus is the consequence of three things: 1) the failure of the massive Keynesian stimulus bills in 2009, 2) the failure of austerian policy to resolve the European sovereign debt crisis, and 3) most importantly, the U.S. presidential election, which will pit President Obama's demand-side model against a Republican model that is becoming increasingly pro-growth due to the recent surge by Newt Gingrich.
Certainly, the economic model of the U.S. President in 2013 will have a major influence around the world on how to deal with the global malaise. As a result, demand-siders and Democrats, tied to Obama, are fighting for their political lives. Their emerging economic strategy is to emphasize more stimulus or 'shovel-ready projects', and some tax cuts for lower and middle-class Americans while raising taxes on the wealthiest.
Romney has been stumbling in recent weeks because he continues to be identified as a Republican-In-Name-Only (RINO) and refuses to improve his economic plan. At the same time, Gingrich is surging because he has highlighted his hard money position, which is the perfect complement to his across-the-board tax cuts. His call for a Gold Commission was, without a doubt, the primary reason for his come-from-behind victory in South Carolina. If Gingrich sticks with his emphasis on low taxes and hard money, he will win the nomination.
To be sure, the conventional notion that Romney is the biggest threat to Obama is wrong. Gingrich is the biggest threat.
As we think about the political marketplace and debate a few steps in advance, a Gingrich nomination would likely cause demand-siders and Democrats to pursue another strategy because their 'growth plan' wouldn't grow the economy and it will not win over the electorate.
Look for them to attack Gingrich as a budget-balancing austerian. In so doing, they'll be trying to bait Gingrich into explaining how he would cut the deficit and defending why many government programs must be cut. Republican austerianism is usually a major political loser. But given Gingrich's experience in 1995-1996, we expect that he'll keep the focus on growth as the best means to shrink the deficit. Even Larry Summers would agree with that.
Monday, October 31, 2011
BWR on the Cain and Gingrich surge.
Reprinted courtesy of Bretton Woods Research:
Cain & Gingrich: Megaliths of the Tea Party Movement?
Oct 26 2011
By Slate...
[The front-runner status of businessman Herman Cain and the steadily climbing poll numbers for Newt Gingrich -- who was left for dead by the media in July -- have defied conventional wisdom for how one tries to win the early battles in the GOP presidential nomination. At least that`s the story when speaking to seasoned political strategists such as Rick Perry`s campaign manager Dave Carney (who left Gingrich back in June when his campaigners bolted en masse) and former Gingrich strategist Rich Galen.
Now, without much organization on the ground or at the local level in early contest states, Cain and Gingrich are enjoying a tailwind according to recent polls. Slate columnist Dave Weigel thinks what`s at work is the influence of the Tea Party and the narrow-casted media profiles of Cain & Gingrich who have spent more than a few years honing palatable messages specifically geared toward attracting conservative, Tea Party support.
We think that it`s much more than that. The rise of Cain and to a lesser extent Gingrich -- both of whom have agreed to a Lincoln-Douglas style debate on November 5 -- are due to their pro-growth ideas. Cain`s 999 plan has clearly struck a chord within the GOP, where he still enjoys the first-mover advantage in the contest for the pro-growth mantle. In fact, the August 18 unveiling of 999 is what caused him to virtually leapfrog the photogenic, but hapless debater Perry, who has recently come out with Steve Forbes` flat tax platform 3.0 (a 20% rate with voluntary opt-ins and deductions). Gingrich, a supply-sider who has clearly absorbed the lessons of his government shut down during the Clinton era, is clearly capable, as seen in the debates so far, of thinking on his feet and advancing sound ideas. He has also produced his own flat tax platform.
Given how the Tea Party has mobilized itself into a formidable bloc within the GOP, efforts to win their support and enthusiasm can count for a lot. Hence, the flat tax ideas we`re seeing blossom from the right are likely to survive the winter. Of course, for Mitt Romney, who`s been stuck at about 25% of the GOP vote for the past two years, this must be alarming. His economic plan -- all 59 points of it -- remains thin gruel for these hard economic times. If he wants to win, and he does, he may have to become more of a convincing fiscal supply-sider or conventional dogmas will be upended and establishment pecking orders will be overturned. BWR]
Newt's Not Here, Man
Cain & Gingrich: Megaliths of the Tea Party Movement?
Oct 26 2011
By Slate...
[The front-runner status of businessman Herman Cain and the steadily climbing poll numbers for Newt Gingrich -- who was left for dead by the media in July -- have defied conventional wisdom for how one tries to win the early battles in the GOP presidential nomination. At least that`s the story when speaking to seasoned political strategists such as Rick Perry`s campaign manager Dave Carney (who left Gingrich back in June when his campaigners bolted en masse) and former Gingrich strategist Rich Galen.
Now, without much organization on the ground or at the local level in early contest states, Cain and Gingrich are enjoying a tailwind according to recent polls. Slate columnist Dave Weigel thinks what`s at work is the influence of the Tea Party and the narrow-casted media profiles of Cain & Gingrich who have spent more than a few years honing palatable messages specifically geared toward attracting conservative, Tea Party support.
We think that it`s much more than that. The rise of Cain and to a lesser extent Gingrich -- both of whom have agreed to a Lincoln-Douglas style debate on November 5 -- are due to their pro-growth ideas. Cain`s 999 plan has clearly struck a chord within the GOP, where he still enjoys the first-mover advantage in the contest for the pro-growth mantle. In fact, the August 18 unveiling of 999 is what caused him to virtually leapfrog the photogenic, but hapless debater Perry, who has recently come out with Steve Forbes` flat tax platform 3.0 (a 20% rate with voluntary opt-ins and deductions). Gingrich, a supply-sider who has clearly absorbed the lessons of his government shut down during the Clinton era, is clearly capable, as seen in the debates so far, of thinking on his feet and advancing sound ideas. He has also produced his own flat tax platform.
Given how the Tea Party has mobilized itself into a formidable bloc within the GOP, efforts to win their support and enthusiasm can count for a lot. Hence, the flat tax ideas we`re seeing blossom from the right are likely to survive the winter. Of course, for Mitt Romney, who`s been stuck at about 25% of the GOP vote for the past two years, this must be alarming. His economic plan -- all 59 points of it -- remains thin gruel for these hard economic times. If he wants to win, and he does, he may have to become more of a convincing fiscal supply-sider or conventional dogmas will be upended and establishment pecking orders will be overturned. BWR]
Newt's Not Here, Man
Wednesday, October 12, 2011
Wednesday round up: Danker and The Economist on China; Lehrman on transitioning to gold; The NY Sun says Paul won the debate.
From Forbes, Rich Danker explains the Chinese trade deficit is more a function of the dollar’s reserve status than currency manipulation.
The Economist notes that as China’s currency has risen, so has its trade deficit.
At The Washington Examiner, Lew Lehrman summarizes the steps to get to a gold standard.
On The Kudlow Report, a panel discusses Herman Cain’s rise in the polls:
The NY Sun argues US Rep. Ron Paul (TX) won last night’s debate due to his monetary answers.
At a press conference, Cain doesn’t sound like a monetary reformer:
Politico features an analysis of Cain’s tax plan by supply-sider Gary Robbins, who predicts it would stimulate strong growth (h/t: Bretton Woods Research).
At First Trust, Brian Wesbury and Robert Stein see reason for economic optimism.
The WSJ quotes from Larry Lindsey’s The Growth Experiment (1990):
At Slate, William Saletan notes Mitt Romney’s liberal answers in last night’s debate.
The WSJ suggests the latest economics Nobel Prize was for supply-side economics:
The Atlas Sound Money Project reports on last week’s Heritage conference on a stable dollar.
At COAL, Paul Krugman argues Keynesianism has been validated by the current crisis.
The Economist notes that as China’s currency has risen, so has its trade deficit.
At The Washington Examiner, Lew Lehrman summarizes the steps to get to a gold standard.
On The Kudlow Report, a panel discusses Herman Cain’s rise in the polls:
The NY Sun argues US Rep. Ron Paul (TX) won last night’s debate due to his monetary answers.
At a press conference, Cain doesn’t sound like a monetary reformer:
“Representative Paul wrote a book called ‘End the Fed.’ I believe we can fix the Fed,” Cain said. “Because when I ask the Ron Paul people, ‘what would you replace it with?’ they don’t have an answer.”On International Liberty, Dan Mitchell scrutinizes Cain’s 9-9-9 tax plan.
Cain said he is falsely accused of opposing an audit of the central bank.
“As far as auditing the Fed, in the vernacular of my grandfather, I does not care,” he said, quickly slipping into the third person. “But what Herman Cain has said is, ‘It’s not going to be one of my top issues … If members of Congress were to get together and bring me legislation to audit the Fed, I’d sign it. But I don’t have a problem with it. Now, that being said, you don’t need the president to sign a bill to audit the Fed. Representative Paul sits on a committee that already has that authority!”
Politico features an analysis of Cain’s tax plan by supply-sider Gary Robbins, who predicts it would stimulate strong growth (h/t: Bretton Woods Research).
At First Trust, Brian Wesbury and Robert Stein see reason for economic optimism.
The WSJ quotes from Larry Lindsey’s The Growth Experiment (1990):
[The Economic Recovery Tax Act of 1981] did not pay for itself as some of the most enthusiastic supply-siders claimed it would. Personal income tax collections were lower under ERTA than they would have been had tax rates never been cut. . . . However, the reductions in very high tax brackets easily paid for themselves and produced a rather sizable increase besides. This increase helped finance a large part of the reduction in taxes from lower- and middle-class taxpayers. Though this is not what some enthusiastic supply-siders predicted during the political fight for the tax cuts, it is what basic supply-side theory would predict. . . .In The WSJ, Peter Wallison blames federal programs but not the weak dollar for the subprime mortgage mess.
Putting theory to one side for a moment, were the Reagan tax cuts a good idea? More specifically, could the country afford them? By 1985, at a revenue cost in that year of $33 billion, economic output was between 2 and 3 percent higher than it would have been without the tax cut. That extra growth stands for millions of new jobs and a higher standard of living. Moreover . . . the tax cuts had salutary effects on inflation, investment, and savings and contributed only marginally to the deficit.
By the standards of government programs this one would have to be judged a bargain.
At Slate, William Saletan notes Mitt Romney’s liberal answers in last night’s debate.
The WSJ suggests the latest economics Nobel Prize was for supply-side economics:
The Atlas Sound Money Project reports on last week’s Heritage conference on a stable dollar.
At COAL, Paul Krugman argues Keynesianism has been validated by the current crisis.
Monday, October 10, 2011
Monday items: Domitrovic and Stoll on the new Nobel Laureate; Benko on US/China currency debate; Mundell on the Greek debt problem.
From Forbes, Brian Domitrovic adds the new economics Nobel Laureate, Thomas Sargent, to the growing list of Phillips Curve debunkers.
In The NY Sun, Ira Stoll notes Sargent’s skepticism of Keynesian stimulus.
From last week’s Roll Call, Ralph Benko argues the floating dollar’s reserve status is responsible for the US/China trade imbalance.
Also from last week on Bloomberg, Robert Mundell explains that a Greek default would spread damage to the US:
At RCM, Bretton Woods Research suggests the Occupy Wall Street protestors are motivated by the monetary-induced weak economy.
On Business Week, Caroline Baum claims a flat tax would reduce the corruption opposed by the Occupy Wall Street protestors.
From Herald Scotland, Antony Akilade provides a detailed history of gold and fiat currency.
At Future of Capitalism, Ira Stoll rebuts the claim that the 1950s and 1990s prove that high taxes can correspond with high growth eras.
On The Kudlow Report, James Pethokoukis discusses the Tea Party’s hostility towards GE:
From International Liberty, Dan Mitchell argues Republicans should make no deal on the budget and allow the sequestration process to run its course.
On Forbes, John Tamny reports from the Nantucket Project on innovation.
At his blog, David Frum outlines what Republicans get wrong on economics, some of which is good but he includes “it is wrong to fetishize the exchange value of the dollar against other currencies.”
In The NY Sun, Ira Stoll notes Sargent’s skepticism of Keynesian stimulus.
From last week’s Roll Call, Ralph Benko argues the floating dollar’s reserve status is responsible for the US/China trade imbalance.
Also from last week on Bloomberg, Robert Mundell explains that a Greek default would spread damage to the US:
At RCM, Bretton Woods Research suggests the Occupy Wall Street protestors are motivated by the monetary-induced weak economy.
On Business Week, Caroline Baum claims a flat tax would reduce the corruption opposed by the Occupy Wall Street protestors.
From Herald Scotland, Antony Akilade provides a detailed history of gold and fiat currency.
At Future of Capitalism, Ira Stoll rebuts the claim that the 1950s and 1990s prove that high taxes can correspond with high growth eras.
On The Kudlow Report, James Pethokoukis discusses the Tea Party’s hostility towards GE:
From International Liberty, Dan Mitchell argues Republicans should make no deal on the budget and allow the sequestration process to run its course.
On Forbes, John Tamny reports from the Nantucket Project on innovation.
At his blog, David Frum outlines what Republicans get wrong on economics, some of which is good but he includes “it is wrong to fetishize the exchange value of the dollar against other currencies.”
Sunday, September 11, 2011
Romeny-Perry Competition.
From last week from Bretton Woods Research:
Romney-Perry Competition
Romney-Perry Competition Good for Markets: We think that Mitt Romney out-pointed Rick Perry last night because he emphasized his new cap gains tax cut and promised to protect social security and not re-appoint Ben Bernanke.
On Tuesday, Mitt Romney unveiled his new economic platform, and the highlight was a plan to eliminate taxes on capital gains, interest and dividends for individuals earning less than $200,000 per year. We have yet to see Rick Perry's plan, but Romney's step forward should compel a smart counter by the Texas Governor. Unfortunately, Romney's platform would also call on the Treasury Department to classify China as a 'currency manipulator', which would enable the U.S. government to place tariff sanctions on Chinese imports until the yuan is significantly revalued. While it is in China's best interest to appreciate the yuan (in order to immediately extinguish the Fed-engineered inflation that is negatively affecting its economy), Romney's plan is misguided as it could spark trade tensions with China. Additionally, John Boehner, as House Speaker, has prevented any anti-China tariff-related proposals from reaching the House floor. Romney, as president, could side with Democrats on the issue and sway enough Republicans to out-maneuver Boehner.
The trade sanction idea from Romney reaffirms, in our opinion, his propensity during this campaign to appeal to the populist vote and to avoid the appearance of appealing to wealthier Americans. This has been Democratic strategist David Plouffe's advice for President Obama. Romney, for example, continues to avoid tax cut proposals on the highest income earners, and has instead chosen to propose reducing the corporate tax rate to a level that even Democrats are seeking while only eliminating tax rates on capital for the "middle class" and lower. Anyone who understands the philosophical underpinnings for eliminating the capital gains tax would know that its elimination would be most powerful if done for all Americans including the wealthiest Americans who have the most capital to invest.
Romney's appeal to the populist vote has been beneficial, though, with respect to his new-found criticism of Fed policy, compared to last April when he supported it. During last night's debate, he said that he would not re-appoint Ben Bernanke to head the Federal Reserve, stating that he thought the Fed has 'over-inflated' the economy.
Despite Romney's flaws, he has made marginal improvements in his economic platform which is especially important as it will likely push Perry to be even more aggressive and bold. Consequently, we continue to view the Romney-Perry competition for the nomination as good for U.S. assets, and especially important to buffer U.S. financial markets from the European debt crisis.
Romney-Perry Competition
Romney-Perry Competition Good for Markets: We think that Mitt Romney out-pointed Rick Perry last night because he emphasized his new cap gains tax cut and promised to protect social security and not re-appoint Ben Bernanke.
On Tuesday, Mitt Romney unveiled his new economic platform, and the highlight was a plan to eliminate taxes on capital gains, interest and dividends for individuals earning less than $200,000 per year. We have yet to see Rick Perry's plan, but Romney's step forward should compel a smart counter by the Texas Governor. Unfortunately, Romney's platform would also call on the Treasury Department to classify China as a 'currency manipulator', which would enable the U.S. government to place tariff sanctions on Chinese imports until the yuan is significantly revalued. While it is in China's best interest to appreciate the yuan (in order to immediately extinguish the Fed-engineered inflation that is negatively affecting its economy), Romney's plan is misguided as it could spark trade tensions with China. Additionally, John Boehner, as House Speaker, has prevented any anti-China tariff-related proposals from reaching the House floor. Romney, as president, could side with Democrats on the issue and sway enough Republicans to out-maneuver Boehner.
The trade sanction idea from Romney reaffirms, in our opinion, his propensity during this campaign to appeal to the populist vote and to avoid the appearance of appealing to wealthier Americans. This has been Democratic strategist David Plouffe's advice for President Obama. Romney, for example, continues to avoid tax cut proposals on the highest income earners, and has instead chosen to propose reducing the corporate tax rate to a level that even Democrats are seeking while only eliminating tax rates on capital for the "middle class" and lower. Anyone who understands the philosophical underpinnings for eliminating the capital gains tax would know that its elimination would be most powerful if done for all Americans including the wealthiest Americans who have the most capital to invest.
Romney's appeal to the populist vote has been beneficial, though, with respect to his new-found criticism of Fed policy, compared to last April when he supported it. During last night's debate, he said that he would not re-appoint Ben Bernanke to head the Federal Reserve, stating that he thought the Fed has 'over-inflated' the economy.
Despite Romney's flaws, he has made marginal improvements in his economic platform which is especially important as it will likely push Perry to be even more aggressive and bold. Consequently, we continue to view the Romney-Perry competition for the nomination as good for U.S. assets, and especially important to buffer U.S. financial markets from the European debt crisis.
Thursday, July 21, 2011
Thursday round up: Mixed reviews for the Gang of Six proposal; Taylor says the growth consensus is over; Forbes on returning to the gold standard.
The WSJ expresses cautious optimism about the Gang of Six budget and tax reform deal; in The Washington Post, former G.W. Bush speech writer Marc Thiessen argues the proposal is a $3 trillion tax increase.
At Bloomberg, Richard Rubin analyzes the likely capital gains tax increase in the Gang of Six debt proposal (h/t: Vlad Signorreli).
In The WSJ, John Taylor suggests the growth consensus of the 1980s and ‘90s has been abandoned.
On Fox Business News, Steve Forbes explains how to return to the gold standard:
At Asia Times, David Goldman argues the small business start-up economy is dead, while large companies with global reach continue to grow.
From TGSN, Ralph Benko cites Jude Wanniski on what a currency should do.
At his blog, former FDIC Chairman William Isaac argues mark to market accounting rules played a major role in the 2008-09 recession and financial crisis. According to Bretton Woods Research, “We continue to believe that the MTM [congressional] hearings proved the turning point for financial markets back in March 2009.”
On The Kudlow Report, Don Luskin sounds bullish on the economy:
In The NYT, Ohio University Professor Alonzo L. Hamby provides a good economic history of the US.
At Pajamas Media, Ed Driscoll claims Hollywood doesn’t understand inflation.
At Bloomberg, Richard Rubin analyzes the likely capital gains tax increase in the Gang of Six debt proposal (h/t: Vlad Signorreli).
In The WSJ, John Taylor suggests the growth consensus of the 1980s and ‘90s has been abandoned.
On Fox Business News, Steve Forbes explains how to return to the gold standard:
At Asia Times, David Goldman argues the small business start-up economy is dead, while large companies with global reach continue to grow.
From TGSN, Ralph Benko cites Jude Wanniski on what a currency should do.
At his blog, former FDIC Chairman William Isaac argues mark to market accounting rules played a major role in the 2008-09 recession and financial crisis. According to Bretton Woods Research, “We continue to believe that the MTM [congressional] hearings proved the turning point for financial markets back in March 2009.”
On The Kudlow Report, Don Luskin sounds bullish on the economy:
In The NYT, Ohio University Professor Alonzo L. Hamby provides a good economic history of the US.
At Pajamas Media, Ed Driscoll claims Hollywood doesn’t understand inflation.
Tuesday, March 15, 2011
BWR on growth and the debt.
More great analysis courtesy of Vlad Signorelli at Bretton Woods Research, in partnership with Louis Woodhill. The chart below deserves wide circulation.
Notes on the Growth Scenario
Mar 14 2011
Given the stir our recommended reading "Paul Ryan Is Wrong" created among clients last week, we asked Forbes columnist and Club for Growth Leadership Council member, Louis Woodhill, to elaborate on the growth case in relation to the deficit and public debt from a technical perspective.
Below Louis explains how the CBO's doomsday Alternate Fiscal Scenario emerged. It was unveiled in June 2010 and has become the dominant projection for various studies on the subject, including President Obama's "Debt and Deficit Commission" and is routinely cited by Congressman Paul Ryan. It assumes an average annual growth rate of 2.16%. Woodhill, who is also an engineer and successful software entrepreneur, has done a yeoman's job working through the numbers and constructing a budget model that closely approximates the inputs and outputs of the CBO case. This allows different scenarios to be explored such as if the U.S. economy were to grow close to its historic norm of 3.5%.
His model in printable excel format is available upon request.
Notes on the Growth Scenario
Mar 14 2011
Given the stir our recommended reading "Paul Ryan Is Wrong" created among clients last week, we asked Forbes columnist and Club for Growth Leadership Council member, Louis Woodhill, to elaborate on the growth case in relation to the deficit and public debt from a technical perspective.
Below Louis explains how the CBO's doomsday Alternate Fiscal Scenario emerged. It was unveiled in June 2010 and has become the dominant projection for various studies on the subject, including President Obama's "Debt and Deficit Commission" and is routinely cited by Congressman Paul Ryan. It assumes an average annual growth rate of 2.16%. Woodhill, who is also an engineer and successful software entrepreneur, has done a yeoman's job working through the numbers and constructing a budget model that closely approximates the inputs and outputs of the CBO case. This allows different scenarios to be explored such as if the U.S. economy were to grow close to its historic norm of 3.5%.
His model in printable excel format is available upon request.
-Bretton Woods Research
Notes on the Federal Deficit, Debt & Faster Growth
March 12, 2011
Concern about Federal deficits and the mounting Federal debt escalated noticeably after the Congressional Budget Office (CBO) released its “Long Term Budget Outlook” (LTBO) on June 30, 2010. One of the cases they presented, their “Alternate Fiscal Scenario” (AFS), became widely cited in various studies and articles. The AFS was the basis for the work done by President Obama’s “Debt and Deficit Commission”, headed by Alan Simpson and Erskine Bowles.
The CBO's AFS predicted financial doom, with “Federal debt held by the public” rising rapidly and steadily until it reached an incredible (and unsustainable) 947% of GDP in 2084, which was the end of the CBO’s forecast period. As bad as this number was, it did not include the ongoing unfunded liabilities of Social Security and Medicare.
What was striking about that budget outlook is that it was based upon a single, very pessimistic forecast of economic growth, averaging 2.16% over the period. No cases were run on the sensitivity of the results to higher rates of economic growth. This was curious, since economic growth is the variable that has by far the largest impact on Federal finances.
On July 11, 2010, Erskine Bowles publicly asserted, "We can't grow our way out of this. We could have decades of double-digit growth and not grow our way out of this enormous debt problem." This statement prompted me to write a piece for RealClearMarkets entitled, “The Conspiracy Against Economic Growth”.
My article was based upon a financial model that I constructed using the CBO's numbers. The latest version of this model has the filename “Growth vs Spending Cuts LRW V6 031111”. The model includes the same dollar amounts of non-interest Federal spending assumed by the CBO alternative fiscal scenario. The model makes it possible to examine the impact upon Federal debt held by the public of changes in four variables: 1) real GDP growth; 2) the Federal “tax take” (taxes as a % of GDP); 3) real interest rates; and, 4) non-interest spending.
As expected, if the assumed GDP growth rate is increased to levels that are historically “normal” for the U.S. (3.5%), the debt/deficit problem goes away, whether or not spending is cut.
To illustrate this point, the following is a chart of the public debt as percentage of GDP for the next 73 years with a 2.16% growth rate as well as with an annual growth rate of 3.5%.
It is important to note that the model does not reflect the fact that higher economic growth would produce higher wages, which would eventually lead to higher Social Security costs. However, it also does not take into account the fact that higher economic growth would lead to lower costs for various “safety net” programs, like unemployment insurance, food stamps, and Medicaid.
Congressman Paul Ryan stated earlier this week on Kudlow & Company that faster economic growth cannot solve the financial problems of Social Security. This does not make sense. As a thought experiment, imagine that we woke up tomorrow and real wages had doubled. This would cause Social Security tax revenues to immediately nearly double, but outlays would rise only with a considerable lag. From this example, it is obvious that there has to be some rate of economic growth that would solve the problems of Social Security.
-Louis R. Woodhill
Congressman Paul Ryan stated earlier this week on Kudlow & Company that faster economic growth cannot solve the financial problems of Social Security. This does not make sense. As a thought experiment, imagine that we woke up tomorrow and real wages had doubled. This would cause Social Security tax revenues to immediately nearly double, but outlays would rise only with a considerable lag. From this example, it is obvious that there has to be some rate of economic growth that would solve the problems of Social Security.
-Louis R. Woodhill
Thursday, March 10, 2011
BWR on Rep. Ryan's Social Security claim.
From our friends at Bretton Woods Research.
Recommend Reading: Social Security Needs Growth, Not Cuts
By Louis Woodhill may be found here.
Louis Woodhill, supply-sider and member of the Club for Growth's Leadership Council, discusses U.S. economic growth in relation to Social Security solvency in Forbes. Between 1998 and 2003 the projected 'doomsday' date -- the year when Social Security outlays would exceed dedicated payroll tax revenues -- kept moving forward at 15 years out. How was it possible that the doomsday date simply moved ahead with each year? Quite simply, the U.S. economy grew during that period and averaged about 3.2% annually. The obvious deduction is that if a 3.2% growth rate is sufficient to indefinitely postpone a 'doomsday' scenario by the Social Security Trustees, a 3.5% growth rate, contrary to Paul Ryan's contention, would likely increase the doomsday timeline or "cushion". Bottom line: growth is part of the solution to the Social Security question, we just need Congress to focus on optimizing it by advocating pro-growth tax policies and a stronger dollar. Politically unpopular benefit cuts and increases in the retirement age are suboptimal for the GOP and the American people.
Recommend Reading: Social Security Needs Growth, Not Cuts
By Louis Woodhill may be found here.
Louis Woodhill, supply-sider and member of the Club for Growth's Leadership Council, discusses U.S. economic growth in relation to Social Security solvency in Forbes. Between 1998 and 2003 the projected 'doomsday' date -- the year when Social Security outlays would exceed dedicated payroll tax revenues -- kept moving forward at 15 years out. How was it possible that the doomsday date simply moved ahead with each year? Quite simply, the U.S. economy grew during that period and averaged about 3.2% annually. The obvious deduction is that if a 3.2% growth rate is sufficient to indefinitely postpone a 'doomsday' scenario by the Social Security Trustees, a 3.5% growth rate, contrary to Paul Ryan's contention, would likely increase the doomsday timeline or "cushion". Bottom line: growth is part of the solution to the Social Security question, we just need Congress to focus on optimizing it by advocating pro-growth tax policies and a stronger dollar. Politically unpopular benefit cuts and increases in the retirement age are suboptimal for the GOP and the American people.
Thursday, February 17, 2011
BWR on bipartisan deficit deal to raise taxes.
Sharp analysis from our friends at Bretton Woods Research.
Pay-go Consensus?
A group of six senators (Durbin, Conrad, Warner, Coburn, Crapo & Chambliss) proposed to Democratic leaders yesterday legislation that would automatically raise taxes and cut spending should certain deficit reduction targets not be met. The negotiations are in their very early stages, and the specifics have yet to be fully discussed with Congressional leaders. But we are disappointed that this "pay-go" type of legislation was not immediately shot down by Republican leaders.
Reportedly, more than 40 Senators have shown interest. Meanwhile, Republican aides suggested yesterday that the only thing necessary for House Republicans to go along with the Senate's push would be for President Obama to publicly embrace the effort. While we don't think such legislation is a real possibility, these negotiations are another example of the absence in Congress today of pro-growth, revenue-raising ideas. Instead of bad ideas like this plan, Boehner and McConnell should be leading their caucuses by discussing cuts in capital gains and corporate income taxes to increase the economic incentives to produce and create jobs.
As Jude Wanniski said 25 years ago, there is something in Republicans' DNA that drives them crazy during recessions when they see unbalanced budgets.
Deficit Plan Details Emerge Bipartisan Senate Group Mulls Spending Caps That Could Trigger Tax Increases
Pay-go Consensus?
A group of six senators (Durbin, Conrad, Warner, Coburn, Crapo & Chambliss) proposed to Democratic leaders yesterday legislation that would automatically raise taxes and cut spending should certain deficit reduction targets not be met. The negotiations are in their very early stages, and the specifics have yet to be fully discussed with Congressional leaders. But we are disappointed that this "pay-go" type of legislation was not immediately shot down by Republican leaders.
Reportedly, more than 40 Senators have shown interest. Meanwhile, Republican aides suggested yesterday that the only thing necessary for House Republicans to go along with the Senate's push would be for President Obama to publicly embrace the effort. While we don't think such legislation is a real possibility, these negotiations are another example of the absence in Congress today of pro-growth, revenue-raising ideas. Instead of bad ideas like this plan, Boehner and McConnell should be leading their caucuses by discussing cuts in capital gains and corporate income taxes to increase the economic incentives to produce and create jobs.
As Jude Wanniski said 25 years ago, there is something in Republicans' DNA that drives them crazy during recessions when they see unbalanced budgets.
Deficit Plan Details Emerge Bipartisan Senate Group Mulls Spending Caps That Could Trigger Tax Increases
Monday, February 14, 2011
BWR on U.S. Rep. Paul Ryan.
Note: From Vlad Signorelli at Bretton Woods Research, analysis of U.S. Rep. Paul Ryan's (WI) drift towards root-canal economics.
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Paul Ryan: Most Dangerous Republican at the Margin?
http://brettonwoodsresearch.com/showx.asp?articleid=6782
[As the budget debate heats up, Paul Ryan has been arguing that he wants to cut spending significantly to protect the bond market and keep interest rates down. As one worried client mentioned this morning, "[Ryan's] whole worldview seems to have shifted away from Reagan/Kemp/Wanniski to Dole/Bush/whoever.... I guess [John] Taylor is in his ear. Kemp is spinning in his grave." Amen.
Publicly, since the elections, Ryan has clearly abandoned a pro-growth solution for the country's deficits and underfunded entitlements. Instead, he sounds like an old-guard austerian Republican who exaggerates the danger of the federal government's liabilities -- which can easily be paid for if economic growth can be sustainably accelerated by 1%.
Ryan, once the leader of the growth wing of the Republican Party, is no longer its leader. And before a new leader emerges, he may lead other members of the growth wing astray.
Equally important, Ryan's rhetoric and public persona is playing into the hands of Ben Bernanke and the Federal Reserve. After all, it has been Bernanke who has been testifying before Congress since 2009 that the federal government must reduce the deficit or interest rates will rise. We fear that, as the Federal Reserve raises interest rates in the future (which will slow growth at the margin), Republicans will be perceived as the party of spending cuts while the poor and middle class require growth the most. With Democrats ready to emerge as protectors of these segments of the electorate, the image will become a big political liability for the GOP.
Is Paul Ryan the most dangerous Republican today? Sadly, we think so.
The first thing that he can do is to stop listening to the establishment Republican John Taylor, who because of his belief that low interest rates were and still are the reason for a weak dollar and excessive liquidity, would like to see the austerian, interest-rate hiking scenario that we're so worried about. BWR
BWR note: The following recommended reading is yesterday's oped by Robert Reich. The article is important in that Reich is one of the first Establishment Democrats to start portraying current GOP leaders in the House, such as Paul Ryan, to be like the 1995 Gingrich Republicans. With the way that Ryan and company have approached their first month in the majority, this is the parallel that we expect and fear. Of course, while we agree with Reich's criticism of the current spending-cut focus on Capitol Hill, we certainly disagree with Reich's fiscal prescriptions.]
The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy
--------------------------------------
Paul Ryan: Most Dangerous Republican at the Margin?
http://brettonwoodsresearch.com/showx.asp?articleid=6782
[As the budget debate heats up, Paul Ryan has been arguing that he wants to cut spending significantly to protect the bond market and keep interest rates down. As one worried client mentioned this morning, "[Ryan's] whole worldview seems to have shifted away from Reagan/Kemp/Wanniski to Dole/Bush/whoever.... I guess [John] Taylor is in his ear. Kemp is spinning in his grave." Amen.
Publicly, since the elections, Ryan has clearly abandoned a pro-growth solution for the country's deficits and underfunded entitlements. Instead, he sounds like an old-guard austerian Republican who exaggerates the danger of the federal government's liabilities -- which can easily be paid for if economic growth can be sustainably accelerated by 1%.
Ryan, once the leader of the growth wing of the Republican Party, is no longer its leader. And before a new leader emerges, he may lead other members of the growth wing astray.
Equally important, Ryan's rhetoric and public persona is playing into the hands of Ben Bernanke and the Federal Reserve. After all, it has been Bernanke who has been testifying before Congress since 2009 that the federal government must reduce the deficit or interest rates will rise. We fear that, as the Federal Reserve raises interest rates in the future (which will slow growth at the margin), Republicans will be perceived as the party of spending cuts while the poor and middle class require growth the most. With Democrats ready to emerge as protectors of these segments of the electorate, the image will become a big political liability for the GOP.
Is Paul Ryan the most dangerous Republican today? Sadly, we think so.
The first thing that he can do is to stop listening to the establishment Republican John Taylor, who because of his belief that low interest rates were and still are the reason for a weak dollar and excessive liquidity, would like to see the austerian, interest-rate hiking scenario that we're so worried about. BWR
BWR note: The following recommended reading is yesterday's oped by Robert Reich. The article is important in that Reich is one of the first Establishment Democrats to start portraying current GOP leaders in the House, such as Paul Ryan, to be like the 1995 Gingrich Republicans. With the way that Ryan and company have approached their first month in the majority, this is the parallel that we expect and fear. Of course, while we agree with Reich's criticism of the current spending-cut focus on Capitol Hill, we certainly disagree with Reich's fiscal prescriptions.]
The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy
Wednesday, January 26, 2011
BWR on SOTU.
Courtesy of Vlad Signorelli at Bretton Woods Research:
We have published a new report which can be found at:
http://www.brettonwoodsresearch.com/showx.asp?articleid=6768
SOTU First Thoughts: Republicans Must Do Better
President Obama highlighted his new centrist political strategy last night, which includes support for reducing the corporate tax rate. Unfortunately, he argued that such a reduction must not increase the deficit. The President certainly does not believe in the economic power of increasing incentives for investment. In 2009, the U.S. government raised nearly $140 billion in revenue from the corporate tax. If the government reduced the corporate tax rate to zero, the resultant growth in the economy would, without question, easily pay for the government's $140 billion in annual revenue loss. The growth wing of the Republican Party must counter the White House's misconception here.
And this is why we were so disappointed with Paul Ryan's response last night. Ryan emphasized our country's ‘crushing burden of debt' that ‘no economy can sustain'. We like Ryan, but he is wrong -- economically and politically.
Research by Louis Woodhill shows quite clearly that should the long-term growth rate of the U.S. economy increase just a little bit, to say 3.9%, the federal government could easily afford its current expenditures and long-term entitlement programs.
And the GOP seems to be reverting to its old political mistake that Jude Wanniski identified in his Two Santa-Claus Theory of modern American politics, which has held true for the last century:
If Republicans are going to focus on spending, they should, as this morning's Wall Street Journal does, focus on the difference between Keynesian stimulus programs by the government and classical economic stimulus that empowers producers in the free market to allocate capital. This was part of what the electorate demanded last November; it was not 'shrinking government' as Charles Krauthammer said last night.
The rest of the voters' message last November was a repudiation of the 2010 healthcare reforms and the Fed's mismanagement of monetary policy. Republicans must improve from here, or the political momentum they enjoyed months ago will fizzle.
We have published a new report which can be found at:
http://www.brettonwoodsresearch.com/showx.asp?articleid=6768
SOTU First Thoughts: Republicans Must Do Better
President Obama highlighted his new centrist political strategy last night, which includes support for reducing the corporate tax rate. Unfortunately, he argued that such a reduction must not increase the deficit. The President certainly does not believe in the economic power of increasing incentives for investment. In 2009, the U.S. government raised nearly $140 billion in revenue from the corporate tax. If the government reduced the corporate tax rate to zero, the resultant growth in the economy would, without question, easily pay for the government's $140 billion in annual revenue loss. The growth wing of the Republican Party must counter the White House's misconception here.
And this is why we were so disappointed with Paul Ryan's response last night. Ryan emphasized our country's ‘crushing burden of debt' that ‘no economy can sustain'. We like Ryan, but he is wrong -- economically and politically.
Research by Louis Woodhill shows quite clearly that should the long-term growth rate of the U.S. economy increase just a little bit, to say 3.9%, the federal government could easily afford its current expenditures and long-term entitlement programs.
And the GOP seems to be reverting to its old political mistake that Jude Wanniski identified in his Two Santa-Claus Theory of modern American politics, which has held true for the last century:
For the U.S. economy to be healthy and growing, there must be a division of labor between Democrats and Republicans; each must be a different kind of Santa Claus....The Democrats, the party of income redistribution, are best suited for the role of Spending Santa Claus. The Republicans, traditionally the party of income growth, should be the Santa Claus of Tax Reduction. It has been the failure of the GOP to stick to this traditional role that has caused much of the nation's economic misery. Only the shrewdness of the Democrats, who have kindly agreed to play both Santa Clauses during critical periods, has saved the nation from even greater misery.... It isn't that Republicans don't enjoy cutting taxes. They love it. But there is something in the Republican chemistry that causes the GOP to become hypnotized by the prospect of an imbalanced budget. Static analysis tells them taxes can't be cut or inflation will result. They either argue for a tax hike to dampen inflation when the economy is in a boom or demand spending cuts to balance the budget when the economy is in recession. [emphasis ours]Last night could have marked a critical inflection point for the economy and the stock market if Ryan had properly countered President Obama's position on corporate taxes. Instead, he seconded Obama's concern on public finances, and thus, the Dow is up only 30 points this morning. While both parties are far from reaching a Hooverian consensus of deep spending cuts along with tax hikes in an effort to tackle the nation's debt, such rhetorical common ground makes it more difficult to achieve substantive tax reform.
If Republicans are going to focus on spending, they should, as this morning's Wall Street Journal does, focus on the difference between Keynesian stimulus programs by the government and classical economic stimulus that empowers producers in the free market to allocate capital. This was part of what the electorate demanded last November; it was not 'shrinking government' as Charles Krauthammer said last night.
The rest of the voters' message last November was a repudiation of the 2010 healthcare reforms and the Fed's mismanagement of monetary policy. Republicans must improve from here, or the political momentum they enjoyed months ago will fizzle.
Thursday, November 11, 2010
Thursday items.
On RCM, Louis Woodhill posits the novel theory that the Fed’s Interest on Reserves program caused the 2008 financial crisis.
At Forbes, Econoclasts author Brian Domitrovic explains that the world is desperate for the U.S. to stabilize the dollar.
On The Kudlow Report, U.S. Rep. Paul Ryan (WI) discounts demand side economics and underscores sound money:
On Forbes, Charles Kadlec advocates a gold-based international currency system.
At NRO, Larry Kudlow expresses cautious optimism about the deficit commission report.
Reuters reports the commission’s tax reform options.
Also on Kudlow, James Pethokoukis debates how to pay for the Bush tax rate extension:
The NYT hosts a debate on the gold standard but can’t find a single pro-gold economist.
At IBD, Walter Williams debunks trade deficit paranoia.
From Vlad Signorelli at Bretton Woods Research:
At Forbes, Econoclasts author Brian Domitrovic explains that the world is desperate for the U.S. to stabilize the dollar.
On The Kudlow Report, U.S. Rep. Paul Ryan (WI) discounts demand side economics and underscores sound money:
On Forbes, Charles Kadlec advocates a gold-based international currency system.
At NRO, Larry Kudlow expresses cautious optimism about the deficit commission report.
Reuters reports the commission’s tax reform options.
Also on Kudlow, James Pethokoukis debates how to pay for the Bush tax rate extension:
The NYT hosts a debate on the gold standard but can’t find a single pro-gold economist.
At IBD, Walter Williams debunks trade deficit paranoia.
From Vlad Signorelli at Bretton Woods Research:
Reports this morning that Obama may have 'conceded' on extending Bush-era tax cuts for upper incomes may have been premature. The National Journal reports that [presidential advisor David] Axelrod clarified his stance around 9am, signaling the White House is still opposed to the idea.
Nonetheless, Obama's rhetoric is slowly evolving for the better as he is now conceding that economic growth is at least just as good as tax increases in reducing the deficit. Today, Obama made the point in Seoul that if economic growth increased by "1 percentage point over time that could have as much impact as completely eliminating the Bush tax cuts." And he added, "The single most important thing we can do to reduce our debt and deficits is to grow." Therefore, despite Axelrod's inept comments this morning, Obama seems to be gravitating toward growth solutions, which may spare expiration of Bush-era tax cuts on all.
On Forbes, Rich Karlgaard sees the worst of the recession as past.
From 2007, Art Laffer clarifies the claim that tax rates pay for themselves.
Monday, September 13, 2010
Bretton Woods Research on Fed policy.
The following is a comment from Vlad Signorelli at Bretton Woods Research on The WSJ's recent forum, "What Should the Fed Do Next?" It's available for subscribers here.
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The best thing that the Fed could do is to abandon this endeavor of seeking to grow the economy, while maintaining a policy of price stability that is based on highly flawed inflation statistics. Instead, it should adopt a rules-based dollar policy by announcing a plan to target a specific dollar-gold price, perhaps at $850 or lower. By doing so, the inflation-deflation concerns would be substantially mitigated. Then, to address weak growth, Congress should permanently extend low tax rates, and ideally eliminate corporate and capital gains taxes.
This dual approach would solve the stagflation risks facing not only the US but global the economy, which the conventional Keynesians are completely missing. Like the 1970s, their models do not know how to properly diagnose and remedy such an economic predicament because slow growth and inflation are not supposed to happen based on Phillips Curve theory.
Even though the Republican's electoral prospects look outstanding these days, some polls show that the American people still don't trust the GOP to manage all of the country's economic affairs. From our classical economic perspective, we believe the reason lies in the fact that Republicans, despite their relatively better fiscal proposals, have little clue about monetary affairs -- just like most of the politicians and economists involved in our country's economic policymaking. The Tea Party, which sprang up in reaction to the monetary and fiscal response to the financial crisis, is an example of the anger in grassroots America about these modern-day Keynesian failures.
Friday, August 13, 2010
Friday update.
Bretton Woods Research argues Republicans have lost political ground by focusing on deficits rather than growth.
At Asia Times, David Goldman believes rising CPI doesn't discount deflation fears.
On The Kudlow Report, Stephen Moore debates the Bush tax cuts.
In The WSJ, Michael Darda suggests tax reform will improve the economy.
H.C. Wainwright's David Ranson analyzes tax revenue and debt.
John Tamny discusses the economy on the John Batchelor radio show.
The Heritage Foundation reports on the effect of tax increases.
The WSJ editorial page remembers Dan Rostenkowski's work on tax reform.
Jon Stewart mocks Republicans for saying they care about deficits but won’t raise taxes.
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