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Opinion: Trump economy is doing fine, to the chagrin of the dismal science

By mell following x   2018 Jun 11, 9:24am 163 views   9 comments   watch   sfw   quote     share    


https://www.marketwatch.com/story/trump-economy-is-doing-fine-to-the-chagrin-of-the-dismal-science-2018-06-11

"
Tax cuts, deregulation and smart trade policies will make America boom

They don’t call it the dismal science for nothing.

Remember Paul Krugman predicting the apocalypse in the wake of Donald Trump’s election. And now with the economy clipping along at nearly 3%, deregulation and lower taxes reviving manufacturing, and consumers confidently spending again, some two-thirds of private-sector prognosticators see a recession beginning as early 2020.

The new doomsday scenario offered by the Congressional Budget Office and others is that the economy is getting only a temporary jolt from tax cuts and increased government spending, and aggregate demand will tail off.

Much of this has to do with political bias in a profession where it has become fashionable to call the president a demagogue or simply ignorant and irresponsible, and to view with hypocritical disdain any goal for policy he sets.

It is one thing to dislike him but it’s another thing to ignore years of professional research that predate his ascent. For example, forecast of a coming recession denies that lowering corporate taxes provides more than a temporary jolt to cash flow — it also lowers the cost of capital in the United States as compared to other economies.

Nonpartisan research predating the Trump candidacy indicates the 15% cut in taxes on business profits enabled by corporate reforms should increase investment between 7.5% and 15%. And in the current environment of deregulation, the higher figure should more closely apply.

Look for all that to boost growth in 2019 if something else bad does not happen.

In the near term, little danger is apparent from overheating. Unemployment may be down to 3.8% but wages are not taking off. Simply, a good number of healthy recruits remain available among those who became discouraged during the Obama years, a stronger dollar is keeping competitive imports inexpensive, and robotics and artificial intelligence are kicking in.

Headline inflation is piercing the Fed’s 2% threshold but that is largely because oil prices CLU8, +0.63% were depressed from 2015 to 2017. Bouncing gas prices have lifted headline consumer prices but the trend in the core — prices less food and energy — has been decidedly downward since January.

Consumers generally take a breather during the winter months, because the financial crisis taught them caution. Households have a good time shopping for the holidays and then pay down their bills in the first quarter—hence the tax cut only recently boosted consumer spending.

Fed Chairman Jerome Powell, unlike most professional economists, does not let what personal feelings he has towards politicians cloud his thinking. If the numbers continue to show core inflation subdued, he will recognize the Fed can do little but wreak havoc by boosting interest rates too quickly or too much.

An intemperate surge in rates could be devastating internationally. The Europeans, whose statism most professional economists worship, has failed to clean up its banks. The Brits are the exception but on the continent Germany’s largest bank, Deutsche Bank DB, +1.69% , is still run badly, and in Italy, medieval practices die hard.

The dollar BUXX, +0.14% has become even more dominant globally, compelling businesses and governments to borrow greenbacks instead of in local currency. Overly aggressive Fed tightening could create crises for many of those debtors—look at Argentina’s recent begging at the door of the International Monetary Fund.

As for a trade war, economists can’t get over the fact that free trade did not work out for the vast swath of interior America, because the Chinese hardly play by free-trade rules.

A poorly conceived American response to China’s aggressive mercantilism could be devastating but doing nothing would be even worse. Look at the corrosive consequences of trade-driven unemployment, social decay and opioid addiction in America’s rural communities and small cities.

The trick is to penalize China in ways that make retaliation difficult—and that can be done. If I have reservations about Trump, it is that his trade team listens to few outsiders because they are too busy arguing among themselves.

Administrations that don’t listen are nothing new. Barack Obama was in constant broadcast mode, and his economists could never be accused of having open minds.

There is a resiliency about America when the government gets out of the way. Bank on that.

History has been very unkind to those that short sell the United States of America—credentialed experts included.
"

#winning
1   Quigley   ignore (0)   2018 Jun 11, 9:29am   ↑ like (3)   ↓ dislike (0)   quote        

Good article!
I agree that calls for imminent doom and economic ruin are premature by at least another 6 years!
My prediction is that we will enter another recession when the lessons of the Great Recession of 2008 are forgotten. Usually that means a generation, plus a few years for bad ideas to really wreck things. Giving a generation as 22 years, adding 3 to stew the pot, that’s 2008+25=2033 for the next real recession.
Calling it now!
Better stock up on yams!
2   HEYYOU   ignore (13)   2018 Jun 11, 9:52am   ↑ like (0)   ↓ dislike (0)   quote        

The Right to raise & eat yams shall not be infringed.
3   Feux Follets   ignore (0)   2018 Jun 11, 10:16am   ↑ like (2)   ↓ dislike (1)   quote        

It's an opinion piece - anyone want to check in on the reality of the environment under Pruitt ?

Kind of a interesting thing to keep tabs on since your children and grandchildren will be reaping the benefits of his actions - they won't be impressed with Pruitt or the fact you voted for someone who put Pruitt in his position.
4   Feux Follets   ignore (0)   2018 Jun 11, 10:17am   ↑ like (1)   ↓ dislike (1)   quote        

Quigley says
My prediction is that we will enter another recession when the lessons of the Great Recession of 2008 are forgotten


For the most part they already are
5   APOCALYPSEFUCKisShostikovitch   ignore (30)   2018 Jun 11, 10:22am   ↑ like (0)   ↓ dislike (0)   quote        

Bank regulation is marxist by definition and racist to the core.

DEAD! UNEMPLOYED! ETHNICS! deserve mortgages for shacks doubling in price by the hour just like everyone else in AMERICA!
6   Goran_K   ignore (0)   2018 Jun 11, 10:28am   ↑ like (1)   ↓ dislike (1)   quote        

Feux Follets says
For the most part they already are


Are liar loans back?
7   Feux Follets   ignore (0)   2018 Jun 19, 3:04am   ↑ like (0)   ↓ dislike (0)   quote        

Goran_K says
Are liar loans back?

This is and has gotten a boost as well...go figure.

How U.S. tax reform rewards companies that shift profit to tax havens

(Reuters) - The corporate tax cut passed by U.S. President Donald Trump and fellow Republicans that was in part designed to help dissuade U.S. companies from moving profits overseas may instead make the practice a lot more rewarding.

That is because companies which shifted profits linked to U.S. sales, research or production previously had to pay U.S. taxes on the money at the rate of 35 percent when they brought those profits home.

The new tax bill cuts the overall corporate tax rate to 21 percent, and allows income from overseas to be taxed at about half that rate – to as low as 10 percent.

AbbVie Inc. (ABBV.N) is a case in point.

Its Chief Executive Richard Gonzalez told investors earlier this year that because of the change to a territorial system, whereby only profits reported by domestic subsidiaries face U.S. tax, the U.S. drugmaker expects its tax rate to fall to 9 percent this year from around 22 percent in recent years.

That ranks among the lowest of the companies in the S&P 500 that have announced estimates for their tax rate, which average around 22 percent, according to Credit Suisse.

The company has historically reported its income in lower tax jurisdictions, which is possible in part because AbbVie parks the majority of the patents for its top-selling drug in Bermuda - a country that has a zero tax rate on corporate profits, according to a Reuters analysis of 88 Humira patents.

Despite recording over half its $28.2 billion in 2017 sales in the United States and basing most of its research facilities there, the suburban Chicago company has never reported a profit in its home country, its annual reports show.

In 2017, AbbVie reported foreign earnings before income tax of $10.4 billion on international revenue of only $9.97 billion.

Yet, between 2013 and 2016 AbbVie had to pay around $1 billion a year of taxes in the United States, when it took the profits reported by foreign subsidiaries home to help cover expenses from its U.S. operations.

In the future, it will not have to pay such taxes under the Tax Cuts and Jobs Act. The authors of the tax legislation, including Senator John Thune of the Senate Finance Committee, said their bill would discourage the shifting of profits earned in the United States.

But the principal anti-tax avoidance measures introduced still allow companies to benefit strongly from profit shifting.

AbbVie does not address the patent locations on earnings conference calls or in its SEC filings, and declined to discuss its accounting practices or its annual U.S. losses - which are widely accepted among investors who have scooped up its shares over the 5-year life of the company.

The main driver for AbbVie, a rheumatoid arthritis treatment called Humira, generated more than $12 billion in sales in 2017 from patients in the United States, where the most common dose has a list price of about $60,000 a year.

“If the guardrails in the new territorial system were meant to prevent companies from avoiding all taxes, AbbVie’s (tax rate) is a pretty clear signal that these guardrails may not be effective,” said Matthew Gardner, senior fellow with the Institute of Taxation and Economic Policy.

More: https://www.reuters.com/article/us-usa-tax-abbvie/how-u-s-tax-reform-rewards-companies-that-shift-profit-to-tax-havens-idUSKBN1JE12Q

So much winning for Middle America...
8   Feux Follets   ignore (0)   2018 Jun 20, 3:45pm   ↑ like (0)   ↓ dislike (0)   quote        

U.S. Growth Is ‘Close to a Peak’, But Risks Are Mounting....

Projected 4% expansion rate this quarter may be short-lived

Economy already at late stage of business cycle, analyst says (Logan has also mentioned this)

The housing market is struggling to build on its progress thanks to supply constraints and soaring property values, with data Tuesday showing an unexpectedly large drop in construction permits. Manufacturing is coming off the boil amid lengthening order backlogs and accelerating input prices, particularly for oil and partly due to tariffs on metals. On top of that, President Donald Trump has brought the U.S. to the verge of a trade war with China that could see levies on hundreds of billions of dollars in goods.

It all amounts to increasing headwinds on economic growth that has a fair shot this quarter at reaching 4 percent, the fastest since 2014. While the Trump administration said such strength makes it a good time to tighten the screws on U.S. trading partners, especially China, markets gave a less-sanguine judgment on Tuesday, and economists caution that prolonged pain from trade will complicate the path for companies and consumers.

With the U.S. economy about to enter the 10th year of expansion -- a time where growth typically faces hurdles in reaching new heights -- any slowdown would arrive just as the rest of the world shows signs of losing steam.

U.S. growth “is close to a peak” and momentum will be “cooling from here,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York. The trade risks “come at a point when the economy itself is in the late stage of the business cycle, it’s already close to capacity, where you can’t easily substitute for imports, and businesses are worried about trade tensions.”

More: https://www.bloomberg.com/news/articles/2018-06-20/-close-to-a-peak-u-s-growth-at-risk-on-trade-threats-housing
9   MisterLefty   ignore (0)   2018 Jun 20, 3:56pm   ↑ like (0)   ↓ dislike (0)   quote        

Librul dimwit poster objects when economics is described as a pseudo science.





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