Goldilocks is Now “Officially Dead”

Econ_forecasting

Last night, we had an open thread on the "Falling Dollar, Rising Gold, Oil, Inflation."

One of the articles I referenced for discussion was this WSJ piece, Forecasters Increase Odds Of Recession Over Next Year. If you click through to the full survey, a few things will pop out:

My man Larry Kudlow upped his possibility of a recession to 50%:

Goldilocks_is_deceased

 

In related news, a small, closed casket funeral (mauled by Bears, not very pretty), was held for Goldilocks. It was a lovely ceremony attended by family and a few close friend. Goldilocks left behind no children, but she was admired around the world. In lieu of flowers, please send donations to the Bear Affection.

Does any of this really matter?

In a word, no.

I specifically detailed in the Folly of Forecasting how Humans are notoriously bad at predicting the future. And as I have noted in the past, as a group, economists make for especially lousy forecasters.  They consistently over-estimate GDP and Job creation, they underestimate CPI and inflation. They have forecast exactly zero of the past 9 recessions.

As John Kenneth Galbraith eloquently stated, "We have 2 classes of forecasters: Those who don’t know… and those who don’t know they don’t know."

The chart below makes this all too clear:

Forecast

However, they do manage to extrapolate the trend on the 3 month note 90 days into the future . . . (nicely done!)

>

Source:
Likelihood of a Recession Is Given Better Odds
Economists Debate If Job Outlook Is as Bad as Feared
SUDEEP REDDY
WSJ, September 13, 2007
http://online.wsj.com/article/SB118954072982324112.html

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What's been said:

Discussions found on the web:
  1. UrbanDigs commented on Sep 13

    What is Larry’s catch phrase going to be if its no longer “the greatest story never told”?

    Maybe….”the most mis-understood story never told”?

  2. SPECTRE of Deflation commented on Sep 13

    We are at First and First at the nexus of the universe folks. Anything that happens is good for stocks. really. Dollar at 79.50 is no problem because it helps exports. Nevermind that we continue to have growing trade deficits. Only look at one number please.

    Here we are at the cliff. Which way will Benny go?

  3. SPECTRE of Deflation commented on Sep 13

    The “Greatest Story Never Told” has been moved to fiction and horror in the book store. It’s wonderful that Larry has now upped the chance of recession to 50%, but Gonzo the monkey already made that call.

  4. spencer commented on Sep 13

    the consensus has never correctly forecast a recession and I believe — or at least have a very good argument — that they never will.

  5. Owner Earnings commented on Sep 13

    Why do people even watch CNBC et al? (Kudlow etc)

  6. Stuart commented on Sep 13

    I don’t think it’s surprising that most of the forecast err on the optimistic side after-all those making the forecasts represents interests that have a distinct bias in ensuring the public remains fully invested. To illustrate this, when the NASDAQ crashed, one just needs to look back at the pitifully low percentage of sell recommendations…. How many justifications did we all hear for Amazon’s valuation.

  7. Mike G. commented on Sep 13

    He must have seen something overnight then because I didn’t get that take from his show yesterday. The only hint was that he is concerned the Fed will lower the rates too slowly and actually cause people to hold off investments until they think rates have “bottomed” again. He may be right there, but his other thing that he’s pushing (i.e. “lower the rates and STRENGTHEN the US$”) seems a bit odd and he doesn’t seem to have found a taker for it among his guests either. Reminds me of “Save the cheerleader, save the world”. *L*

    I think there is a stretch of bumpy road ahead as Bear etc. report earnings and people get a good idea of how this credit risk “readjustment” is costing everyone. That and the fact that Bernanke will probably try and do a 1/4 point cut and a lowering of the discount rate instead of a 1/2 point cut will probably cause the market to take another leg down IMHO.

    I say the dollar goes lower, commodities go higher which means Russia’s pockets become more flush and they become even bolder vis a vis Europe and threaten them with recession by jacking up energy prices within 2 years. By that time we’ll be screwed here because the libs will raise taxes in a failing economy. Can’t wait to hear what Krugman says then! “It’s all Bush’s fault…”

  8. Mike G. commented on Sep 13

    “Why do people even watch CNBC et al? (Kudlow etc)”

    Larry’s got a great show! You don’t have to agree with him, he certainly covers the bases by having guests of vastly different stripes on. My only fault with him is that he is a bit long winded when asking questions. He’ll ask a question and then pause, and then stick in 2 or 3 re-wordings of the question before finally giving the guest 10 seconds to start a response. Just put it out there and LISTEN for a minute Larry! The other thing is he tends to have too many kids in the pool. My man Barry gets short shrift because he’s usually in a “panel” of 5-6 people. Combine that with the long-winded questions and it is “less than optimal”.

    But I don’t think you’ll find a more frank ad-hoc discussion of the economy anywhere. Of course, with CNBC ratings we might call K&C “The Greatest Financial Show Never Watched” :)

  9. Paul commented on Sep 13

    Larry’s new catchphrase should be “the greatest scam ever sold.”

  10. Florida commented on Sep 13

    I was thinking verbal crutch, but catchphrase is also appropriate. I never watch Kudlow’s show. The guy is just too much of a joke.

  11. Josh commented on Sep 13

    He’s actually listed in the article as one of the pessimists. Outstanding. Is this capitulation? Does this mean the market takes off through 14k? Or is the market just making a run up so the hedge funds can handle all their redemptions in an orderly manner?

  12. DavidB commented on Sep 13

    Does any of this really matter?

    In a word, no.

    Well, thank you for completely wasting our time.

    (;

  13. Ironman commented on Sep 13

    Barry,

    A couple of economists at the SF branch of the Fed released a paper in July that pretty much concurred with your view of the ability of professional economic forecasters. They found that the U.S. Treasury yield curve did a better job.

    Now for the part that I know you can’t resist – here a link to a couple of charts that track the probability of recession based on the trailing one-quarter averages of the Treasury yield curve and the Federal Funds Rate. The first shows four years of data from September 8, 2003 to September 7, 2007.

    This chart indicates that the probability the U.S. will be in recession 12 months from September 7 is 29.0%. The probability of recession in this four year period peaked at 50.0% on April 4, 2007. This would suggest that any upcoming recession is likely to be very short lived.

    The second shows the four preceding years, from September 7, 1999 to September 5, 2003, the period which includes the 2001 recession, which helps illustrate the predictive power of the method.

  14. Steve commented on Sep 13

    You’re always taking shots at economists. Do you also point out to your clients that most money managers can’t beat the market?

  15. Josh commented on Sep 13

    This survey is great. I looked at the August results (from 8/9) and the group thought Fed Funds would be 5.1 in December, now they think 4.6.

    Yen was 119 now 114.5 for this December.

    In August, 64% thought the worst was behind us and in March 80% thought that. I remember Paul Kasriel having a comment last time: “Consensus and the Fed never forecast a recession. It always takes us by surprise.”

    How true.

  16. Douglas Watts commented on Sep 13

    SUV dealers rarely warn you about the threat of gas hikes on that 6 mpg boat either.

  17. John T commented on Sep 13

    Larry thinks by stating 50% chance, that this alone will panic the fed to lower rates.

  18. dhukka commented on Sep 13

    If economists were held to the same standards as doctors they’d be mired in mal-practice suits.

    Here’s a question. If someone forecasts a 50% chance of a recession and it happens does that make them 50% right and 50% wrong? How about if they gave it a 10% chance 6 months out but 90% 6 weeks out, do you give them a weighted average score?

    I had to laugh the other day when Barry upped his probability of a recession to 65%. Oooh go out on a limb why don’t ya Barry.

    An economy is never 50% in a recession, it is either in one or it isn’t. Anyone making anything less than a definitive call one way or the other 6 – 12 months out from the event is sitting on the fence.

  19. Mike G. commented on Sep 13

    We need a rate cut, but that isn’t going to make the credit problem go away. The press has taken the easy consumer story (sub prime slime) instead of highlighting what’s really going on so everyone thinks a rate cut will save the day.

    The sub prime loan problem was triggered by the realization when BSC tried to cash in on some of it that what BSC had the CDOs on the books for was WAY over valued. That caused everyone holding any kind of mark-to-model product to suddenly feel (potentially) exposed to a vastly different risk than what they thought they exposed themselves too. Moody’s etc. “re-rating” things they already rated AAA only made that worse. THAT is what needs to be worked through, the re-evaluation of the mark-to-model products. A rate cut will help a little bit because adjustable rates are tied to that rate, but that isn’t the main problem. And as far as Cramer et all saying there will be 7 million foreclosures, PLEASE!

  20. Stuart commented on Sep 13

    “As John Kenneth Galbraith eloquently stated, “We have 2 classes of forecasters: Those who don’t know… and those who don’t know they don’t know.” ”

    Or as Jung said, conscious incompetent and unconscious incompetent.

  21. michael schumacher commented on Sep 13

    Let’s see

    Oil at 80…check
    dollar below 80….check
    exceed our national debt….check
    credit issues not going away….check
    highest foreclosure rate ever (and soon to get higher)….check
    weak shorts easily let into a short because of no uptick rule……..check

    Sounds like a recipe to send the dow back up to 13,400……

    What utter garbage. I gather that Hank wants to market here so that his PPT can be ready to act when Ben does’nt lower rates next week………

    Ciao
    MS

  22. Philippe commented on Sep 13

    Without discarding the studies in reference they may be counter balanced by the Fed statistical model (MR Wright) please see the page hereafter

    http://politicalcalculations.blogspot.com/2006/11/how-to-predict-recession-using-our.html
    http://politicalcalculations.blogspot.com/2006/04/reckoning-odds-of-recession.html

    With Fed funds at 5 pct or 5.25 pct, at the given rates of treasury 3 months and 10 years the probability of a recession are much lower than ten months ago (20 and 23 Pct respectively) against 45/50 Pct ten months ago.

  23. Crush Da Bears commented on Sep 13

    Dead? What are you talking about?

    Goldilocks and I had breakfast together this morning. She was full of energy and hot (as always).

  24. me commented on Sep 13

    “You’re always taking shots at economists. Do you also point out to your clients that most money managers can’t beat the market?

    Thank you Steve for my daily laugh.

  25. Pool Shark commented on Sep 13

    Crush Da Bears,

    Let me guess, Goldilocks paid for her breakfast with plastic because her checking account is tapped out; she’s having to take a second job in order to fill the tank on her Hummer, and she’s looking for an apartment because her house is in foreclosure?

    I’ll bet her bowl of breakfast porridge was pretty pricey with $9/bushel wheat…

  26. Strasser commented on Sep 13

    NEWS FLASH across Bloomberg:

    ‘Greenspan said he wouldn’t do anything different than Bernanke’ (how do I draw a picture of my eyes wide open and glazing over?)

  27. Strasser commented on Sep 13

    News flash continues on Greenspan: and he failed to see the subprime crisis… this is a joke, right? Hell, he created it!

  28. michael schumacher commented on Sep 13

    well what could you do with an additional $21 billion in cash today????

    http://www.newyorkfed.org/markets/omo/dmm/temp.cfm

    3…count ’em 3 ops today for a total of $21 billion..

    You think he was’nt anticipating something today?? Especially since the ECB just threw another $53 billion at it’s markets.

    This is just getting out of hand……

    Ciao
    MS

  29. Pool Shark commented on Sep 13

    Strasser,

    This just proves it:

    Alan Greenspan = Homer Simpson

    (We’d have been so much better off if Greenspan were merely running a nuclear power plant…)

  30. Neal commented on Sep 13

    (Larry getting out of the way so he doesn’t look like the complete fool (tool) that he is.)

    In normal times, housing and housing related expenditure accounts for up to 20% of the GDP. In these past few non-normal years, the percentage HAD to go up. Add in the kick from home equity-based purchases. Add in the “innovative financial products”. You now have the economy that was known as Goldilocks.

    Take away most if not all of the added factors, and back off on the “normal” housing related GDP factors due to over-supply and years of over-consumption.

    How could you not end up with a recession of epic proportions?

    Add in exogenous factors such as dollar collapse, deficits, lack of savings, increasing energy prices, etc., etc.,

    How could you not end up with a terminal depression?

  31. Ironman commented on Sep 13

    Philippe,

    Thanks for referencing the URLs! For those who’d like to save the trouble of copying and pasting, here are clickable links:

    How to Predict a Recession Using Our Tools – Political Calculations’ guide to using the Reckoning the Odds of Recession tool (link below).

    Reckoning the Odds of Recession – Political Calculations’ tool that allows you to run your own numbers in finding the probability of a recession occurring in the next 12 months (best used using one-quarter trailing averages of the input data.)

    The links I provided earlier in the comment thread are to the most recent charts we’ve created as a tool for visualizing the current probability of recession, as well as the illustrating the recent trend.

  32. jag commented on Sep 13

    If there’s only a 29% probability of recession (using the U.S. Treasury yield curve analysis) the Fed won’t (or shouldn’t) cut rates then will they?

    I can’t argue against the U.S. Treasury yield curve analysis. However, I have a hard time seeing how a recession is avoided with so many consumers undergoing significant stress.

  33. Frankie commented on Sep 13

    “By that time we’ll be screwed here because the libs will raise taxes in a failing economy”

    Every time adults try to have a conversation, pigs come to groink in the living room.

    Grrr!

    Everything that has gone right goes to Bush and Co. credit, and anything that WILL go wrong can only be the “libs” fault.

    Is it too much to ask for a raise in common sense rate in the comments? Really too bad there ain’t a Fed for THAT.

    I came to the USA 10 years ago, in part because the political and social discourse was (make that “appeared”) to be so much better than in the Rodina, to quote Comrade Vladimir.

    Well…it is sad to say, but this country is looking more and more like the France of the 60s – 80s: full of hot air, deluded extreme partisan politics, and scattered around, always difficult to find, are some nanograms of common sense and deference to the facts.

    It’s getting so freakin’ OLD!! And rather tiresome, on top of being unproductive.

    Francois

  34. Mike G. commented on Sep 13

    So, Frankie, you think now is an excellent time to raise taxes? Is that what you’re saying? Explain what part of the flagging economy raising capital gains and dividend taxes?

    oink.

  35. wunsacon commented on Sep 13

    >> I say the dollar goes lower, commodities go higher which means Russia’s pockets become more flush and they become even bolder vis a vis Europe and threaten them with recession by jacking up energy prices within 2 years. By that time we’ll be screwed here because the libs will raise taxes in a failing economy. Can’t wait to hear what Krugman says then! “It’s all Bush’s fault…”

    But, Mike G., what will be wrong with that statement?

    Didn’t cutting taxes while raising healthcare spending, paying for the unilateral invasion and occupation of Iraq, and the resulting increased deficits strain the dollar and the economy?

    Didn’t the housing bubble stem from (a) cutting lending rates to 1% and keeping them there too long and (b) not regulating NINJA and subprime loans for years after people knew there was a problem, including considerable fraud?

    If Bush and the 2000-2006 GOP Congress weren’t responsible, who was in charge during this time? Thru omission and commission, the “buck” stops with them.

  36. John commented on Sep 13

    “If Bush and the 2000-2006 GOP Congress weren’t responsible, who was in charge during this time? Thru omission and commission, the “buck” stops with them.”

    In a democracy, the people are in charge. Thru omission and commission the buck stops with anyone and everyone over the age of 18.

  37. Mike G. commented on Sep 13

    “Didn’t cutting taxes while raising healthcare spending, paying for the unilateral invasion and occupation of Iraq, and the resulting increased deficits strain the dollar and the economy?

    Didn’t the housing bubble stem from (a) cutting lending rates to 1% and keeping them there too long and (b) not regulating NINJA and subprime loans for years after people knew there was a problem, including considerable fraud?

    Here’s a surprise, the Left conflating issues! You are re-playing the Reagan criticism. “Tax cuts –> deficit” and that’s just pure BUNK! There are two distinct halves here. Bush’s (and R’s) tax cuts BALLOONED revenue. SPENDING on the war and other things has been more than I would like but considering the cost of the war and Katrina and 9/11 etc. is much better than I expected frankly.

    But in any case, Frankie’s claim was (apparently) that we need to raise tax rates. Increasing the income, capital gains, dividend or any other tax isn’t going to lessen what we spend on the war etc. You want to cut spending? I’m with you! But don’t claim you can tax your way out of a deficit while the economy is stalling. That’s all I’m saying.

  38. Stuart commented on Sep 13

    Goldman Sachs Alpha fund plunged last month
    By James Quinn, Wall Street Correspondent
    Last Updated: 5:29pm BST 13/09/2007

    Goldman Sachs’ high-profile alternative investments business appears to be in further trouble after it emerged that its Global Alpha hedge fund lost 22.5pc of its value last month.

    In full: the credit crisis
    The one-month decline – the fund’s steepest in its 12-year history – means the fund has fallen by a third in 2007, and is down 44pc from its March 2006 peak.

    The bad news comes just weeks after Goldman bailed out one of its other high profile hedge funds – Global Equity Opportunities (GEO) – with a $3bn (£1.5bn) recapitalisation.

    The numbers will make grim reading for Goldman Sachs’s chairman and chief executive Lloyd Blankfein, who is all too aware that Global Alpha has historically been one of the top performers in the bank’s asset management arm.

    News of the losses emerged in an update sent to investors, which also showed that investors plan to withdraw $1.6bn of the fund – almost a fifth of its assets – in the coming months.

    As a result, the fund’s managers, Mark Cahart and Raymond Iwanoski, have been involved in a whistle-stop tour of investors aimed at offering reassurances over performing.

    Losses from the quantitative fund – which uses complex mathematical algorithms to construct its investment decisions – are understood to have resulted from a decision to sell Japanese yen and buy Australian dollars.

    That decision proved to be the wrong one when the so-called global “carry trade” began to unravel, with the Australian dollar falling 6pc against the yen last month.

    However Goldman has been somewhat more fortunate with its GEO fund, whose recapitalisation involved $2bn of Goldman’s own money and $1bn from existing investors including Hank Greenberg’s AIG.

    A week after the recap, GEO, which is run by Robert Jones, rose 12pc, and is understood to be still trading well. A Goldman Sachs spokesman declined to comment.

    Meanwhile Red Kite Metals, the world’s largest hedge fund dedicated to investing in metals, fell 20pc last month, brining its loss in value for the year to date to 29pc.

  39. Neal commented on Sep 13

    Mike, tax cuts had little to do with rising tax revenue. Tax revenue went up because of real estate inflation and all of the associated manifestations. Without the real estate inflation of the last few years the economy would have fallen on it’s face.

    That’s the greatest story never told.

  40. DavidB commented on Sep 13

    It looks like that WSJ editorial was the signal for media capitulation. The lead dog has spoken and now the lapdogs can come out and be outraged. Kudlow and Greenspan are a sign of things to come. Watch the whole media bull crowd turn now as if on cue. That is my guess as to what will happen next.

    ….and is this all designed to spice up the next election? It really is convenient that the epicenter of this explosion will be early next year. Nothing like motivating the slums with a good hard kick in order to trigger a regime change.

    It’s all becoming very clear to me now. And of course with all these barbs I just caused the NSA eye to look at me

  41. Fred commented on Sep 13

    Anyone notice the improvement in the CP market, libor rate, and treasury yileds?

    Every time but one (1973) when the spread between Libor and T-bill rates got this wide, most of the equity downside had occured, and proved to be some of the BEST long term buying opportunities.

  42. Mike G. commented on Sep 13

    “Mike, tax cuts had little to do with rising tax revenue. Tax revenue went up because of real estate inflation and all of the associated manifestations. Without the real estate inflation of the last few years the economy would have fallen on it’s face.”

    I disagree. They helped, to be sure, but to say the economy would fall on its face without them is just not so. The economy WILL fall on its face if the commercial paper situation that was exposed by the sub prime slime doesn’t get fixed anytime soon.

  43. Fred commented on Sep 13

    Also look at the improvement in the “drek” ABX indecies (CDO’s):

    http://www.markit.com/information/affiliations/abx

    Any idea of the short positions in this market? — (hint – it is NOT small)

    The market has broomed out many of the weak holders — in most of the markets.

  44. Michael Donnelly commented on Sep 13

    We economists always get smacked around by this kind of stuff, but you’ll notice that while the averages were way off, there’s always somebody who’s exactly right.

    Just add another couple of hundred economists to the survey and we’ll have somebody on every forecast spot on.

  45. Rambuncle commented on Sep 13

    In a democracy, the people are in charge. Thru omission and commission the buck stops with anyone and everyone over the age of 18.

    This is the kind of crap people say when they don’t want to take responsibility for their own actions.

  46. VJ commented on Sep 13

    Mike,

    You are re-playing the Reagan criticism. “Tax cuts –> deficit” and that’s just pure BUNK!

    I’m afraid not. Federal income tax revenues PLUNGED to 1940s levels after the tax cuts for the Rich & Corporate. Even David Stockman, who was Reagan’s Director of the Office of Management and Budget (1981-1985), stated:

    “Ronald Reagan’s original across-the-board income tax cut would have permanently reduced the federal revenue base by 3% of GNP … the Reagan tax-rate cut alone would have strained the nation’s fiscal equation beyond the breaking point. As of August of 1981, Uncle Sam had been left to finance a 1980s-sized [federal government] and defense build-up from a general revenues base that was now smaller relative to GNP than at any time since 1940 !”

    There are two distinct halves here. Bush’s (and R’s) tax cuts BALLOONED revenue.

    Nope.

    According to the U.S. Treasury, they reduced federal income tax revenues to 1959 levels. Tax rate cuts have failed every time they have been tried, always resulting in massive federal budget deficits.

    SPENDING on the war and other things has been more than I would like but considering the cost of the war and Katrina and 9/11 etc. is much better than I expected frankly.

    According to the Congressional Budget Office, the cost of the four previous rounds of tax cuts enacted is almost THREE TIMES as great as the cost of the Iraq war (including the costs of the military operations and subsequent reconstruction), all homeland security expenditures, the costs of rebuilding after September 11, all military action in Afghanistan, and all other costs of the ‘Global War On Terrorism’, COMBINED.

    But don’t claim you can tax your way out of a deficit while the economy is stalling.

    Both President Roosevelt and President Clinton accomplished just that.
    .

  47. VJ commented on Sep 13

    Neal,

    tax cuts had little to do with rising tax revenue. Tax revenue went up because of real estate inflation and all of the associated manifestations.

    Actually, according Douglas Holtz-Eakin, who was the director of the Congressional Budget Office, it was an increase in corporate tax receipts that increased overall tax revenues, as a result of the expiration of a corporate tax cut. In other words, a tax increase increased tax revenues.
    .

  48. VJ commented on Sep 14

    Mike,

    The marginal tax cuts of Reagan and Kennedy before him both increased tax revenues in subsequent years.

    I’m afraid not.

    Both decreased federal income tax revenues and both slowed the national economy dramatically, Reagan’s resulting in a recession.

    Clinton’s economy didn’t get going until the GOP congress took over.

    I’m afraid not.

    The “GOP congress took over” in January of 1995, but they didn’t get anything other than very minor legislation signed into law until February of 1996, after they had shut the federal government down twice and eventually capitulated. By then, the national economy was booming, the stock market was skyrocketing, and both the federal deficits and unemployment were plummeting, as a result of the President’s 1993 budget and tax legislation passed by the Democrat Majority Congress.

    Both Clinton and Reagan raised SOME taxes in the later years but the good economy had already been established.

    President Clinton raised the federal income tax ONLY on the top 1.2% of the wealthy taxpayers, and raised the corporate income tax. Used the money to cut taxes for the Middle-class and Working Poor, and pay down some of the Reagan/Poppy Bush federal debt. The national economy zoomed to historic levels.

    http://www.heritage.org/Research/Taxes/wm182.cfm

    Gov’t revenues increased over $1T with Reagan.

    http://www.heritage.org/Research/Taxes/images/chart.gif

    Gibberish propaganda.

    Federal tax revenues only turned around and increased because Reagan signed into law SEVEN tax increases, FIVE of which were the largest tax increases in American history, in a desperate attempt to stem the massive red ink from his earlier tax rate cuts:

    * In 1982, just months after the tax rate cuts failed dismally, Reagan signed into law two major tax increases. The ‘Tax Equity and Fiscal Responsibility Act‘ and the ‘Highway Revenue Act‘. According to the Treasury Department, TEFRA alone raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history.

    * In 1983, Reagan signed legislation raising the Social Security tax rate.

    * In 1984, Reagan signed another big tax increase in the ‘Deficit Reduction Act‘.

    * In 1985, Reagan signed the ‘Consolidated Omnibus Budget Reconciliation Act‘ which raised taxes again.

    * Even the ‘Tax Reform Act‘ of 1986, which was spun as being revenue-neutral, contained a net tax increase.

    * In 1987, Reagan signed the ‘Omnibus Budget Reconciliation Act‘ which raised taxes still more.

    Proving once again, that when tax rates are cut, tax revenues decline, and when tax rates are increased, tax revenues increase. Pretty basic stuff.

    Oh, in case your still interested in actual facts, the Treasury department report indicating that federal income tax revenues plummeted to 1959 levels after the four rounds of tax cuts for the Rich & Corporate from 2001 – 2004 is HERE.
    .

  49. wunsacon commented on Sep 14

    Mike G.,

    I half expected you to point out that Bush didn’t give Russia all those natural resource to “threaten” withholding from those “needy” Europeans. You didn’t. But, if it crossed your mind, think also about how the misguided invasion and mismanaged occupation of Iraq removed 2million barrels of oil per day from the global market. Since price is often determined by marginal demand or supply, Bush’s foreign policy actually made Russian oil resources that much more valuable.

    VJ,

    Thanks for that considerable detail.

  50. todd commented on Sep 14

    Wow. Kudlow raised his recession possibility to 50%. This guy is the biggest Polyanna of all time so that really is news.

    For the most part, I can’t stand watching his show because he always stacks it with so many of the same old guests that just parrot his permabull views that gloss over the major economic risks out there.

    The show would be so much more interesting and thought-provoking if he had regular guests such as Peter Schiff who has been very negative on the US markets vs global markets since 2000 and seems to be one of the smartest guys in the room.

    Just how many times do we have to watch Arthur Laffer and Jed Babbin just to name a few of the tired, old guests Kudlow keeps trotting out? zzzzzzzzzz………..

  51. todd commented on Sep 14

    Wow. Kudlow raised his recession possibility to 50%. This guy is the biggest Polyanna of all time so that really is news.

    For the most part, I can’t stand watching his show because he always stacks it with so many of the same old guests that just parrot his permabull views that gloss over the major economic risks out there.

    The show would be so much more interesting and thought-provoking if he had regular guests such as Peter Schiff who has been very negative on the US markets vs global markets since 2000 and seems to be one of the smartest guys in the room.

    Just how many times do we have to watch Arthur Laffer and Jed Babbin just to name a few of the tired, old guests Kudlow keeps trotting out? zzzzzzzzzz………..

  52. Mike G. commented on Sep 14

    VJ

    “http://www.heritage.org/Research/Taxes/wm182.cfm

    Gov’t revenues increased over $1T with Reagan.

    http://www.heritage.org/Research/Taxes/images/chart.gif

    Gibberish propaganda. ”

    Well! Never let a table of actual concrete data get in the way of an opinion!

    “* Even the ‘Tax Reform Act’ of 1986, which was spun as being revenue-neutral, contained a net tax increase.”

    You’re missing the entire point. It was a reduction in INCOME TAXES from Kennedy and Reagan that increased gov’t receipts. Marginal INCOME TAXES. And that’s not to say that any piddly little income tax reduction will do the same as some may claim, but when meaningful income taxes are given, the data shows that the gov’t takes in more $, partly because they are getting more $ from a smaller piece of a bigger pie.

  53. StockRake commented on Sep 14

    Then how do these economists have fucking jobs?

  54. VJ commented on Sep 14

    Mike,

    Well! Never let a table of actual concrete data get in the way of an opinion!

    Concrete data” from the Heritage Foundation ?

    Sure.

    And I’m not giving you my “opinion“.

    You’re missing the entire point.

    Obviously not.

    It was a reduction in INCOME TAXES from Kennedy and Reagan that increased gov’t receipts.

    But it DIDN’T.

    It’s NEVER happened.

    If federal income tax revenue had actually “BALLOONED” as you claim, then why was Reagan forced to have to enact SEVEN tax increases, FIVE of which were the largest in history, starting with the very first (which still ranks as the largest tax increase in history), just MONTHS after enacting the tax cuts ???

    the data shows that the gov’t takes in more $, partly because they are getting more $ from a smaller piece of a bigger pie.

    The “data shows” just the opposite.

    As the most recent example quite clearly documents, after four rounds of tax cuts for the Rich & Corporate from 2001 – 2004:

    Receipts in 2004 … As a share of GDP, they accounted for the smallest proportion since 1959

    Did you actually READ the Treasury data I linked ?

    Again, when tax rates are decreased, tax revenue decreases. When tax rates are increased, tax revenue increases. Everything else is just Purple Kool-Aid.
    .

  55. Mike G. commented on Sep 14

    “”Receipts in 2004 … As a share of GDP, they accounted for the smallest proportion since 1959”

    Did you even READ my previous post? I believe I mentioned something about a smaller piece of a bigger pie? The key words in your line above are “as a share of GDP”. I’m talking in $, you’re talking in %. So tell me, would you rather have 100% of $500 or 80% of $1,000?

  56. Mike G. commented on Sep 14

    A decent explanation of the Bush tax cuts & revenue (from VJ’s favorite site no less!)

    http://www.heritage.org/Research/Taxes/bg2001.cfm

    But a key point is that tax revenue is tied to growth, not tax rates. Low tax rates cause economic growth which gives you more tax revenue DOLLARS.

    Myth #6: Raising tax rates is the best way to raise revenue.
    Fact: Tax revenues correlate with economic growth, not tax rates.

    Many of those who desire additional tax revenues regularly call on Congress to raise tax rates, but tax revenues are a function of two variables: tax rates and the tax base. The tax base typically moves in the opposite direction of the tax rate, partially negating the revenue impact of tax rate changes. Accordingly, Chart 4 shows little correlation between tax rates and tax revenues. Since 1952, the highest marginal income tax rate has dropped from 92 percent to 35 percent, and tax revenues have grown in inflation-adjusted terms while remaining constant as a per­cent of GDP.

  57. VJ commented on Sep 14

    Mike,

    Did you even READ my previous post?

    Unfortunately, yes.

    I believe I mentioned something about a smaller piece of a bigger pie? The key words in your line above are “as a share of GDP”. I’m talking in $, you’re talking in %.

    Exactly. As a percentage of GDP is the proper manner to do comparisons over long stretches of time. Do try and keep current.

    But a key point is that tax revenue is tied to growth, not tax rates. Low tax rates cause economic growth which gives you more tax revenue DOLLARS.

    Except it’s NEVER actually happened in the REAL WORLD, no matter how many times it’s tried.

    Myth #6: Raising tax rates is the best way to raise revenue.
    Fact: Tax revenues correlate with economic growth, not tax rates.

    Then explain why the two periods of greatest prosperity and economic growth in America during the 20th Century were when tax rates on the wealthy were at their highest ?

    Reality bites.

    Stop drinkin’ the Purple Kool-Aid from Fake RightWing front groups. It will rot your brain cells.
    .

  58. Mike G. commented on Sep 14

    VJ,

    I’m assuming (since you mentioned them earlier) that you mean Clinton and Roosevelt? Roosevelt was way before my time and I can’t even pretend to be tempted to dig into those #s because I was around for Clinton and know you’re dreaming on the reasons behind that one too. ( I assume Clinton is the other one you mean).

    Clinton inherited robust economy from Reagan (despite the deficits) and in his first two years nearly screwed it all up. Until, of course, he was blessed with a Republican congress. Clinton can be given credit for listening to Dick Morris over the dems and “triangulating” on the GOP tax cuts, welfare reform and spending cuts that led to a healthy economy. But after the internet boom started (and I suppose in your mind by some miracle higher taxes would actually trigger the invention of the internet?) it almost didn’t matter. The growth was explosive and after all, that’s exactly why the GOP always wants to cut tax rates in the first place isn’t it? To make the economy grow? So with the internet boom the economy was growing so rapidly that they could actually afford to raise taxes in later years and not totally kill the economy. So Clinton proves MY point. The growing economy generates the revenues, not the tax rates. Clinton didn’t have a good economy until the GOP took over congress.

  59. VJ commented on Sep 14

    Be my guest and wallow in your ignorance.
    .

  60. Mike G. commented on Sep 14

    The purple kool-aid’s a damn sight better than the swill you’re drinking.

  61. jesus commented on Sep 15

    But Barry, the yield curve is not forecasting recession, and the yield curve is the most accurate forecaster.

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