Well I’m new here (see post count)
<--------------
but i do know a fair amount about economics;). And I would like to start by asking who exactly told you that the DOW or the NASDAQ was a good or acurate measure of economic performance? You do realize the market is fickle, and responds to many things, not just economic conditions. Second, I would like to make sure we are clear on the definition of recession. Now I have noticed in the past when people are rattling off how Bush is gonna cause a recession and I make sure they actually understand the definintion of a recession before doing anything else, most debate over the impending “recession” soon fades away. Now everyone here realizes that the US economy has been growing at more than 5% annually and sometimes even greater. We also all realize the the accepted and “ideal” growth rate is around 2%. Furthermore, we all realize that this 5% growth rate was precisely the reason Mr. Greenspan proceeded with the last 6 rate hikes to slow the economy. Ok since we all have that clear, what exactly is the problem? The economy is slowing down right? Well what do you think those 6 rate hikes were intended to do? Encourage growth:confused:? Well our ol boy Alan over hiked the interest rate, now the economy is tanking a little faster and a little more severly than we would have liked. However, you must remember there is nothing fundementally wrong with it, the slow down is artifical, and purposely induced. Thus, reversing it should not be difficult. The Bush’s tax cut WILL (as opposed to CAN) stimulate the ecomomy. And btw tax cuts have nothing to do with helping the rich, its just a tool used to “adjust” the economy as needed. Yes, the Bush tax cut will crowd out investment and raise interest rates, I don’t deny that. However, if Mr. Greenspan (well not really him alone, but since that is the common conception I suppose I can play along :)) lowers the interest rate by enough to offset the expected increase in the interest rate from the Bush tax cut, we can get the ecomomy back to a reasonably strong equilibrium where inflation is still held in check.
Voodoo economics? I don’t know but it seems that the web is overflowing with voodoo economists
Believe it or not, economics is not like religion. If you pray for a new porsche (well assuming you believe in god and so forth) you might just get it (doubtful). So in that respect praying for a new porsche may CAN get you one. However, cutting taxes is not like this. One cannot say the economy MAY or COULD be stimulated, but rather it must be!!! Cutting taxes increases disposable income, and thus people will either consume more or save more out of that higher disposable income. Now lets assume they spend it, well to consume something it must be produced right? Well if you consume more, more is produced, if more is produced income (GDP) rises (since income=output). NOw lets take the other course. Lets assume they save all the new found disposable income. Well now what happens? Well through the mechanism proposed by Mr. Keynes we still get a higher GDP. Why? Because an increase in the supply of loanable funds causes the interest rate to fall. As interest rate falls, more risky projects become feasible, and more marginal capital investments by firms become feasible. Well then firms invest in new means of production and we have an investment driven stimulus. So you see, tax cut → GDP increase all else equal :).
My point of all this? Give the man a break!!! He hasn’t even taken office yet and we are talking recession.
Oh btw did I define recession? I think I forgot b:( OK to have a recession we need negative grow (some fraction of a percent I can’t remember exactly at the moment). Therefore, those who scream recession when there is a relative decline in the economy are mistaken. This is not a recession, a slow down yes, but a recession No. Bush is very unlikely to actually see a recession in the next 4 years. A slow down, yes, but a full-fledged recession is highly unlikely.