The Lie of the "Tax Cut' meme

[Capn Sunshine]

already we're hearing that *'s tax cut miracle has created a thriving economy , due to q3 GDP. Despite the fact that the growth rate is compared to last years crater (if you fall in a deep hole and hit bottom, is this progress?) Ther are a few other tidbits:

Extant of War related growth, intentionally left out , we find that GDP increased due to

1) HUGE continued REAL ESTATE activity related to refinance ( debt) and purchase (debt)-- purchases of new homes also affect durable spending as people buy new stuff for their new homes. Guess what ? This sector is tailng off. It's not a bubble, but that's another topic for the wonky psuedo economists.

2) automotive sales driven by 0% financing plus rebates.

Tax cuts just don't play into this scenario. They were supposed to "create millions of jobs", remember? The economy still lost 41,000 jobs last month. The best that can be said is maybe the bleeding has stopped.

What I suspect is the market is trying to recreate that feel good time of yore and get the money they know is out there on the sidelines back into the market , prior to the large decline which will suck more money out of middle america into the pockets of the rapacious pirates who haven't drunk of fresh blood for a while.

Oh, I forgot, you guys don't know a large decline is coming. But any survey of experts will reveal they agree with this.

Heads up.

[Skittles]

1. yup, it is indeed an illusion

we're in for one hell of a rocky ride

[Wwagsthedog]

2. Agree

The tip off is/will be the continued rise in long term interest rates. When this happens over the long haul, automobile and housing sales will fall taking with them other industries/businesses which depend on cheap money. Whatever tax cuts were received and spent by now. Cash out refinancing is reaching its nadir which in turn also reduces household spending. Anyone here remember the economic effects of the Vietnam era? Then it was the cost of war and the great society. Now, tax cuts and war have driven us into an untenable economic situation. Sorry, like last time, there is no easy fix.

[zoidberg]

3. Where did you get your info?

Consumer spending shot up, which can be attributed to the tax cut. I haven't read anything about automotive sales.

[Capn Sunshine]

4. I did my own analysis

Just look at todays numbers by line item.

Consumer spending shot up due to cash out refis my friend, tax cuts did nothing, else the employment picture would have improved.

[papau]

5. I agree - the earlier qtrs were fake so as to have 2nd & 3rd qtr rise

personal consumption was Q 2002 to now:

6609.9, 6637.9, 6670.9, 6733.9, with 6842.1 for Q3 2003 - and it has been all in non-service last 3 qtrs - meaning the 30% reduction in the exchange rate had an effect.

The changed seasonal adjustments are not shown - and this is where I believe the game playing is going on.

All in All - the expected push from the weak dollar has occurred - what will be the second act - if there is one.

It seems Bush has most of his eqqs in the currency basket - with him begging China and Japan to take a hit by dropping their currency protection activity and letting their currency rise relative to the dollar - so does the yen break 110 with Japan taking an export reduction - likewise the yen - and if so we continue to make sale improvements into exports?

I would not bet on it. 7.2% was the high water mark - next qtr will be about 4% - and then it will trend lower.

[NoMoreRedInk]

6. Way too pessimistic. The economy is doing great. It's jobs that....

are the problem.

We have come way out of the whole we dug ourselves (see quarterly GDP #'s from the last 3 years below).

Most economists agree the economy will continue growing at a steady pace through 2004.

The real question is: when will employment catch up with the productivity boom?

2000Q4 1.1
2001Q1 -0.6
2001Q2 -1.59
2001Q3 -0.29
2001Q4 2.74
2002Q1 5.04
2002Q2 1.25
2002Q3 4.03
2002Q4 1.38
2003Q1 1.43
2003Q2 3.28
2003Q3 7.15

[Capn Sunshine]

8. "growing" is a relative term

its a comparison to the previous year, not a vacuum.

"we are underwater but rising at an annualized rate of 7%. Soon we'll be back to zero"

I agree about jobs. 341,000 new filers per week instaed of 400,000 is nothing to celebrate.

[sandnsea]

7. Why we always lose

It was a goddamn Democratic tax cut and we're so fucking busy trying to bash Bush that we can't even see we should be standing up and taking credit for this. Maybe we are too stupid to run the country.

[SahaleArm]

9. Yeah, but maybe it's better to...

see if the wheels come off the recovery wagon. As stated above spending has increased due to cheap money (refi's + loans). The economy is not that healthy once you look beyond the GDP glitz. Since early 2001, when Bush took office, the Fed has cut interest rates to it's present level of 1%. That's how the market is being propped up.

[livinontheedge]

10. Repuke comeback: You said tax cuts HURT the economy.

How do we counter that?