Once again I’m going to save Donald Trump some time in writing up the legislation. Here is some handy-dandy text borrowed from the Chinese Exclusion Act of 1882.
Economic Policy Uncertainty on the Rise
What does it mean for economic activity?
Figure 1: Daily US Economic Policy Uncertainty Index (blue), and centered 7 day moving average (bold red). Source: policyuncertainty.com accessed 1/15/2018, and author’s calculations.
Does economic policy uncertainty matter for real activity. In a new CEPII brief, Laurent Ferrara, Stéphane Lhuissier & Fabien Tripier review the evidence in “Uncertainty Fluctuations: Measures, Effects and Macroeconomic
Policy Challenges”.
Their Lesson #3 is particularly interesting.
The effectiveness of economic stabilization
policies depends on the state of uncertainty and should
then be adapted accordinglyBeside the role of public authorities in stabilizing political,
economic and financial uncertainty, the channel of
transmission of macroeconomic policies is likely to be
impaired by uncertainty. Under conditions of high uncertainty,
the effectiveness of fiscal and monetary policies is damaged,
and thus economic actors (households, firms, and investors)
become less inclined to respond to policy impulses. …
Entire brief here.
More on uncertainty, relating to Brexit, here, JIMF-BdF-UCL conference here, at ASSA here.
Government Shutdown Expectations
Now at 29%, according to PredictIt, for 1/22 (CR ends midnight this Friday).
Source: PredictIt.
Making Mexico Pay for the Wall (Redux)
So we’re back to this again? From CNN:
“They can pay for it indirectly through NAFTA,” Trump said Thursday in an interview with The Wall Street Journal. “We make a good deal on NAFTA, and, say, ‘I’m going to take a small percentage of that money and it’s going toward the wall.’ Guess what? Mexico’s paying.”
More Faith Based Budgeting from Mnuchin
From Reuters:
U.S. Treasury Secretary Steven Mnuchin said on Friday he believed the Republican tax cuts will ultimately become revenue neutral over 10 years due to higher growth, but the Treasury will likely ask Congress for more money to implement the plan.
The Course of the Dollar
We tell our students not to read too much into the strength or weakness of a currency. However, the dollar’s trajectory since November 2016 is quite striking.
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Formal Assessment of the Growth Impact of the TCJA
Never have so many simulations been ignored in favor of faith in tax cuts. Here’s the CRFB’s run down on growth impacts from the tax legislation as passed.
Guest Contribution: “Trade and Inequality Within Countries”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. This is an extended version of a column that appeared at Project Syndicate.
Negative interest rates
A few years ago, most economic models presumed that interest rates were subject to a lower bound of zero. Why lend a dollar to someone who only promises to pay you back 99 cents, when you could just hold on to the dollar yourself? But we now have several years of experience from Sweden, Denmark, Switzerland, Japan, and the European Central Bank in which the central bank successfully induced negative interest rates in hopes of stimulating a greater level of spending on goods and services. We have enough data now to take a look at how much that seems to have accomplished, and update my earlier discussion of this topic.
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Stephen Moore: “When It Comes To Electric Power, Coal Is No. 1”
That’s a title of a July 28 piece in IBD. He writes:
According to the Energy Information Administration, which tracks energy use in production on a monthly basis, the single largest source of electric power for the first half of 2017 was…coal.