May 2013, Shawn Fremstad, Rebecca Vallas

You get a one month jump in housing prices and suddenly the economy is booming. Okay, that's not quite fair, housing prices have been rising at a pretty rapid pace for a year now, but still does the Post really want to claim that the economy is "surprisingly robust?"

Let's remember where we stand. The economy grew at a 2.5 percent annual rate in the first quarter. Given the economy's trend rate of growth is between 2.2-2.5 percent, this means that we were at best making up lost ground at the rate of 0.3 percent annually. The Congressional Budget Office estimates that the economy is 6.0 percent below its potential. At the first quarter growth rate it will therefore take us at least twenty years to get back to potential GDP. 

But it gets worse. Much of the growth in the first quarter was due to a jump in inventories. Final demand grew at just a 1.5 percent annual rate. Investment in new equipment is only slightly above year ago levels. Non-residential construction has been falling in recent months.

The second quarter does not look a whole lot better. Retail sales fell 0.5 percent in March. They only made up 0.1 percentage point of this drop in April. The April job growth numbers were not bad, but because of a sharp drop in the length of the average workweek, there was a drop in index of total hours that equaled the largest in the recovery.

In addition to the run-up in house prices, the optimism rests on rising stock prices and a jump in the latest consumer confidence numbers. Not surprisingly, most of the rise in the consumer confidence index was due to the expectations component. This component is highly erratic and has little relationship to consumption. The current conditions index also rose, but not by anywhere near as much and not to levels higher than it has been in the past.

Dan Beeton
Third World Quarterly, May 28, 2013
En Español

May 28, 2013 (Housing Market Monitor)

May 28, 2013

Dean Baker
Truthout, May 27, 2013

Mark WeisbrotAl Jazeera English, May 26, 2013En Español

Robert Samuelson makes an important point in his column today, the "strong" dollar is hurting the country's economy. This fact is central to understanding the imbalances that have shaken the U.S. and world economy over the last 15 years. Because of an over-valued dollar the trade deficit exploded in the late 1990s.

A trade deficit means that demand is going overseas rather than for goods and services in the United States. To offset this lost demand we must either have public sector deficits or we must have private savings lag investment, or some combination. In the late 1990s the consumption, and resulted low savings, generated by the stock bubble filled the demand gap. In the last decade, when the trade deficit hit a peak of 6.0 percent of GDP in 2006, the construction and consumption booms generated by the housing bubble filled the gap.

Until we get the dollar down to a level consistent with more balanced trade we will have a large demand gap that will have to be filled by either public or private sector deficits. That is a fact of accounting, not a debatable point. Those who disagree simply do not understand.

The part of the story that Samuelson misses is that the over-valued dollar is a relatively recent phenomenon, not something that dates from the U.S. becoming the world's leading reserve currency. The dollars soared in 1997 as a result of the U.S. government and IMF"s mismanagement of the East Asian bailout from the financial crisis.

The conditions they imposed on the countries of the region led developing countries around the world to begin to accumulate massive amounts of dollars as a cushion so that they would not ever be in the situation that the East Asian countries found themselves in 1997. This means that the imbalances of the last 15 years can be directly attributed to the failures of the Greenspan-Rubin-Summers team (a.k.a. "The Committee that Saved the World") that directed the bailout.

As the January 1, 2014 date, when the main body of President Obama's health care plan takes effect, comes closer Republicans are getting ever more frantic. After all, the risk to the country is enormous. The program will extend health care insurance to tens of millions of people and provide real security to tens of millions more (suppose you get sick now and lose the job that provides you insurance).

Now that is really scary. People may like the plan and actually look to extend it and improve it in various ways that could mean lower incomes for insurers, doctors, and other providers. This is why the Republicans are pulling out all the stops to sink the plan now before it's too late.

Robert Samuelson carries the torch today in his column "the fog of Obamacare," the point of which is that it is all so confusing. As evidence he cites polls showing that people don't know what the main provisions of the bill are or when they take effect or even if the bill was passed into law.

Yes, that is bad news. It probably didn't help matters in this area that we had many Republicans talking about death panels or that the government was going to take over the health care system.

Unfortunately the public is often less informed that many of us might like. They think that welfare and foreign aid are among the largest items in the federal budget. Many also thought that Saddam Hussein was behind the September 11th attacks. In other areas Samuelson has not been especially concerned about public ignorance.

But Samuelson tells us that employers are also confused about their responsibilities. He knows this because he talked to the heads of four employer consulting companies. He tells readers that many of these companies "are only now coming to grips with the ACA, because they’d assumed that the Supreme Court would invalidate it or that a Republican White House would repeal it."

So employers rely on consultants who had not paid attention to the ACA because they thought the Supreme Court would repeal it or that Romney would win the election? Now that is scary.