Friday, February 24, 2017

Not Since 1973

The US economy posted the lowest initial jobless claims number since 1973.  This doesn't mean that much, since there are no specific Trump policy enactments that could have done anything yet.  But, the atmosphere has definitely changed since Trump was elected and a new spirit of business optimism may have been a factor.  No one really knows.

The big debate will be whether economic growth can be increased above and beyond the 3 percent level.  Many, mostly Keynesian, economists don't think so.  But, other economists disagree.  Do free markets matter?  That really is the penultimate issue.

The attitude since the inauguration of the first George Bush has been that free markets really don't matter and government intrusion is irrelevant to the performance of the economy.  That view is about to be put to the test.

Forecasts of economic disaster and stock market collapses that were routinely made prior to the Brexit vote and prior to Trump's election proved to be among the worst forecasts in history.  Those who thought that the government was the route to prosperity predicted that free markets would torpedo economic growth.  Folks with that view do not have history on their side.

The state of academic macroeconomics is so pitiful that is unlikely that economists have much to say about economic performance any longer.  Witness Bernancke's soothing statements in 2008 just prior to the collapse of the economy.  Yellen's forecasts have been no better.  Economists can't seem to be able to out-do a straight-edge in predicting the future of the economy.  That doesn't keep them from trying.  Mostly they simply put forward their political views based upon not much economic science.

But, the economy is beginning to feel pretty good.  Potential repeal of Obamacare, rollback of excessive regulation of the financial sector and the energy industry, lower and simplified taxes all point to a potential rebirth of the historically powerful American economic engine.

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