December 07, 2014
The NYT had an article which discussed the potential political implications of a better than expected economic picture. At one point the article comments:
“The White House’s push for fast-track trade negotiating powers — and eventually for a major Trans-Pacific Partnership trade pact — could be eased by growing confidence in the economy and the nation’s ability to compete internationally.”
This comment is essentially a non sequitur. The major pacts up for negotiation, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP) will have almost no impact on traditional trade barriers in the form of tariffs or quotas. They are about imposing a regulatory structure on federal, state, and local governments that will be more business friendly.
For example, the deals are likely to limit the sorts of environmental and health and safety restrictions that can be put in place. They will also likely limit the ability of governments to put in place privacy restrictions on the use of personal data. And they will increase patent and copyright protections, likely putting in place rules similar to those that Congress tried to impose through the Stop Online Piracy Act (SOPA). There is almost nothing about the likely provisions of the TPP and TTIP that would become more acceptable to the public due to a stronger economy.
This article also includes the bizarre comment:
“The Republican Congress will again want to pursue a balanced budget while also cutting taxes.”
If the republicans want to balance the budget and cut taxes, then they want to cut spending. It would have been simpler and more informative to just say Republicans want to cut spending to offset the revenue lost through tax cuts and lower the deficit.
It is also important to note that economy is not really doing much better than expected. Through the first three quarters of 2014 the economy has grown at a 2.1 percent annual rate. At the start of the year, the Congressional Budget Office projected the economy would grow by 3.1 percent in 2014. Employment has grown more rapidly than projected and unemployment has fallen by more than projected. This is due to lower than expected productivity growth and people dropping out of the labor force.
Tax collections have been higher than expected largely as a result of the run-up in the stock market and the resulting capital gains. Part of the story of the strong stock market has been the redistribution from wages to profits. Unless the we see several more years of strong job growth like the 321,000 job gains in November, workers are not likely to see substantial wage gains. Untill workers start seeing wage growth, and thereby share in the benefits of economic growth, most people will not view the economy as strong.
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