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Richmans' Trade and Taxes Blog
Ambrose Evans Pritchard writes:
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.
David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. "You truly cannot make this stuff up. The US governnment is freaked out about the prospect of a double-dip," he said.
The White House request is a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade.
Some economic advisors are able to learn from their mistakes. Larry Summers does not appear to have that ability. He keeps trying to blow up the economic tire without patching the trade deficit leak. For the last three quarters, the U.S. trade deficits have been increasing at a $220 billion per year rate. Summers thinks that he can overcome that leak with an additional $200 billion of government spending.
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