The Recessions of 2003, 2004, 2006 & 2006

From today's WSJ (subscription required):

Meanwhile, back at the economy, you may have noticed that 2006 ended without a recession. This follows the recessions of 2003, 2004 and 2005, all of which also never occurred, though they were widely warned about in the press and even forecast by many economists at some point during each of those years.

The big economic story going into this New Year is that growth is accelerating. Jobless claims have dipped, as the labor market stays tight amid a low 4.5% unemployment rate and rapidly rising real wages. Corporate profits continue to defy gravity, growing at nearly double-digit rates some five years into this expansion. Economist Ed Hyman's ISI Group reports that as of last Friday some 57% of companies had beat profit expectations for the fourth quarter.

Then there's the "trade deficit," which was supposed to have produced a crisis any day now but is instead contributing to faster growth as American exports soar. Peppier growth abroad is helping, especially in Europe, assuming Germany's big increase in value-added taxes this month doesn't get in the way. Oil prices have come down, and even the housing slump seems to have stabilized in some parts of the country.




UPDATE: Apparently, our government revenues are off the charts t00, in light of the capital gains tax cuts. Dan Clifton writes:

The debate about the capital gains tax cut is over. When Congress passed the 15 percent reduction on capital gains all we heard from the naysayers is this will produce massive deficits. When Congress extended the 15 percent rate in 2006 we heard the same tired rhetoric - only louder. Now the new leadership want to repeal this tax cut to generate revenue to the federal government. Based on the new data they may want to reconsider whether repealing this tax cut will generate any revenue to the federal government.

Today's CBO report puts the debate to bed. We were told by the Joint Committee on Taxation (JCT) the capital gains tax cut would "cost" the Federal Treasury $5.4 billion in fiscal years 2003-2006. Thus, the initial CBO forecast (January 2004) forecasted capital gains revenue to be $42 billion in 2003, $46 billion in 2004, $52 billion in 2005, and $57 billion in 2006.

Well in what could now be considered the worst forecast in modern times we find out today capital gains tax collections were actually $51 billion in 2003, $72 billion in 2004, $97 billion in 2005, and $110 billion in 2006. For 2005 and 2006 collections nearly doubled the initial forecast.

Translation = total capital gains tax collections over this period were 68 percent higher than forecasted. But even more important, a loss of $5.4 billion is actually a gain of $133 billion. That is a swing of $138 billion in in just short years since the January 2004 forecast. Oops.

Hat tip to Don Luskin. I conclude with the following:

1) Properly structured taxes (and tax cuts) reduce poverty and distribute wealth.

2) Congressional entitlement programs reduce wealth and distribute poverty.

Please remember this when you vote in 2008. Unfortuantely, neither Dems nor GOPs understand these principles yet.

I have an idea of which I'm proud (does not happen often): legislators should take a economics and law policy test before they can candidate. The test results will not prevent them from being voted into office--the voters have the final say. But the test results will be listed on the ballots. Think of it as American Legislator: American Idol for congress, without the ratings starved judges skewing the phone-in votes.