Will most of the slips you see in 2011 be pink? (photo: Amanda *Bake It Pretty*)

As long as I gave you my take on the economy in 2011, I might as well show you the wide-eyed optimistic viewpoint. Jim O’Neill, the Goldman Sachs guru who has been largely right throughout the past decade, predicts that 2011 will be “the year of the US.” Of course, this is an investor guideline. I have no problem believing that the US stock market will gain 20%, and at the same time unemployment will stay elevated. That’s little different from what corporate America pulled off in 2010. But O’Neill adds that “the growth is likely to be strong and robust enough to lead to declining unemployment which, if correct, should mean that the worst of the social consequences of the credit crisis should start to ease.” O’Neill is adamant that exports and investment will lead the way.

We know all about Goldman, but it’s in their business interest to know where the money will flow. I don’t know where he stands if Republicans manage to cut spending by $100 billion or more in the near term. Tom Coburn laid it on really thick on Fox News Sunday yesterday, predicting “apocalyptic pain” if nothing is done. I would place Coburn as strongly in the mainstream of the Republican Party on spending, at least on ideas if not on rhetoric.

I think within 3-4 years, if we have not done the critical changes that we have to make, I think the confidence in our economy and our currency will be undermined significantly. And that may scare some folks — it’s not intended to.

“We’re not taking seriously the very real and urgent threat that will undermine the standard of living in this country,” Coburn continued.

He went on to say: “Chris, the history of Republics is they average 200 years of life, and they all fail in history over fiscal matters. They rot from within before they collapse.”

Coburn said “we can cut $100 to $200 billion dollars” this year without blinking. Some of the more honest economists out there realize that would undermine all the stimulative effects of the tax cut bill. Now, O’Neill wants us to believe that exports and investment will lead the way, but most economists only raised their forecasts after the tax cut deal.

Preposterously, those who have spent a lifetime undermining government action claim that canceling the stimulus will have positive economic effects:

Grover Norquist, the president of Americans for Tax Reform, said cuts would stimulate the economy because taxpayers will perceive it is less likely that their money will be “stolen” to pay for wasteful spending.

“The victory against the omnibus spending bill is so important because it allows Republicans to make a change to spending quicker,” Norquist said. Passage “would have been devastating to morale, and to the voters.”

Norquist has this idea that the economy moves on 300 million Americans perusing the paper to make sure that federal spending isn’t too wasteful, and that they dictate their own personal earning and spending accordingly. That’s one of the crazier economic theories you can imagine, something that would get you laughed out of any university in America. But it’s the driving, overriding theory behind the party who will write the budget in the House of Representatives as soon as March. [cont’d.]

Later, Norquist says that Republicans just have to “do the right thing for the economy, even at the risk that Obama could try to take the credit for a stronger recovery,” which also goes against the lived experience of the past 700-plus days of the President in office. So Occam’s Razor suggests he’s lying through his teeth.

The less insane rationalization, from budget slayers like Maya MacGuineas, claims that there’s enough waste in the budget to cut spending massively without affecting recovery. Tom Coburn, who put out his “Wastebook” last week, has a mix of MacGuineasian “cut the waste” theory with Norquistian “spending cuts will give people strength” nonsense. None of these people are actually basing their claims on any data, because they would fall apart upon scrutiny.

You kind of know Republicans aren’t acting in the country’s best interest when they pronounce themselves willing to let the payroll tax holiday expire but not the Bush tax cuts. Though the payroll tax cut is certainly worse for stimulus than the Making Work Pay, which directs the money to lower wage earners, every single economist in America favors them over the Bush tax cuts for the wealthy. They want the payroll tax cuts to expire right in 2012, so that the economy sags in an election year. Which means they do believe that the economy still needs stimulus and that investment or exports just can’t lead the way at this time.

So as much as I’d like to see Jim O’Neill as a prophet, I don’t think he’s accounting for the whole picture.

As long as I gave you my take on the economy in 2011, I might as well show you the wide-eyed optimistic viewpoint. Jim O’Neill, the Goldman Sachs guru who has been largely right throughout the past decade, predicts that 2011 will be “the year of the US.” Of course, this is an investor guideline. I have no problem believing that the US stock market will gain 20%, and at the same time unemployment will stay elevated. That’s little different from what corporate America pulled off in 2010. But O’Neill adds that “the growth is likely to be strong and robust enough to lead to declining unemployment which, if correct, should mean that the worst of the social consequences of the credit crisis should start to ease.” O’Neill is adamant that exports and investment will lead the way.

We know all about Goldman, but it’s in their business interest to know where the money will flow. I don’t know where he stands if Republicans manage to cut spending by $100 billion or more in the near term. Tom Coburn laid it on really thick on Fox News Sunday yesterday, predicting “apocalyptic pain” if nothing is done. I would place Coburn as strongly in the mainstream of the Republican Party on spending, at least on ideas if not on rhetoric.

I think within 3-4 years, if we have not done the critical changes that we have to make, I think the confidence in our economy and our currency will be undermined significantly. And that may scare some folks — it’s not intended to.

“We’re not taking seriously the very real and urgent threat that will undermine the standard of living in this country,” Coburn continued.

He went on to say: “Chris, the history of Republics is they average 200 years of life, and they all fail in history over fiscal matters. They rot from within before they collapse.”

Coburn said “we can cut $100 to $200 billion dollars” this year without blinking. Some of the more honest economists out there realize that would undermine all the stimulative effects of the tax cut bill. Now, O’Neill wants us to believe that exports and investment will lead the way, but most economists only raised their forecasts after the tax cut deal.

Preposterously, those who have spent a lifetime undermining government action claim that canceling the stimulus will have positive economic effects:

Grover Norquist, the president of Americans for Tax Reform, said cuts would stimulate the economy because taxpayers will perceive it is less likely that their money will be “stolen” to pay for wasteful spending.

“The victory against the omnibus spending bill is so important because it allows Republicans to make a change to spending quicker,” Norquist said. Passage “would have been devastating to morale, and to the voters.”

Norquist has this idea that the economy moves on 300 million Americans perusing the paper to make sure that federal spending isn’t too wasteful, and that they dictate their own personal earning and spending accordingly. That’s one of the crazier economic theories you can imagine, something that would get you laughed out of any university in America. But it’s the driving, overriding theory behind the party who will write the budget in the House of Representatives as soon as March.

Later, Norquist says that Republicans just have to “do the right thing for the economy, even at the risk that Obama could try to take the credit for a stronger recovery,” which also goes against the lived experience of the past 700-plus days of the President in office. So Occam’s Razor suggests he’s lying through his teeth.

The less insane rationalization, from budget slayers like Maya MacGuineas, claims that there’s enough waste in the budget to cut spending massively without affecting recovery. Tom Coburn, who put out his “Wastebook” last week, has a mix of MacGuineasian “cut the waste” theory with Norquistian “spending cuts will give people strength” nonsense. None of these people are actually basing their claims on any data, because they would fall apart upon scrutiny.

You kind of know Republicans aren’t acting in the country’s best interest when they pronounce themselves willing to let the payroll tax holiday expire but not the Bush tax cuts. Though the payroll tax cut is certainly worse for stimulus than the Making Work Pay, which directs the money to lower wage earners, every single economist in America favors them over the Bush tax cuts for the wealthy. They want the payroll tax cuts to expire right in 2012, so that the economy sags in an election year. Which means they do believe that the economy still needs stimulus and that investment or exports just can’t lead the way at this time.

So as much as I’d like to see Jim O’Neill as a prophet, I don’t think he’s accounting for the whole picture.

David Dayen

David Dayen