Recession Talk Could Impact 2008 Election

IBD ^ | December 3, 2007 | Lawrence Kudlow

[Kaslin]

There was some revealing information in the three-year forecast published by the Federal Reserve last week. It looks like Ben Bernanke and Co. are dissing high oil and gold prices and the sagging dollar as influences on future inflation.

Instead, they basically see 2% inflation — both headline and core — in 2008, 2009 and 2010. The Fed also sees Goldilocks-type economic growth — not too hot, not too cold — for the next three years. For 2008, an election year, the Fed is looking at 2.1% growth, its lowest estimate. This rises to 2.5% in 2009 and 2010.

A slower 2008 does make some sense given the lingering subprime hangover and the housing recession. But one wonders if the Fed might be thinking about higher tax rates under a Democrat like Hillary Clinton, which would produce substandard growth for the longer term.

Nevertheless, with the Fed forecasting 2.1% growth next year, it certainly looks like it'll follow Treasury bond market interest rates down toward a 3.5% federal funds rate. (Today's rate stands at 4.5%.) On CNBC this week, former Fed Gov. Wayne Angell told me to expect this, and former Dallas Fed President Bob McTeer agrees.

My own view remains the same:

[Parley Baer]

Heck there has been recession talk, bad economy talk for seven years. Nothing new here. Mainly BS put out by the msm.

[traditional1]

We’re all doomed, I tell ya........DOOMED !

[BenLurkin]

there has been recession talk, bad economy talk for seven years

Very true.

Guess the MSM is hoping that it has successfully dumbed down the public to an attention span of 45 days.

[AmericanInTokyo]

The talk of the economy on FR will for the most part (with some dissenters in the minority) all be optimistic, until 12 noon, on 20 January 2009--if a Democrat takes over.

Then, this forum will shift to a pessimistic mode, and the DU type Lib Dem forums will go from pessmism to optimism.

It always happens. Whichever party is in power.

Regardless, the economy a few months leading into January 2009, and a few months out of January 2009, will essentially be the same.

Just the perceptions, and loyalties will change, IMHO.

[traditional1]

IF a Democrat takes the WH in 2009 with a Democrat Congress, there's no doubt the entire country (those who work for a living) will be pessimistic.

Your wallet will be OWNED !

I don't need to wait until January 2009 to know what will happen to this country if that happens (Dem WH + Dem Congress).....

[AmericanInTokyo]

That may well be part of the story, yes.

But I think you get my point.

[Signalman]

So far, former Tennessee Sen. Fred Thompson is preparing to unveil a corporate tax cut for business income and capital gains. That's what I call the right medicine for a sluggish economy.

Hey, I'm a Mitt guy, but this tax cut plan from Fred really sounds good. Whomever is the nominee, he needs to hammer the Dems about their plans to raise taxes, and get them to admit they will. Look what it did to Walter Mondull.