Here's the problem with this economists prediction:
Falling oil prices have the net effect of a HUGE TAX BREAK, far bigger than the Federal Government would provide.
Less $$ in the gas tank = more $$ in consumers pockets. What they'll do with that additional money remains to be seen, however typically that money is spent on other goods and services which spurs the economy.
It's fact that more $$ in people's pockets, the more the economy recovers. Happens every time.
He could be saying that low oil prices are not being caused by the Saudis, but by a global recession. The point is being made because no way increased supply can possibly cause such a huge drop. See http://davidstockmanscontracorner.com/occams-oil-razor-oil-is-falling-hard-because-world-demand-is-falling-hard/
In that case, interest rates will go down, though, yes, can’t go much lower.
“Falling oil prices have the net effect of a HUGE TAX BREAK, far bigger than the Federal Government would provide.”
This is not true. In this case, consumer spending does not increase one cent; instead, the consumer will just have this “tax break” money to spend on something else. Instead of paying more for gasoline, the consumer will buy a Korean-made TV from a part-time clerk at Best Buy. No additional money is generated, but the same money is just spent differently. Hence, there is no additive GDP growth. Yes, input costs will drop for certain industries, but whether the savings are passed on to the consumer is another question (example: airline ticket prices have not dropped). Also, there will be wide destruction of well-paying jobs in the oil-producing states (the Dakotas, south Texas, Ohio, Pennsylvania). The average compensation in the oil industry is ~$95,000 per year, and this industry has accounted for all of the net job growth over the last 5 years. Furthermore, each oil job creates another 2.8 jobs in the local economy.
The bottom line: be careful about thinking linearly about the drop in oil prices. The second and third order effects could be devastating.