Growth is Not the Problem

Another great column from Madison's own Mike Darda on National Review Online.

To be sure, if the residential real estate market goes into a tailspin, households likely would sideline a significant portion of their after-tax income, and spending would decline. However, widespread weakness in residential real estate typically has followed periods of high short- and long-term real interest rates that also weakened employment and output.

Today, real short rates have normalized while long rates remain well below historical norms. This is not to say there are no significant risks to the outlook. If Congress doesn'’t act to extend the 2003 tax cuts, tax rates on capital will rise, which would depress after-tax rates of return to capital and stunt growth. Even worse, there are rumors circulating that China could be tagged a '“currency manipulator'” by the U.S. Treasury, which would only invite a potentially disastrous protectionist legislative response from Congress (i.e., a 27.5 percent tariff on Chinese goods).

Read the entire piece. But with all Darda columns, keep your Thesaurus handy.