My Economic Forecast
By Arnold Kling
Traditionally, fiscal stimulus would increase the demand for automobiles and for other consumer durable goods. Growth in these sectors would then spill over into the rest of the economy. Today, however, many of the automobiles, televisions, and other durable goods that Americans buy are manufactured abroad. Much of the low-skilled labor that meets American demand for these goods works overseas. Thus, the ability to increase employment in this country by stimulating demand for consumer durables is not what it used to be.
…I expect that growth in real GDP will pick up strongly over the next year, as pent-up demand for new household formation and durable goods purchases produces a strong rebound. However, for reasons given above, employment growth will be sluggish while inflation pressures will slowly build.
It is interesting to see in the comments at the Pajamas Media site I am accused of being an Obama shill. If they also read this, they might think I’m even more in the tank for the Democrats.