One of Brian’s Favorite Quotes
The world always makes the assumption that the exposure of an error is identical with the discovery of truth that the error and truth are simply opposite. They are nothing of the sort. What the world turns to, when it is cured of one error, is usually simply another error, and maybe one worse than the first one. H. L. Mencken”
Goldman’s Jan Hatzius Answers The 10 Most Important Questions For 2013
And the most important question of 2013 is….
1.Will the 2013 tax hike tip the economy back into recession?
No. To be sure, it will likely deal a heavy blow to household finances, and we therefore expect consumer
But we do not expect the impact to be as bad as suggested by Exhibit 1. We recently estimated the effects of higher taxes on consumption using three different econometric models: (1) a vector autoregression (VAR) model that traces out the dynamic impact of shocks to disposable income on consumption; (2) the Fed’s large-scale econometric model, FRB/US; and (3) the database of “exogenous” tax increases compiled by economists Christina and David Romer of the University of California, Berkeley. As illustrated in Exhibit 2, the estimates for the impact on real consumer spending growth in the first half of 2013 from the three models center around a 1-percentage-point hit to real consumer spending growth—a substantial impact, but not enough to cause an outright contraction in spending.