FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
October 27, 2020

IN THIS ISSUE:

1. Overview – Big Economic Jump Due Out Friday

2. 3Q GDP Expected to Soar Over 30% (Annual Rate)

3. I Voted Last Week – Long Lines – Hope You Do Too

4. Excellent Article By Stephen Moore On The Election

Overview – Big Economic Jump Due Out Friday

Perhaps the most important economic report of the year comes out this Friday. That’s when the Commerce Department will release its first estimate of 3Q Gross Domestic Product, the sum of all goods and services produced in the third quarter.

I say “the most important report of the year” because we all knew the GDP number for the 2Q was going to be a disaster because of the economic shutdown last spring. It was inevitable and everyone knew it happened. The first report on the 3Q will be more important because none of us knows how much the economy rebounded in July-September. We’re about to see.

Pre-report estimates from forecasters put the 3Q rebound at 25%-35% (annual rate) following the plunge of over 30% in the 2Q. I’ll give you the median forecast below. Unfortunately, many Americans are likely to believe that if the economy dropped 30% in the 2Q and then bounced back 30% in the 3Q, then we’re back to even. Of course, it doesn’t work that way. I’ll explain as we go along today.

Following that discussion, I am going to reprint the latest column from Stephen Moore, one of my favorite writers, who offers his analysis on Joe Biden’s liberal “tax & spend” economic plan he intends to implement if he is elected on November 3. You know I think that plan will be a disaster, but I thought you’d like to hear what one of my favorite economists believes.

Stephen Moore is a senior fellow at the Heritage Foundation, the co-founder of the Committee to Unleash Prosperity and is a member of President Trump’s Economic Recovery Task Force.

3Q GDP Expected to Soar Over 30% on Friday

The Commerce Department will release its first estimate of 3Q GDP on Friday morning at 8:30 Eastern. The pre-report consensus – the median of forecasters’ predictions – is for a rise of 31.4% (annual rate) following the plunge of 31.7% in the 2Q.

If accurate, it will have been one of the largest jumps in quarterly economic output in America’s history – just as the 2Q plunge was the worst since the Great Depression.

Here are some of the main drivers of the rebound in the 3Q. Personal consumption which accounts for apprx. 70% of economic growth bounced back sharply in July-September. Business investment in equipment rebounded strongly in the 3Q. Home building revived rapidly in the 3Q. And government spending surged in response to the pandemic, just to name a few.

Now, it’s important to point out that even with a similar sharp rebound in the 3Q versus the plunge in the 2Q, the economy will not be anywhere near back to where it was when the pandemic hit. A 30% bounce following a 30% plunge doesn’t get you back to breakeven.

As you can see, to fully recover from a 30% loss, you have to gain almost 43% to get back to breakeven. So, a 31% loss in the 2Q followed by a 31% gain in the 3Q doesn’t get us back to where the economy was before the pandemic broke out. We’ve still got a ways to go.

Most forecasters believe the US economy will gain another 5%-10% (maybe more) in the 4Q, so we should be back to where we were before COVID – 19 by yearend, if there are no big surprises. Let’s hope so!

I Voted Last Week – Long Lines – I Hope You Do Too

I finally got to vote last week. The lines at polling places all across Texas have been enormous, with wait times of two hours and much more in many places. I read yesterday that Texas is leading the nation in early voting with 80% of all the votes cast in 2016 already submitted. From what I read, it has been like this in many parts of the country.

Early voting has smashed all records this year, as has mail-in voting. It’s clear the six million Democrats who sat out the 2016 election, and cost Hillary the White House, are not staying home this year. That should help Joe Biden.

What struck me most of all when I went to vote was the huge number of very young people who were there. I’ve never seen so many young people at a voting location ever before. And there were very few old people in the line – I assume most voted by mail to avoid COVID.

Anyway, it was refreshing to see so many young people showing up in person to vote. I’m not sure how they’re voting, but the media would have us believe it’s for Biden. We’ll know soon enough.

Now, let’s move on to Stephen Moore’s excellent column from last week.

Biden’s 7 Economic Deadly Sins
by Stephen Moore, Oct. 20

Joe Biden keeps claiming to be a centrist Democrat. Polls show that, while most realize that President Donald Trump would be better for our economy than Biden, many think that old Uncle Joe's economic plan is relatively harmless and won't endanger jobs, paychecks or retirement savings.

Think again. Let's look at what's actually in Biden's economic plan so everyone has their eyes wide open when they vote. I've read the whole thing.

There is nothing centrist in this economic scheme. In many ways, it is the most radical plan proposed by a major presidential nominee of either party in any of our lifetimes. Biden's plan is further to the socialist left than anything such liberal nominees of yesteryear, including Jimmy Carter, George McGovern, Barack Obama and even Hillary Clinton, ever dreamed.

Here are the most dangerous ideas in the Biden plan, or what I call Biden's seven economic deadly sins:

No. 1: The most significant tax increase in the history of America. Biden would raise taxes by some $4 trillion over the next decade. The plan clobbers small businesses with a maximum corporate income tax rate from 21% now to 28%. The capital gains tax would skyrocket from 24% to 40% for those making more than $1 million per year, thus threatening to tank the stock market and reduce every family's retirement savings in America.

No. 2: The end of right-to-work laws in America. Biden's plan forces millions of workers to join a union and pay union dues, whether they want to or not. Today, 27 states, including Arizona, Georgia, Michigan and Texas, have right-to-work laws that give workers the right to choose to join the union. The National Right to Work Association warns that these state laws are effectively repealed under the Biden plan. Big Labor bosses could snatch away thousands of dollars right out of workers' paychecks without their consent.

No. 3: The end of U.S. energy independence. Under Trump, America has become energy independent for the first time in at least 50 years. Biden insists he won't ban fracking, but his radical energy agenda requires zero fossil fuels by 2035, which means hundreds of high-paying jobs lost in states such as Pennsylvania, Ohio and Texas. Saudi oil sheikhs and Russia will love that plan, but it sure isn't good for America.

No. 4: Higher death taxes. The death tax is one of the most unfair taxes because the public already pays a lifetime of income taxes, payroll taxes, sales taxes, gas taxes and property taxes. The Biden tax scheme of taxing 45% of a family farm, ranch or family-owned business could require these legacy businesses to break up to pay the taxes. That's un-American.

No. 5: Say hello again to the corrupt Paris climate treaty. Trump wisely pulled the United States out because almost none of the countries has come close to meeting their pollution targets. They want America to pay all the bills, which Biden seems willing to do. We are already reducing carbon emissions more than virtually any other nation. China and India are adding multiple times as much pollution into the atmosphere as America is.

No. 6: A $400 billion blue-state bailout. Biden wants states that have already balanced their budgets, such as Arizona, Tennessee and Florida, to bail out bankrupt blue states such as California, Illinois, New Jersey and New York. That isn't fair. It only rewards bad behavior and government lockdowns imposed by incompetent Democratic mayors and governors.

No. 7: A $15-an-hour minimum wage. This will destroy millions of jobs for young people and low-skilled workers. It will severely damage poorer states with lower costs of living, such as Mississippi, Arkansas and South Carolina. Can you think of a worse time to saddle small businesses and restaurants with higher costs when so many firms are already facing bankruptcy due to the virus?

Is it any wonder that socialist Sen. Bernie Sanders and radical leftist Rep. Alexandria Ocasio-Cortez have enthusiastically embraced the Biden plan? Some economists, myself included, worry that we could be looking at a second Great Depression with the Biden policies. Something to think about over the next two weeks. END QUOTE

Hoping everyone votes,

Gary D. Halbert

SPECIAL ARTICLES

Biden’s Tirade Against Oil At Debate – Big Mistake!

Victor Davis Hanson – Trump Won Debate, Biden Could Implode

What We Know About the Biden Family Scandal (Very good)

Gary's Between the Lines Blog: US Budget Deficit Explodes To Record $3.1 Trillion

 

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