Friday, August 14, 2015

6% Real GDP Growth and DOW 36000

Jonathan Chait says Huckabee has trumped Jeb!
But there’s a weakness in basing your economic message on pulling a crazy number out of thin air: Another candidate can always pull an even crazier number out of thin air. And now Mike Huckabee has done it. The obvious choice would be to one-up Bush by promising 5 percent growth. But Huckabee, thinking two steps in advance, probably realized that if he went with 5 percent, another candidate could still leapfrog him. So he went with 6 percent.
His voodoo economics seemed to be based on passing that “FAIR” tax. But never mind Huckabee as how Jeb! came up with 4% is really funny:
That ambitious goal was first raised as Bush and other advisers to the George W. Bush Institute discussed a distinctive economic program the organization could promote, recalled James Glassman, then the institute's executive director.
Glassman once wrote that one should value stocks by assuming that all companies have a value to sales ratio equal to one. He also co-authored DOW 36000 which claimed valuations should be 100 times profits. How is this supposed to work unless all companies have a profit margin of only 1 percent? Pulling numbers out of thin air is bad enough but putting forth valuation multiples that are so wildly inconsistent seems to be the specialty of Team Republican.


Sandwichman said...

Isn't "thin air" just the polite term for somewhere the sun don't shine? said...

It is funny that not only does Glassman show up getting taken seriously, but so does his coauthor Hassett, now at AEI I think. Of course, there are quite a few commentators on various subjects who have been publicly and massively wrong about a lot of things, but somehow continue to be approached for their views of things.

The latest, slightly different, is Paul Wolfowitz apparently advising Jeb Bush on foreign policy. Maybe he thinks that if we invade Iran, we'll be met by people with flowers, and the Iranians will pay for our invasion, kind of like Trump with his view that Mexico will pay for that wall he wants to build.

Sandwichman said...

Could do 6% or more for a several years in a WW II mobilization-style transition to a carbon-neutral economy -- after which, though, it would be steady state or degrowth. But no, don't need to do that -- there is a built-in mechanism and state economic planning is for serfs.

Sandwichman said...

Oh, and of course for Hoaxterbee, climate change is a hoax.