Sunday, April 21, 2019

USMCA, the International Trade Commission, and Kevin Hassett

Tracey Samuelson of Market Place writes:
USMCA would slightly boost U.S. economy, says ITC report - On Thursday, the International Trade Commission released its assessment of the projected economic impact of USMCA, President Trump's proposed replacement for NAFTA. The report shows the new deal is projected to boost the U.S. economy by .35% when fully implemented.
I will to read this report after I get over laughing at the latest from Menzie Chinn who quotes Kevin Hassett:
Two-thirds of U.S. CFO’s expect a recession by summer of next year, but White House Council of Economic Advisers Chair Kevin Hassett believes the economy shows no signs of slowing down. “There’s so much momentum right now,” he told FOX Business Stuart Varney on Friday. “It just seems almost impossible that there would be a recession by the summer of next year.”
You should watch what turned out to be a really stupid interview on Fox Business covering not only on the alleged impossibility of a recession and how Hassett fluffed off Trump pressuring the FED to lower interest rates. Hey Kevin – if it is impossible for there to be a recession, why lower interest rates? Never mind that for now and listen to how Hassett declared USMCA to be the best trade deal and how it would increase GDP by $100 billion in the first year. Did the ITC really say that? Update: The report can be found here. It does say on page 37:
The results of the industry- and provision-specific analyses were then jointly integrated into an economy-wide model that provided estimates on the combined impact of the agreement on the U.S. economy, including key economic indicators such as GDP, trade, and employment. The economy-wide model estimates that USMCA would likely increase GDP by about 0.35 percent ($68.2 billion), employment by about 0.12 percent (176,000 full-time equivalent jobs), and exports to Canada and Mexico by about 5.9 and 6.7 percent ($19.1 billion and $14.2 billion), respectively.
But let’s turn to page 43:
The economy-wide model estimates the U.S. economy’s complete adjustment to the full implementation of USMCA, which is assumed to be year 6 after USMCA enters into force. Therefore, the estimates show the impact of the modeled provisions after the economy has responded to the changes in USMCA. The estimates show the incremental effects of USMCA relative to a baseline that reflects the U.S. economy in 2017 and assumes that no other changes to the economy unfold. The model is long term and does not estimate effects during a transition.
It would have been nice had Hassett’s noted the gains were long-term and came to a mere 0.35% of GDP. No – he suggested to Stuart Varney that yuuuge benefits would occur in the first year. Yes – even the chair of Trump’s CEA lies about everything!

2 comments: said...

I have stayed out of the game on Econbrowser of trying to predict when the next recession will arrive (I do not know), but it is clear that Hassett's claim that it is impossible before next summer is just plain ridiculous. Of course if one does not happen he will claim he was right, but from here this extreme claim has the credibility of his infamous Dow 36,000 one of 20 years ago or so.

Sandwichman said...

No Recession! No Recession! No Collusion, no Obstruction, no Recession! What could be more obvious?