On The Economy, The Environment & Income Tax Time by Gary D. Halbert
FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
March 31, 2015
IN THIS ISSUE:
- How Concerned Are Americans About Climate Change?
- The Weakest US Economic Recovery in Generations
- US Economy Continues to Disappoint in Most Reports
- Ahead of Tax Time, Some Interesting Rasmussen Surveys
The combination of topics for today’s E-Letter might seem unusual, and it is – the economy, the environment and income tax time. How do those fit together? They don’t really, but I think you will find today’s discussion on each to be interesting.
The economy has been in a slow recovery for the past five-and-a- half years. It’s the weakest post-recession rebound in generations. The Commerce Department’s latest revision of 4Q GDP shows that nothing much has changed. Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker 1Q, perhaps only around 1% growth in GDP.
Today we will look at several recent economic reports, most of which were (you guessed it, unless you didn’t read last week’s E-letter) disappointing. That includes last week’s final Gross Domestic Product report for the 4Q, Gallup’s Economic Confidence Index and February durable goods orders and housing starts.
I also want to share with you some of the latest interesting polling results from Rasmussen Reports that I think you’ll find very interesting, especially regarding how most Americans feel about the IRS – given that income tax day is just two weeks away.
But before we get to those topics, I want to share with you the findings of a couple of new Gallup polls which gauge Americans’ concerns about the environment and global warming. With so much alarmist rhetoric out there, you would think that the environment would be near the top of most Americans’ worry list. Let’s take a look.
How Concerned Are Americans About Climate Change?
With back-to-back severe winters in the US, climate scientists and environmental activists are warning louder than ever about global warming or “climate change,” as they now prefer to call it. Given the intensity and frequency of the warnings, you would think that the environment would be a top concern for most Americans. Yet the latest Gallup Environment Surveys taken in early March prove otherwise.
One of the questions asked of over 1,000 adults (age 18 or over and in all 50 states and DC) was: How would you rate the overall quality of the environment in this country today – excellent/good or fair or poor? Now before you look at the chart below, think of which of the three categories you would select, and which one you would think most other people would pick. Now take a look.
Did you think that 50% of survey respondents would answer “Excellent/Good,” the largest selection of the three? Did you think that 90% would answer Excellent/Good or “Fair”? And finally, did you expect that only 9% would select “Poor”? I didn’t!
As you can also see, the percentage selecting Excellent/Good has increased significantly since the low in 2009. The percentage selecting Poor has declined significantly since the high in 2009. This is despite the increasingly shrill warnings from some climate scientists and environmental activists, including President Obama.
In a separate survey, Gallup asked Americans about specific environmental threats they worry about, ranging from global warming to polluted drinking water to pollution of rivers, lakes and reservoirs to air pollution to the loss of rain forests, etc.
Again, before you look at the chart below, think about which of the five specific threats worry you the most, and which one the least. Now take a look.
What this chart tells us is that the only significant point about the public’s concern over global warming is that it has gone essentially nowhere over the last 25 years. This is rather remarkable given that the environmentalists have waged perhaps the most expensive public relations campaign ever over the same period.
In doing so, they have had significant help from the public school system, the universities, an infinite parade of celebrities, think tanks and an entire major political party – the Democrats. Yet most Americans are considerably less worried today over most environmental threats.
My main point today is that even though the shrieking from the environmentalist crowd is getting louder, Americans are becoming more positive about the quality of their environment and less concerned about the threats.
Let’s move on to some economic analysis.
The Weakest US Economic Recovery in Generations
The economy has been in a slow recovery for the past five-and-a- half years. It’s the weakest post-recession rebound in generations. The Commerce Department’s latest revision of 4Q GDP shows that nothing much has changed, as I will discuss below, even though there was some brief optimism last year when 3Q GDP hit 5%. But that didn’t last.
Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker 1Q, perhaps only around 1% growth in GDP. And Wall Street is talking about a possible profits recession, with expectations of a 2-3% drop in corporate earnings for the first half of 2015.
Globally, things are even worse. Europe, Japan, and Russia are all in recession or near it, and all are flirting with outright deflation. China’s formerly red-hot economy is also faltering. Japan doubled-down on quantitative easing late last year, while Europe started QE in a big way this year. Financial risks have definitely heightened.
In light of all this, the stock markets are struggling so far this year. Investors are nervous, as well they should be. Outflows from equity mutual funds and ETFs this year are the heaviest they’ve been since early 2009 at the depth of the Great Recession.
Historically, after deep recessions, the economy comes roaring back with GDP growth of 4-5% or more. But as we all know now, this time is different. By some calculations, GDP is 10% – or nearly $2 trillion – below its long-term trend, and overall jobs are lagging by 8 to 10 million.
Government entitlement transfers pay people not to work. Family breakdown has created a poverty trap for the lowest economic groups. Upward mobility is lagging, so fewer people are moving to where the jobs are. And the government has attacked the high-end movers and shakers with tax hikes and overregulation.
Unfortunately, a damaging business psychology prevails within the current administration that has led to more businesses closing down than starting up – for the first time in US history. The Obama crowd believes success must be punished and that redistribution is the way to solve inadequate growth and income inequality.
With that said, let’s look at some of the latest economic reports.
US Economy Continues to Disappoint in Most Reports
The Commerce Department reported last Friday that 4Q GDP was up 2.2% (annual rate), unchanged from the previous estimate in February. The pre-report consensus was for an increase to 2.4%, so the report was considered another disappointment. For all of 2014, GDP rose by 2.4%.
The overall picture last quarter was mixed, with consumers spending at the fastest pace in several years, but with business investment decelerating and government outlays falling. As a result most estimates for growth in the 1Q of 2015 have