The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

The Joy of Stimulus

11/29/2016

The Organization of Economic Cooperation and Development (OECD) was not created for the sole purpose of criticizing the United States.  It just seems that way.

It is an outgrowth from the Marshall Plan, which oversaw the allocation of American aid to rebuild Europe.  Based in Paris, it was officially established in 1961 with 35 member-nations to “compare policies.”  It has traditionally painted a picture of poor economic prospects, to encourage more assistance from the developed nations, like the “selfish” United States.

In the first major economic projection since the gridlock-ending U.S. election this month, the OECD has published a remarkably optimistic projection.  It projects world economic growth will rise from 2.9% this year to 3.3% next year and 3.6% in 2018.  For the U.S. economy, it projects growth will increase from 2.1% year to 2.3% next year and 3.0% in 2018.  As the President-Elect would say, this is HUGE!

It also predicts U.S. unemployment will fall from an already low 4.9% to 4.5% next year, with inflation rising from 1.2% this year to 2.2% in 2018, which will allow the Fed to increase interest rates from 0.5% now to a still-low 2.0% by the end of 2018.  All this good news is a result of Trump’s stimulus plan, which he sees as Supply-side and which the OECD sees as Keynesian.

Elsewhere, it projects slightly slower growth in Britain and China.  The euro zone growth will only increase from 1.6% this year to  only 1.7% next year.  The difference between them and the U.S. is that gridlock has ended in the U.S.!  In other words, change has come to America . . . I hope!

My Prediction:  The OECD will be laying a major guilt trip on the United States in the near future to increase foreign aid.

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