Automatic cuts, China vehicle sales, Greenspan on wealth effect

by WARREN MOSLER

Trump may allow $125B in cuts if Congress doesn’t act

(The Hill) President Trump has indicated that he would allow $125 billion in spending cuts to take place if Congress does not agree to his spending plan, White House adviser Larry Kudlow said Thursday. Kudlow was referring to budget caps set in place in the 2011 Budget Control Act (BCA), a law that was meant to force bipartisan cooperation on budgeting by threatening steep cuts to both defense and nondefense spending. Without legislation to raise the caps, 2020defense spending would drop $71 billion and nondefense spending would drop $54 billion from current levels — about a 10 percent across-the-board cut.

Vehicle sales in China continue to drop, NEV sales rise

(China Daily) Chinese sales of passenger vehicles, MPVs, SUVs and minivans in March dropped 12 percent on a yearly basis to 1.78 million units. This is the 10th consecutive monthly decrease, according to the China Passenger Car Association (CPCA). The MPV sector saw the largest sales decline, 20.2 percent to 130,000 units in the past month, while SUVs and sedans dropped 10.7 and 12 percent, respectively. As China began to cut manufacturing sector VAT from 16 to 13 percent on April 1, some imported and high-end vehicle brands lowered prices to boost sales nationwide.

I hadn’t seen this quantified and looks reasonable to me, via the various credit channels:

However, Greenspan said much of the improvement has come from a rise in stock market prices: He sees a “stock market aura” in the economy. A rise of 10 percent in the S&P 500 corresponds to a 1 percent real GDP increase, he said. The S&P 500 has risen nearly 16 percent in 2019 and is on track for its best performance in history should current trends hold.

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