1. Keith Schwer Keynote Fayetteville, AR October 23rd, 2016

2. The Rules of the Game Matter
They change the way the players play the game.
They can change the outcome of the game itself.
Freeze tag

3. The Rules of the Game Matter
Federal Regulation and Aggregate Economic Growth
by John W. Dawson and John J. Seater
Journal of Economic Growth (2013) 18:
Examined Economic Growth and Productivity

5. The Rules of the Game Matter
Results:
Regulations have reduced real GDP growth an average of 2% per year.
Real GDP in would have been $53.9 trillion instead of the $15.1 trillion

6. The Rules of the Game Matter
2015 CFR 175,000
Dodd-Frank law 2,300 pages
22,296 pages of rules so far
Another 13,000 on the way
Only 70% of rules in place
Affordable Care Act

7. The Rules of the Game Matter
Dan Gallagher, Commissioner of the SEC:
“And really, to me, Bob, the burden isn’t necessarily as much as the regulations that came from Dodd-Frank. Some of them are just completely nonsensical. I mean, nothing to do with the financial crisis, aren’t really germane to the function of the SEC and that’s what happens when you get a runaway piece of legislation.”

8. U.S. Forecast
A recent paper created an index that quantifies economic policy uncertainty and analyzes its economic impact:
Measuring Economic Policy Uncertainty
By Scott R. Baker Nicholas Bloom, and Steven J. Davis

9. U.S. Forecast The index has three components:
Newspaper coverage of policy-related economic uncertainty.
Number of federal tax code provisions set to expire in future years
Disagreement among economic forecasters
(Survey of Professional Forecasters)

10. U.S. Forecast The economic impact of economic policy uncertainty
Statistical analysis shows that higher policy uncertainty causes:
Lower private investment
Lower industrial production
Much lower employment

11. Policy Uncertainty

14. Chinese economy slowing
Global Factors - China
Chinese economy slowing
GDP growth now at 6.7%
Stock market plunge (x2)
Debt to GDP ratio 260%
No happy ending to the coming debt bust
When?
How bad?

15. Global Factors - ROW Brazil – historic recession
Canadian technical recession 1st half 2015
Back in one again?
Much stronger U.S. Dollar
Brazilian Real has collapsed
U.S. Dollar up more than 30% against the Canadian Dollar

16. Global Factors - Eurozone
U.K. and Brexit
Immediate depreciation of the pound by 10% (down 20% for the year)
Tremendous uncertainty
How does the disentanglement play out and how long will it take
Elevated risk of recession in the U.K.

17. Global Factors - Eurozone
Greece and the Euro
All the Greek bailouts, haircut & the election are stays of execution and not pardons
The Euro still at risk.
Crisis on back burner again, for now.

18. U.S. Forecast
2016 Q1 Q2
2015
2017
2018
2019
GDP
% Change, Annual Rate
0.8
1.4
2.6
1.6
2.4
2.3
Consumer Price Index
-0.3
2.5
0.1
1.2
2.2
Consumer Sentiment
91.6
92.4
92.9
89.8
88.3
87.6
85.0
Consumption
1.8
4.3
3.2

19. U.S. Forecast How will the Fed proceed from here?
Was the December 2015 move necessary?
When will the next hike take place?
Path is increasingly protracted and gradual.

20. U.S. Forecast
Is it time to ponder a recession?

21. Recent Business Cycle Data
REFERENCE DATES
DURATION IN MONTHS
Peak
Trough
Contraction
Expansion
Quarterly dates are in parentheses
Peak to Trough
Previous trough to this peak
December 1969(IV)
November 1970 (IV) 11
106
November 1973(IV)
March 1975 (I) 16 36
January 1980(I)
July 1980 (III) 6 58
July 1981(III)
November 1982 (IV) 12
July 1990(III)
March 1991(I) 8 92
March 2001(I)
November 2001 (IV)
120
December 2007(IV)
June 2009(II) 18 73

22. Historical Business Cycle Data
REFERENCE DATES
DURATION IN MONTHS
Average, all cycles:
Contraction
Expansion
Peak to Trough
Previous Trough to Peak
(33 cycles) 18 39
(16 cycles) 22 27
(6 cycles) 35
(11 cycles) 11 58

23. U.S. Forecast
Will the Bankruptcy of Sky Mall Put an End to Sky Mall™ Policies?
Sky Mall™ Policy:
An Expensive Policy that Fails to Achieve its Desired Outcome

24. U.S. Forecast

25. U.S. Forecast Sky Mall™ Policies: T.A.R.P.
Foreclosure Prevention Act 2009
ARRA of 2009
Affordable Care Act
Dodd-Frank

26. U.S. Forecast

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30. U.S. Forecast

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32. U.S. Forecast

33. Institute for Economic Competitiveness
Thank you
Sean M. Snaith, Ph.D.
Director
Institute for Economic Competitiveness
(407)