Capital Commerce
James Pethokoukis is the assistant managing editor for the Money & Business section at U.S. News & World Report. He has written for many publications including The New York Times, USA Today, Investor's Business Daily and TCS Daily. Pethokoukis is also a frequent guest on CNBC's Kudlow & Company. A 1989 graduate of Northwestern University, Pethokoukis is a 2002 Jeopardy! champion. When Pethokoukis is not teasing some transcendent meaning out of the confluence of economics, politics and finance, he plays lots of Mille Bornes with his gaggle of kids - he's doing his part to save Social Security.

• McCain's Big (Government) Economic Idea
  

  John McCain’s left-for-dead presidential candidacy has been resurrected. Not only does he have a good shot at winning the New Hampshire primary, but the latest Intrade betting market data have Rudy Giuliani at 28 percent, Mitt Romney at 26 percent, and McCain gaining at 17 percent. That’s pretty good for a guy whose numbers were once down in Ron Paul territory. (It seems as if Giuliani’s hemorrhaging support is all bleeding over to McCain.)

  Now the rap on McCain among Republicans is that while he’s great on the war on terrorism, he’s weak on domestic policy. He voted against the 2001 and 2003 tax cuts, for instance. So I couldn’t wait to read his just-released economic plan. Most of it is pretty standard stuff: Get rid of the alternative minimum tax. Extend the Bush tax cuts. Make it harder for Congress to raise taxes. But right toward the end of his agenda is this absolutely mind-blowing bit, especially for free-market types:

  John McCain will overhaul unemployment insurance and make it a program for retraining, relocating and assisting workers who have lost a job. The unemployment insurance system needs ...

• Trade Deficits: Not So Bad, After All
  

  John Tamny of RealClearMarkets—an official F.O.B. (Friend of the Blog)—has a great post, "My Falling Deficit With Safeway," on the logic of free trade. A choice bit: "Broken down to individuals, we can see that falling trade deficits, far from being good, are usually signals of our not being able to purchase what we want, or our not being able to attract the investment that we need." Read it all.

• A Chat With Jack Kemp
  

  I am sick of the negativity out there right now. So what better way to dispel the gloom as we head toward Christmas than a few words from the always optimistic Jack Kemp, the 1996 GOP vice presidential candidate? (Efharisto to U.S. News superintern Matt Bandyk, who did the interview.)

  What explains the period of sustained growth the United States has enjoyed over the past 25 years?
  [Federal Reserve Chairman Paul] Volcker wringing inflation out of the economy, Reagan's tax cuts, bringing down the capital-gains rate, reduction of regulatory barriers. Those policies, coupled with growth of countries like China, Brazil, Ireland—you have a tremendous new world of opportunities that are helpful as markets for U.S. exports.... And Clinton, too.... He signed welfare reform, got NAFTA through. And he signed capital-gains-tax cuts. I can't understand why the Democratic parties seem so hostile to economic growth and business. Kennedy was pro-business and pro-growth.

  What policies would most diminish growth?
  The soak-the-rich schemes. I never met a poor person who wanted to soak the rich; they want to get rich. Having said that, the ...

• The Greatest Economics Film Ever
  

  Let's see, a former Clinton treasury secretary—and some members of Congress—want Uncle Sam to consider a temporary $50 billion to $75 billion tax cut and spending plan to boost the economy. And Alan Greenspan wants the feds to start cutting checks to struggling homeowners. I examined the wisdom and folly of such efforts here. But the 1979 film Being There, about a simple-minded gardener who somehow becomes an influential Washington insider with his gentle wisdom, does it a bit better:

  The President: Mr. Gardner...do you think that we can stimulate growth through temporary incentives?

  [Long pause]

  Chance the ...

• Can Aliens Help Us Fix Our Problems?
  

  John McCain thinks we need a bipartisan panel, like the one created for military base closings, to come up with recommendations to reform the tax code. Hillary Clinton, Mitt Romney, and Rudy Giuliani want a panel to fix entitlement spending. If only the president and Congress could just pull together in the face of daunting challenges and do it themselves...Clinton apparently thinks an alien invasion might do the trick. Per the New York Post:

  Call it Hillary's alien inspiration. The former first lady wants to take America back to the movie references of the 1990s. "Remember that movie 'Independence Day,' where invaders were coming from outer space and the whole world was united against the invasion?" she asked at a campaign event Saturday. "Well, why can't we be united on behalf of our planet?" In 1996, Bill Clinton mused about the movie, saying Americans could beat the aliens. "Yes, I think we'd fight them off. We'd find a way to win. That's what America does—we'd find a way to win if it happened."

  But it's not just Dems who have an alien obsession. President Reagan at least twice remarked—as seen on this YouTube video that an "alien threat" would unify the nations of the world and, one might assume, Republicans and Democrats.

• Keep Cool About Inflation
  

  The always cogent James Glassman of JPMorgan opines on inflation and why we—and the Fed—should not worry:

  November CPI gains were slightly higher than analysts predicted, one of the rare upside surprises in a long time, and it was rightly dismissed as noise by most. For a moment, the upside surprise took many aback, because the core CPI rose 0.3% compared with forecasts of 0.2%. But in retrospect, the report was an issue only for those for whom life is always and everywhere an inflation phenomenon. The actual gain in the November core CPI was 0.27% compared with predictions of around 0.22%. Some indirect spillover from the fall's 50% spike in oil had to be expected. Virtually everyone around the world has been reporting slightly higher inflation readings. Oil's the common thread. The upside surprise in the November CPI came in women's apparel—not men's—implying that seasonal issues, not a weaker dollar was the issue. For those inclined to make a story out of one month's spike, risk takers will be thinking, "fool me once, shame on you ... fool me twice, shame on me" ... The popular quip that it's not fair to exclude food and energy from inflation measures misses the point. No one is pretending that food and oil don't matter. ... The economy is complex and relative prices change constantly in response to myriad factors. Economists devote so much attention to the trend component of inflation, because this has proven to be the most reliable way to determine the economy's underlying inflation tendencies. ... 2008 has the potential to underscore this point in dramatic fashion, if oil prices retreat, as expected. The Fed is being cautious when it forecasts that headline inflation will drop back to core inflation. All that is needed for that to happen is for oil prices to remain at the current $90 level. If they fall back toward $60, where they were in August, it will be much clearer why the Fed tends to focus on core inflation.