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.

• Hillary's Surprising Top Priority: the Bush Tax Cuts
  

  I was poking about Hillary Clinton's website, and this is what she lists as her top priority for "strengthening the middle class."

  Lower taxes for middle class families by: extending the middle class tax cuts including child tax credit and marriage penalty relief, offering new tax cuts for healthcare, college and retirement, and expanding the [earned income tax credit] and the child care tax credit.

  Those tax cuts she is talking about are, of course, the Bush tax cuts. Yet a bit later on the same Web page, she talks about Bush's "fiscal irresponsibility," implying that the Bush tax cuts were fiscally irresponsible. Now letting only the tax reductions on wealthier Americans expire in 2010—as Clinton has said she wants to do—might bring in only an extra $50 billion or so, not counting any negative effects on growth. (Her adviser Dick Gephardt has implied she would keep the investment tax cuts.)

  So when you put it all together, what is Clinton really saying? I'm not sure, but I am Googling "cognitive dissonance" right now.

• My Fantastic Four Favorite Books of the Year
  

  These are my favorite economics books of 2007. Now, some of them did not come out in 2007, but I read them in 2007—and it's my blog, so I can do what I want, brother. Here they are, in no particular order:

  1) Prophet of Innovation: Joseph Schumpeter and Creative Destruction by Thomas McCraw (2007). Who was the greatest economist of the 20th century, Joseph Schumpeter or Milton Friedman? I don't have to choose, so I won't. But this compelling biography of the man who created the intellectual framework for understanding the critical role that entrepreneurship and innovation play in economic growth certainly makes the case that Schumpeter deserves to be as well known to the general public as Friedman is.

  2) American Abundance by Lawrence Kudlow (1997). This ...

• Sorry, al Qaeda, the Global Boom Continues
  

  So how went the seventh year of militant Islam's war on globalization? Not so well, according to this economic analysis by Action Economics:

  The global economy blasted through the 2006 U.S. housing downturn and 2007 market turmoil in high gear. World GDP in 2007 likely matched the 5.4% record growth of 2006, while a 4.0% 2007 global CPI gain will mark the largest since 2001. While advanced economies slow, we expect a solid 5.1% 2008 global GDP gain with a 4% CPI increase and a 2.5% advanced-economy CPI gain that will be the largest since 1996.

  The jumbo gains in world GDP in 2006 and 2007 follow 4.8% growth in 2005 and 5.3% in 2004. This is, by far, the biggest four-year stretch of GDP gains since our dataset began in 1984 and quite possibly in the history of the global economy. The four-year global growth surge is being fueled by low short- and long- term yields and a rapid shift in the world's distribution of wealth to Pacific Basin and Middle East economies—which have both lofty savings rates and aggressive global investment strategies.

• 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 g