When it comes to economic policy, a nation's currency is pretty much the ur-factor. But the political sharpies keep telling me that people don't care about the weak dollar, or at least that it doesn't have any legs as a political issue. I think they are dead wrong. People are beginning to understand how the anemic greenback is playing a role in high energy prices and inflation. Take a look at these poll results:

A Bloomberg/Los Angeles Times poll found that 76 percent of Americans think the government should do something to halt the falling dollar. Among those with incomes of $100,000 or more, 7 in 10 favored aiding the currency.... The U.S. currency has slumped 41 percent against the euro since 2002 and 13 percent in the past 12 months alone.

As I have been predicting, it looks more and more as if President Bush will agree to some sort of bailout for struggling homeowners based on the Dodd-Frank bill. Further evidence today from American Banker:

Sen. [Richard] Shelby [ranking Republican on the Senate Banking Committee] said he expected the White House would support the final agreement. The White House had vowed to veto the House version of the bill, arguing it was a bailout that put taxpayer money at risk. "We've been working with the White House...on some principles that [President Bush] will agree to," Sen. Shelby said.

My take: In a U.S. News interview this morning, the senator basically said the deal is a go in the Senate and will be signed by Bush.

This analysis by JPMorgan Chase is really bad news:

Consumer sentiment dropped to a 28-year low in early May, and there is increasing evidence that surging short-term inflation expectations are spilling over to long-term inflation expectations. One-year inflation expectations increased to 5.2 percent from 4.8 percent a month earlier and are now at their highest level since 1982. Five- to 10-year inflation expectations have moved up less dramatically, but, after rising from 3.2 percent to 3.3% percent, they are now at their highest level since 1996.

What the heck is the matter with Thomas Frank? The new columnist at the Wall Street Journal—and author of the book What's the Matter With Kansas?—wrote a commentary earlier this week, "Our Great Economic U-Turn," that basically said the economic boom of the past quarter century was a "man-made catastrophe." (It's an opinion seemingly shared by Barack Obama if you listen to his speeches.) This chunk pretty well sums up Frank's thesis:

What has overtaken America's working people is not a natural disaster like "globalization," and not even some kind of societal atavism in which countries regress mysteriously to their 19th-century selves. This is a man-made catastrophe, a result that proceeded directly from the deliberate beatdown of organized labor and the wrecking of the liberal state. It is, in other words, a political disaster, with tax cuts, trade agreements, deregulatory measures, and enforcement decisions all finely crafted to benefit one part of society and leave the rest behind.

All your economics news in one fell swoop, courtesy of Action Economics:

Today's slew of U.S. reports were skewed toward the factory sector, and the figures—though dynamic—did little to change the overall outlook. Industrial production showed the concentrated weakness we expected in the April auto sector...but the two factory sentiment measures for May show that sentiment elsewhere remains surprisingly resilient. The sentiment figures continue to track a slowdown rather than recession path, while the big production drop in April will likely be reversed in May and June with a likely end of the American Axle strike. Similarly, the sideways trend in initial claims around the elevated but sub-recessionary 370k area suggests a similar sideways path for the labor market.

Is the stock market voting for a continuation of the Obama-Hillary presidential brawl? Larry Kudlow has dubbed this the Clinton Price Index, meaning that Hillary's electoral fortunes are affecting the price of stock indexes under the theory that the longer the race goes on, the better the chance for a McCain victory and a continuation of low capital-gains-tax rates. It's a theory. The fine blog Redlegs Rant has followed up on this:

April 16: "...Obama also confirmed that he would consider raising the capital gains tax, which is currently at 15 percent, back to its previous Clinton-era high of 28 percent..."

April 22: Obama gets crushed in PA

April 23: Stocks rise

May 6: Obama wins big in NC

May 7: Stocks plunge

May 13: Obama gets crushed in WV

May 14: Stocks rise

DISCLAIMER: Correlation is not causation. But it looks as if investors (100 million-plus strong in this great country) might have a dog in this fight, no?

Thomas Barnett takes Jeffrey Sachs to task for not understanding the role of business and markets in promoting development in Africa.

FuturePundit examines the financial costs of nuclear power plants.

I know this is going to upset many of the supply-siders and economic conservatives who read my blog, but the odds seem to be growing that Mike Huckabee will get the nod from John McCain to be his running mate. I wrote about such a possibility earlier this week, and now independent reporting here at U.S. News also confirms that a growing number of McCain advisers are pushing the Huck option. (Comments to that original post are running about 60 to 40 in favor of Huckabee, BTW.) Who do you think will be the GOP vice presidential nominee? Please vote below!

Are you worried that efforts to limit possible climate-altering carbon emissions might tank the economy? Not a problem, says Douglas Holtz-Eakin, John McCain's top economic adviser. Here's what Holtz-Eakin said during a conference call after McCain outlined his climate plan, including a cap-and-trade system for carbon allowances:

If you look at the modeling studies...they suggest...a reduction of GDP growth by eight tenths of a percent by 2030. If you look at that reduction, it means that instead of hitting a $26 trillion economy in January, you're hitting it in April.

1) Fundmastery offers up a revealing chart on international gasoline prices.

2) The New Economist points to new research showing that skilled immigration boosts innovation.

3) Greg Mankiw prefers Obama's cap-and-auction plan to McCain's cap-and trade plan.

4) To Larry Kudlow, McCain's climate plan looks a bit like Hillary Clinton's indecipherable healthcare plan:

I don't claim to understand everything about the cap-and-trade mechanism. But scanning the McCain announcement, I look at bullets like banking and borrowing permits; unlimited initial offsets; integrating with international markets; strategic carbon reserves; early allocation of permits; U.N. negotiations; climate-change adaptation plans; implementation at the local level; comprehensive plans for infrastructure ecosystems; resource planning...O my gosh!

I got loads of responses (including over 300 comments) to my post yesterday about Mike Huckabee possibly topping John McCain's short list for vice president. (Let me add that I think McCain's climate-change speech makes such a combo more likely. Huckabee sings from the same songbook when it comes to global warming. But so do Minnesota's Tim Pawlenty and Florida's Charlie Crist.) First, here is a bit from the blogosphere:

The Club for Growth blog (Nachama Soloveichik): "Ugh...It was not just economic conservatives who had problems with Huckabee, but across the board conservatives who thought Huckabee looked more like a social conservative Democrat than anything else."

I have been challenged. My ursine friend Barry Ritholtz of the fabulous Big Picture blog wants to bet with me whether or not the U.S. economy will slip into recession in 2008. (I have been skeptical, to say the least.) Actually, it is a bit more complicated than that. Ritholtz's terms:

If a recession is eventually declared by the [National Bureau of Economic Research], and if in between the official start and finish points there is any month in the first or second quarter of 2008, I win. In other words, if any part of Q1 or Q2 2008 is part of a recession, James loses. If there is no recession, or if there is one, but it doesn't include any month in Q1 or Q2 2008, James wins. Loser buys dinner for 4, at the restaurant of winner's choice. Why 4? Winner's and loser's spouses are included. The wager includes dinner, wine, car valet, and tip. James, do we have a bet?

"They change their minds everyday," is how one lobbyist described to me the White House's thinking about whether to veto congressional housing legislation or work on a compromise. Last week, the House, including a fifth of Republican members, passed a bill that would allow some homeowners to refinance loans through the Federal Housing Administration if their lenders agreed to take 85 percent of the amount borrowed. President Bush promised to veto the bill.

I can tell you that many Republicans who were against the bill report getting an earful from constituents who view the measure as a bailout to folks who may have lied to get a cheap mortgage or were just plain financially stupid. On the other hand, Fed Chairman Ben Bernanke—as well as John McCain—has already put his imprimatur on the general idea.

Mike Huckabee, the former governor of Arkansas and defeated contender for the GOP presidential nomination, is currently at the top of John McCain's short list for a running mate. At least that's the word from a top McCain fundraiser and longtime Republican moneyman who has spoken to McCain's inner circle. The fundraiser is less than thrilled with the idea of Huckabee as the vice presidential nominee, and many economic conservatives—turned off by the populist tone of Huckabee's campaign and his tax record as governor—are likely to share that marked lack of enthusiasm. But here is the logic of picking Huckabee:

1) He is a great campaigner and communicator who could both shore up support in the South among social conservatives (Huckabee is a former Baptist minister) and appeal to working-class voters in the critical "Big 10" states of Pennsylvania, Michigan, Wisconsin, and Ohio.

Recession? Where? Looking back months from now, we may find that the economy grew 0.6 percent in the fourth quarter of 2007, 1.2 percent in the first quarter of this year, and 2.5 percent (according to a model from Macroeconomic Advisers) in the second quarter. Now my buddy Barry Ritholtz over at the Big Picture blog has criticized me and economist Brian Wesbury and CNBC's Larry Kudlow for having the temerity to conclude that since the economy expanded in the first quarter—gross domestic product rose at a 0.6 percent annual pace, according to preliminary government estimates—that the economy, well, expanded in the first quarter. (FYI: That initial take may have underestimated first-quarter growth by half given today's economic data, which showed a closing of the U.S. trade gap.)

Ritholtz goes on to note that of the 11 post-World War II recessions, four started with positive-growth quarters, two were flattish, and five were negative. Now all this may sound crazy if you had ever heard that recessions were defined as back-to-back quarters of negative growth. Indeed, by that measure, the 2001 recession was not a recession at all. But the National Bureau of Economic Research uses a more complex calculation. From the NBER website: