Caroline Baum on oil prices and US economic growth

I like reading Caroline Baum's column on Bloomberg for the insights that she provides. But I also find that her articles are sometimes prone to a bit of hyperbole.

In her latest article "Only 'Shock' Is 4 Percent U.S. Economic Growth", she wrote:

[M]any economists watched the incessant rise in oil prices from $30 a barrel a year ago to $50 today, even as producers pumped up supply, and assumed the effect would be the same as if the price increase were the result of a cutback in supply, which is what happened in the 1970s.

She makes a good point about the effect of an increase in oil prices resulting from rising demand being different from one resulting from a cutback in supply. However, I am not aware of any economist who has actually suggested that the recent rise in oil prices will have the same effect as those in the 1970s. The difference in the situation appears to be well understood, at least among mainstream economists. Rather, the main concern has been that economic growth already appears to be slowing and high oil prices makes it all the more difficult for the economy to overcome existing headwinds like slowing consumer demand and inadequate business spending,

Baum also quotes Jim Glassman, senior US economist at JP Morgan Chase & Co.:

"The pickup in consumer spending changed people's thinking on the economy," said Jim Glassman, senior U.S. economist at JP Morgan Chase & Co. Soft second-quarter spending encouraged the view that "the economy's natural tendency is to relapse," Glassman said. "It's not. The economy's natural tendency is to grow."

Glassman is an eternal optimist, and appears to think that everyone else is an eternal pessimist. Actually, most economists think that it is the economic growth rate that will relapse, not the economic output. In other words, they still expect growth, just that it will be slower.