fiscal policy posts
FeedPosted Mar 11th 2009 12:15PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
In his column last week,
New York Times (NYSE:
NYT) columnist and Nobel Prize-winning economist Paul Krugman laid waste to those who argue that he's not critically assessing Obama administration programs. He offered a cogent critique of the U.S. Treasury's tardiness regarding
the banking system fix. Either temporarily nationalize those banks that are clogging the system, buy the toxic assets at unsubsidized prices, or announce some other market-valued removal plan to unclog the system, but let's put this train in motion, Krugman said, in so many words, to get to the root of the matter: We need to get credit flowing freely to facilitate commerce.
Continue reading If the U.S. economy strengthens, Fiscal Stimulus II may be shelved
Posted Mar 9th 2009 1:10PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
Readers of this space know that the emphasis is placed on the economic, on commerce, and business trends, with a general avoidance of goings-on inside the beltway.
However, the financial crisis (which spawned federal bank bail-out legislation) and the nation's pronounced recession (which requires fiscal stimulus to end), has meant that things occurring in Washington once again have great relevance for investors.
And one current D.C. development must be evaluated: the House Republican leadership's decision to seek a federal spending freeze for the fiscal 2010 federal budget,
The AP reported.Continue reading House Republicans take page out of Hoover's 1930s play book with spending freeze plan
Posted Mar 2nd 2009 2:35PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics, Financial Crisis
Most investors know about the United States' anti-state political culture: in America it's private sector solution first, public sector solution second.
And, most also know that what state that does exist is anti-central government: it dates back to our federalist origination. We're even reluctant to call something 'central' for this reason: we have a central bank, but it's called the
Federal Reserve, not the Central Reserve. And it's the
Internal Revenue Service, not the Central Revenue Service.
Continue reading Socialism by any other name is probably a U.S. government program
Posted Feb 17th 2009 4:39PM by Douglas S. Roberts (RSS feed)
Filed under: International markets, Other issues, Economic data, Media World, Politics, Headline news, Recession, Financial Crisis
The most sweeping fiscal stimulus in a generation is about to be signed into law by President Obama. It amounts to $787 billion and includes tax incentives, infrastructure projects, renewable energy developments, and payment to state and local authorities.
However, investors appear to be skeptical as indicated by the performance of the markets today for a variety of reasons:
- Some estimate that as much as 75% of the spending will not reach the economy until 2010.
- There are questions as to how many jobs in the United States will actually be created.
- People are uncertain as to how productive the spending bill will be and how much is actually just wasteful "pork."
Continue reading The fiscal stimulus plan: Where is the missing element that solved the Great Depression?
Posted Feb 12th 2009 2:20PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics, Recession, Financial Crisis
The U.S.'s first fiscal stimulus package 'of size' since the recession's start has passed - - albeit in a modified form that decreased spending by about $140 billion over the original outline.
Further, the young
President Barack Obama, like the young President John F. Kennedy, has learned that presidential honeymoons can be short inside the beltway, particularly if you have to trade policy to obtain votes both inside your party and among the loyal opposition.
Meanwhile, investors and the financial community more broader await the specifics pertaining to Obama administration's revised plan to
stabilize the banking system, with
the declining Dow discounting that even a successful plan will require months of systemic adjustment, and, of course, more public funds.
Continue reading Where does the U.S. economy go from here?
Posted Feb 12th 2009 11:50AM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Forecasts, India, China, Brazil, Russia, Middle East, Mexico, Japan, Recession, Financial Crisis
The manager of the world's largest bond fund, PIMCO, has laid-out in unambiguous terms the problem facing the global economy in the quarters ahead: The U.S. and global recession will worsen -- with a "second wave" of turmoil -- unless governments increase fiscal stimulus and spending plans.
"The economic setback is still in its early stages," Koyo Ozeki, head of Asia-Pacific credit research at Pimco's Tokyo office, wrote in a report
published on PIMCO's web site. "Any further decline in housing prices could accelerate the downturn, intensifying the pernicious feedback loop and possibly leading to a second wave in the financial crisis in the next six to 12 months."
Continue reading PIMCO says recession will deepen without more fiscal stimulus by nations
Posted Feb 9th 2009 5:20PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Forecasts, Recession, Financial Crisis
Financial Times columnist
Martin Wolf reminds investors that, contrary to some views expressed in the United States, depressions are neither good for us, nor unavoidable.
Further, despite the recent year's many reverberations, the United States remains, Wolf argues (and the
U.S. Central Intelligence Agency agrees), the world's preeminent economy in the global economic system it has created and promoted. Moreover, U.S. policy errors had much to do with the current crisis, even if aided by policy errors abroad. By extension, the healing and recovery starts in the U.S. -- with America as the leader of determined, globally-coordinated action.
Continue reading Martin Wolf: If the U.S. dares to succeed, it will
Posted Feb 3rd 2009 7:30PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
Senate debate resumed Tuesday on the
fiscal stimulus package, and as it did several economists offered their policy advice for the august members of the world's greatest deliberative body.
The biggest change should concern size, so says economist David H. Wang. "It's too small. A $900 billion plan is good, but the stimulus plans that most effectively increase GDP are ones that are large, and the bigger the package, the bigger bang you'll get for your buck, from a GDP standpoint," Wang said. Wang said he would add at least $300 billion in spending to the plan.
Continue reading Economists: Modify fiscal stimulus package, but pass it, pronto
Posted Feb 3rd 2009 7:00PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Financial Crisis
You have to appreciate the cleverness of this era's financial humor. (Note that I said,
appreciate the cleverness, not love, or enjoy. That's because, depending on your perspective, the humor is either on-the-mark, or not that funny. But that is part of the subjective nature of humor.)
One joke making the rounds:
Question: What's the capital of Iceland? Answer: $25. Another: In the old days, banks lent money to people. These days, people lend money to banks. New York Times (NYSE:
NYT) columnist and Nobel Prize-winning economist
Paul Krugman discusses bank capital and lending in his most recent column, and argues that the apparent likely Obama administration fix for the banking sector -- a combination of U.S. government purchase of toxic assets and guarantees against losses on other assets, each on terms favorable to the banks -- represents a lousy deal for the U.S. taxpayer, who'll end up "footing the bill for rescuing the banks."
Continue reading NYT's Krugman: Here's a better bank rescue, for the taxpayer
Posted Feb 2nd 2009 6:30PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Forecasts, Recession, Financial Crisis
The nutshell on the
2009 World Economic Forum held in Davos? It was a conference where nearly everyone agreed that the financial crisis started in and is primarily the result of U.S. policy errors, but agreed on little else after that.
Further, the Davos gathering produced almost no new insights regarding the nature of the crisis beyond what is already known: that excessive leverage throughout the system, arcane and in some cases Frankenstein-like derivatives, inadequate national-level financial regulation, and the collapse of demand, set in motion first the U.S. recession, then the credit crunch, then the global recession.
Continue reading Davos Recap: With castigation stage over, collaboration begins
Posted Jan 29th 2009 5:40PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics, Recession
Here's one tax cut/credit that Democrats and Republicans apparently agree on. Or, in Washingtonspeak, 'left has met right, so let's get this bill out the door.'
It appears the U.S. Senate is posed to add a provision to reduce taxes, at least temporarily, on corporate profits earned abroad.
The Washington Post reported Thursday that further Senatorial changes could follow, and the Senate stimulus bill would have to be reconciled via a conference committee with a House version passed Wednesday, but the current Senate proposal would dramatically reduce taxes, from 35% to 5.25%, on foreign corporate profits repatriated to the United States.
Continue reading Stimulus plan's tax cut for foreign corporate earnings could inject $545 billion into U.S. economy
Posted Jan 29th 2009 10:30AM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
Following's Wednesday's
244-188 House vote -- one in which, despite President Obama's efforts to cultivate Republican ideas, every House Republican voted against it -- the focus on the stimulus package shifts to the Senate, where plan revisions are likely.
Assuming Senate passage, any differences between the two versions would have to be resolved in a conference committee.
Republicans are complaining that the bill has too many traditional Democratic-constituency-based programs and 'pork,' while some Democrats are concerned the bill does not contain enough spending - - in particular infrastructure spending, to create jobs the U.S. economy needs. The U.S. economy lost more than 2.6 million jobs in 2008 -- including 1 million in the past two months -- and the nation's unemployment rate has soared to 7.2%.
Continue reading Senate likely to revise stimulus package after House approval
Posted Jan 26th 2009 5:45PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic data, Politics, Recession
One of the biggest misnomers in the current fiscal stimulus debate concerns the United States' ability to service its
budget deficit and national debt (pdf).
Provided the fiscal stimulus package is passed, the national debt ceiling will increase to $12.1 trillion from the current $11.3 trillion.
Deficit approaching intolerable levels?Economic conservatives, market absolutists, and the like argue that the annual budget deficit and national debt are approaching intolerable levels. In truth, what they're arguing against is a needed government intervention and New Deal-type spending required to jump-start the U.S. economy -- even if it means the economy will plunge into a deeper recession without the stimulus. It seems some economic conservatives would rather see the nation's economy suffer, than to violate one their flawed economic theories.
Continue reading U.S. budget deficit remains serviceable, provided U.S. economy grows
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