Fiscal Policy

South Africa’s spending cuts border on hara-kiri

27 Feb 2020

The government wants to lop 6% annually off public sector wages to rein in the biggest deficit since the apartheid era. That’s heroic and points to a dangerous showdown with powerful unions. Even if it prevails, widespread protests will darken an already grim economic picture.

Jay Powell has golden chance to avow independence

18 Dec 2019

The Fed boss can distance himself from President Donald Trump by nudging the U.S. central bank to join a global green network that already includes 51 peers. This will defuse criticism that he has been too malleable on rates. And it may even help to save the planet from frying.

Shinzo Abe fires off another feeble arrow

5 Dec 2019

Japan’s latest fiscal stimulus package, worth just over $120 billion, will avert stagnation or worse. But a recent consumption tax hike and slower global activity pose risks that policymakers lack the firepower to tackle. Healthy growth and inflation will prove elusive.

UK election rivals ignore reality in own ways

25 Nov 2019

Prime Minister Boris Johnson’s manifesto for the Dec. 12 poll is short on policy and long on pledges to deliver Brexit soon. Labour’s Jeremy Corbyn is offering the opposite. The former dodges the difficulties of EU negotiations and the latter avoids difficult spending choices.

German fiscal rethink might backfire on euro zone

13 Nov 2019

ECB boss Christine Lagarde wants Germany and the Netherlands to spend more. Even if she gets her way, the economic benefits for others may be limited. Especially if a northern European rebound lifts the single currency and bond yields, or forces a rethink of easy monetary policy.

Review: Making American taxes great again

11 Oct 2019

In “The Triumph of Injustice”, Emmanuel Saez and Gabriel Zucman call for a return to a time when U.S. taxes hurt the rich by squeezing mega-fortunes and making corporations pay up. The book’s history is good and its recommendations are sensible. But the politics look challenging.

Banks win a little more rope to hang themselves

21 Aug 2019

The Volcker Rule stopping banks betting with their own money was worthy but flawed. That’s still the case after its latest rewrite, but it may at least be more usable. Eased rules imply Wall Street firms are no longer in the sin bin. It’s up to them to prove that’s justified.

German weakness gives ECB carte blanche to be bold

14 Aug 2019

Europe’s biggest economy shrank in the second quarter as global trade tensions hurt export-orientated manufacturers. The problems will filter through to other sectors. That will lessen any Teutonic resistance to European Central Bank boss Mario Draghi’s planned monetary easing.

UK and German fiscal activism is just a palliative

9 Aug 2019

Britain’s GDP shrank in the second quarter. Germany may well report the same within the week. Brexit is largely to blame for the former and trade tensions for the latter. In both cases, budget stimulus would merely mitigate the economic slowdown without fixing its root causes.

New UK finance minister is a man for all seasons

24 Jul 2019

Boris Johnson picked Sajid Javid, an ex-Deutsche banker, to run the economy. The former home secretary's ideas chime with his boss’s plans to spend more. And while some Brexiteers may mistrust him, his business-friendly past offers comfort to those fearing a disorderly EU exit.

Hadas: Bond markets lost in inflation-growth gap

10 Jul 2019

Changing growth expectations explain most daily movements in bond prices, while falling inflation parallels the long-term trend of declining yields. Every so often, however, market gyrations reflect hopes that growth and inflation will reconnect. There’s little sign of that.

Review: The conundrum of no good jobs

5 Jul 2019

Low unemployment in the U.S. and UK hides a grimmer reality, economist David Blanchflower argues in his new book. Weak wage growth and widespread despair have prompted people to turn to populist leaders. He makes a compelling case for why policymakers can still rev up growth.

Bond markets keep raising bar for central bankers

4 Jul 2019

Global yields are falling with benchmark German ones at record lows. Investors expect more monetary policy easing on both sides of the Atlantic. That will come but the scale and speed of market moves mean rate-setters will have to work hard to meet ever-rising expectations.

UK is getting right fiscal policy for wrong reason

1 Jul 2019

Rivals Boris Johnson and Jeremy Hunt both promise a post-Brexit spending splurge when one becomes prime minister. The latest gloomy data shows the economy needs a boost. Bond investors might fret and tax cuts will mainly help the rich, but the departure from austerity is overdue.

America’s record recovery runs on borrowed time

1 Jul 2019

It’s been over 10 years since the economy pulled out of the great recession. That’s unprecedented, yet cycles have lengthened as services predominate over manufacturing. Risks to the outlook have grown, meanwhile, and there’s less room to ease policy when the next downturn comes.

Tech can help uncover the basics of basic income

10 Jun 2019

Seed-capital guru Y Combinator is the latest to study the pros and cons of giving people a guaranteed monthly stipend. Its project is bigger, longer and less restrictive than the Finnish state’s or the U.S. city of Stockton’s. The higher standard should yield more useful results.

Hadas: Shaky assumption underpins debt demand

5 Jun 2019

Investors are rushing into high-grade bonds even though long-term yields are falling. Real returns will be acceptable if disinflation persists. But that’s a big if. More active use of fiscal policy or worsening trade frictions could reverse a trend that’s lasted nearly 40 years.

Italy’s debt conundrum will again rear its head

10 Apr 2019

Rome has admitted its economy will barely grow in 2019, a climbdown from forecasts. That makes it harder to keep debt in check, cut income tax, and avoid sales tax rises. EU Brexit distractions only delay the eventual choice between popular support and a new financial storm.

China’s tax collectors could yet blunt stimulus

14 Mar 2019

Officials say Beijing’s $300 bln levy reduction this year sets a world record. Yet despite a big slash last year, the government’s total take kept rising. Better enforcement could partly offset lower rates, making it harder to predict just how much cuts might juice growth.

The Exchange: Austerity in the age of populism

8 Mar 2019

Fiscal restraint is going out of fashion. In his new book “Austerity”, Harvard professor Alberto Alesina sets out to explain when it’s needed. He tells Breakingviews of the hidden long-term risks of U.S. President Donald Trump’s policies and why Italy’s debt risks are not over.