Fiscal Policy

Pensions need to share pain when cities go broke

28 Mar 2013

Stockton wants bondholders to pay for its financial woes while leaving retirement benefits intact. That’s unfair and undermines the law’s power to rein in runaway pension costs. A U.S. judge should deny the California city bankruptcy protection until it revises its position.

Venezuela’s new capital controls just won’t work

21 Mar 2013

Two-tier exchange rates are frequently used to limit imports. However, history shows that three-tier rates like Venezuela’s new system foster rent-seeking, corruption and huge economic costs, and then fall apart, as did Venezuela’s previous such attempt in the 1980s.

Fed’s supertanker looks destined to make big waves

20 Mar 2013

The U.S. central bank shows no signs of scaling back $85 bln of monthly bond buys and says much time would elapse between ending purchases and raising rates. Yet the Fed’s 2015 target of up to 4.5 pct is a far cry from six years near zero. The rapid turn could shock the system.

Cyprus crisis shows unwelcome return of randomness

19 Mar 2013

The specifics of straightening out the Mediterranean island’s banking system matter less than the way policymakers are making things up as they go along. They seem to backtrack and abandon principles. It’s all too reminiscent of the shifting responses during the 2008 crisis.

Latin America can’t afford parochial finance

15 Mar 2013

Ecuador wants to abandon a treaty for resolving U.S. investment disputes. Other nearby nations have ditched a similar multilateral pact. Such accords gird modern globalization. Rows involving Argentina and Chevron mean investors hardly need more reasons to avoid the region.

All together now, central banks do not go bust

1 Mar 2013

The Federal Reserve and other central banks with bloated balance sheets will book losses when interest rates rise. But the red ink can’t bleed them dry. Ben Bernanke and other policymakers need to hammer this point home to keep away economically unnecessary political trouble.

U.S. budget cuts more blip than bomb

28 Feb 2013

For all the rhetoric, the impending $100 bln of federal spending reductions, however imperfectly chosen, won’t do much real damage to the growing economy. Uncle Sam’s outlays will still rise this year, and any impact will be short-lived and easily absorbed by the private sector.

Stronger economy is Bernanke’s Godot

26 Feb 2013

The Fed chairman is keen on reducing deficits, but not while the U.S. recovery is fragile. Trouble is, there’s no sign of growth gathering much more steam. Waiting for a robust recovery before making meaningful spending cuts is looking more and more like a fool’s errand.

U.S. taxes on rich and poor not created equal

26 Feb 2013

Federal government levies on the wealthy hurt the economy. But sales gloom at Wal-Mart relative to Macy’s and Saks shows that letting payroll taxes rise again has socked it to poorer consumers. That’s worse for economic growth because the less well-off actually spend their wages.

U.S. deficit dynamic duo remain uncontested champs

20 Feb 2013

The plan spearheaded by Alan Simpson and Erskine Bowles became part of the vernacular, though was rejected by policymakers. A revised $2.4 trln compromise, like the original, contains plenty of items not to love. Yet balanced ways to restrain the national debt remain elusive.

Fed’s extraordinary policy risks becoming ordinary

12 Feb 2013

Since World War Two, U.S. recessions have come on average every five years. That makes it likely that the United States will be stuck with ultra-low rates when the economy next turns down. This permanent monetary overdrive is bad for savers and the unbalanced global economy.

Captain Austerity gets his toe tagged

6 Feb 2013

Time of death: Feb. 6, 2013. The new Republican strategy shies away from fiscal tightening after controversial initiatives to slash deficits flopped. President Obama is seeking ways to scale back sharp cuts in defense and other spending. U.S. austerity is gone - and far too soon.

Uncle Sam should pay heed to troubled niece

31 Jan 2013

A fiscal debacle in Illinois has resulted in harsh consequences. The Land of Lincoln was forced to withdraw a $500 mln bond issue after investors got spooked about the state’s credit. It’s a reminder why America can’t get too complacent about its cheap debt or long-term problems.

Carney should remember central banks’ limits

28 Jan 2013

Mark Carney, the incoming governor of the Bank of England, thinks the monetary authorities can do more to help the economy. His suggestion of targeting nominal GDP instead of inflation rates may be fashionable, but that policy is more likely to stoke inflation than growth.

Washington shows how two wrongs can wind up right

28 Jan 2013

In a bid to limit the power of a new financial regulator, U.S. lawmakers blocked the president’s nominee to lead it. Obama’s back-channel appointment of Richard Cordray could be rendered illegal by a Friday court ruling. But Congress should be ready to approve him now anyway.

Washington downgrades debt threat to DEFCON 3

23 Jan 2013

The House has passed a GOP motion to raise the nation’s borrowing limit for four months. That implies Republicans will use fear of a government shutdown to try to cut the deficit. It’s akin to putting a gun to a kneecap rather than a head. It’s less messy and might just work.

California budget shows merit of forced discipline

14 Jan 2013

Governor Jerry Brown faced a deficit crisis in 2011. Now, his 2013-14 budget achieves a modest surplus. Spending cuts and higher taxes were required by the state’s balanced budget law and encouraged by bond downgrades. Washington should learn from the former and fear the latter.

Breaking debt cap is best of bad options for Obama

11 Jan 2013

He must meet U.S. obligations, and he can’t cut spending without Congress’s say-so. But some lawmakers want to stop him borrowing more. Trillion-dollar coins aside, breaching the debt ceiling is legally the president’s safest bet. That could force his critics into hard choices.

Obama pick for Treasury more tweaker than reformer

9 Jan 2013

Jack Lew knows budgets and helped balance America’s books under Clinton. But he may be too liberal for today’s Republicans, and his boss wants to cut entitlements with a scalpel, not a cleaver. That makes it unlikely Lew will preside over a long-term answer to U.S. deficits.

Tim Geithner wore more than firefighter’s hat well

8 Jan 2013

While part of the establishment that allowed the financial system to self-immolate, the departing Treasury secretary helped douse the flames effectively. While that should be his main legacy, Geithner also managed the role’s diverse duties in the toughest economic times.