Fiscal Policy

House finance chief puts politics over governing

23 Apr 2013

Jeb Hensarling, head of the U.S. House finance committee, has shunned the new consumer bureau’s chief. He complains Obama appointed Richard Cordray without congressional consent. The lawmaker would better serve finance, and democracy, by making his case with tough questions.

IMF needs more creative ideas on growth

22 Apr 2013

The world’s richest nations are on track to grow just 1.2 pct this year, half the pre-crisis rate. The policy experiments - austerity, stimulus and easy money - aren’t yet paying off. The IMF seems stuck too. More innovative research and advice would make the fund more valuable.

Prioritizing U.S. debt could stamp out market risk

19 Apr 2013

Drama over the cap on Uncle Sam’s borrowing power rattled investors back in 2011. A new proposal would force Treasury to pay bondholders before contractors and seniors. If the debt limit can’t just be scrapped, at least markets could be spared some of Washington’s dysfunction.

Brazil boxes itself into corner on growth

18 Apr 2013

The central bank just raised interest rates to fight inflation. GDP expansion, meanwhile, is already stalling. High public spending and rapid private credit growth, the fuels for Brazil’s boom, are both reaching their limits. President Rousseff may be running out of options.

Whatever happened to the inflation "Weimarists"?

12 Apr 2013

When the U.S. Fed began its massive stimulus campaign, critics invoked Germanic history and wheelbarrows full of cash. Four years on, only the most stubborn hawks still fear hyperinflation. Consistently low price growth has made Ben Bernanke’s easing look safe, if his exit works.

Obama puts other people’s money where his mouth is

10 Apr 2013

The president doubles down on taxing the rich as the Buffett levy makes an official appearance. New revenue is the centerpiece of Obama’s deficit-cutting ambitions, with millionaires, buyout bosses and smokers targeted. That probably dooms his budget plan - and a big debt deal.

Excessive vacancies are a travesty of Justice

9 Apr 2013

Several key posts remain open at Barack Obama’s law enforcement department as deadlines loom to file financial crisis-linked cases. The president is already under fire for not nailing Wall Street miscreants. It’s starting to look like he and the Justice Department are giving up.

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.