Fiscal Policy

Chuck Hagel is good choice for U.S. deficit hawks

8 Jan 2013

Obama’s pick for defense secretary mixes dovish foreign policy views - at least for a Republican - with budget-cutting fervor. The combination could actually slash Pentagon spending. Reducing it to the proportion of GDP seen in the late 1990s would save Uncle Sam $250 bln a year.

U.S. Congress will listen only to markets

2 Jan 2013

A last-minute, pint-size fiscal deal sets the stage for another cliffhanger in a few months. Worse, chances for deficit reduction are probably weaker now. In theory, everyone should want a broader plan but voters are too narrowly focused. Investors get the final word.

Review: Every monetary system needs a Paul Volcker

14 Dec 2012

William Silber’s biography praises the man whose determination and integrity overcame U.S. inflation with monetary policies the opposite of today’s, against opposition from politicians and economists. Yet once his work was done, policy slid back and his abilities were wasted.

Difference between "and" and "or" could undo Fed

12 Dec 2012

As well as saying it will buy more bonds, the U.S. central bank replaced its estimated duration for low interest rates with thresholds for the unemployment rate and inflation. If reality makes the two measures diverge, the new approach could prove rocky for markets.

Cliff battle shows CEOs must play nice with Obama

11 Dec 2012

U.S. business leaders have rekindled their love affair with the president, backing his tax hikes on the wealthy to avoid fiscal tightening. That may pressure the White House to accept a compromise. Even if Obama burns them, no one else in Washington can help them.

Obama starting to look like fiscal cliff jumper

5 Dec 2012

The president’s approach to solving the budget crisis could take America over the edge. His first offer was dead on arrival and he quickly rejected Republicans’ compromise response. The politics of not reaching a deal might appeal to Obama, but it’s not good for the economy.

Corporate America fears taxes more than recession

28 Nov 2012

Hence the flurry of special dividends. If the “fiscal cliff” of tax hikes and spending cuts really risks a downturn, companies ought to hoard cash. Instead Costco and others are giving it to shareholders while tax rates are low. That’s fine, but suggests the hype is overdone.

BoE likely to see three changes in monetary policy

28 Nov 2012

New governor Mark Carney prefers to give clear guidance on interest rate prospects - in contrast to Mervyn King’s studied ambiguity. He’s also likely to lead the monetary policy committee more assertively. And his appetite for money printing seems lower than his predecessor’s.

Ben Bernanke is no holiday price Grinch

26 Nov 2012

Easy money hasn’t made turtle doves and other “Twelve Days of Christmas” gifts much pricier. The cost is up a below-average 2.6 pct, excluding swans. Thanksgiving was under 1 pct more expensive, against a rise in the U.S. CPI of 2.2 pct. There’s no inflation to unwrap this year.

Obama’s got 99 problems and the SEC isn’t one

26 Nov 2012

It’s a shame, but how else to assess the choice of Elisse Walter to run Wall Street’s watchdog? Picking a bureaucrat reflects Obama’s need to conserve political capital for bigger fights on fiscal issues and his cabinet rather than attempting an upgrade of the SEC’s import.

Whatever happened to the fiscal "Cialis plan?"

16 Nov 2012

That was the name given to a piece of U.S. legislation spearheaded by Erskine Bowles that would have given the lame duck Congress a way to avoid the fiscal cliff and set the framework for a grand bargain. Its absence from the debate suggests a mere temporary patch in 2012.

Fed needs to spend some time out of the spotlight

14 Nov 2012

The hyperactive U.S. central bank has already said it probably won’t raise rates for years. Now it’s considering specifying levels of unemployment and inflation that could change that. It’s a recipe for confusion. Better to keep quiet and finally let markets reassert themselves.

To fix U.S. finances requires compromiser-in-chief

26 Oct 2012

Achieving a grand bargain on tax, entitlements and spending will take a leader who is capable of bipartisan dealmaking. Having worked with Democrats as governor of Massachusetts, Romney may have the edge over Obama, whose signature legislative triumphs were party-line deals.

Fed may hike rates sooner than it reckons

24 Oct 2012

The FOMC’s sticking with its near-zero target till 2015. But after the presidential election longer-term savings and inflation risks of current policies may be more salient than short-term jobless trends. If so, the Fed may soon raise rates, no matter who wins the White House.

Last U.S. debate neglects foreign policy realities

23 Oct 2012

Listening to Barack Obama and Mitt Romney spar, it would have been easy to forget that Europe exists, free trade matters or global coordination of finance remains a priority. Worse, the politically facile China-bashing suggests both men are missing the big opportunity.

It’s not too late to choose an Economic Dream Team

22 Oct 2012

As the U.S. presidential candidates head to their final debate, we’ve added new choices for key economic jobs. Should financial reformer Barney Frank have a spot? Can deficit hawk Martin Feldstein, or Treasury’s No. 2 Neal Wolin, help fix the U.S. fiscal mess?

Romney’s foreign policy doesn’t seem so austere

9 Oct 2012

The Republican indicates a George W. Bush-like interventionist approach, another step away from the party’s pre-World War Two isolationism. That could lead to more Middle East conflict and defense spending, eating savings from thriftier budgets. It’s also just as risky as Obama’s stance.

Federal Reserve running out of taboos to break

21 Sep 2012

One regional head of the U.S. central bank admitted the latest QE broadside would debase the dollar. Another said an above-target inflation rate would be tolerable. Both follow from the Fed’s war on stagnation, but actually saying so could bring domestic and foreign brickbats.

Fed looks helpless until at least 2013

1 Aug 2012

The FOMC bewailed slowing U.S. growth but made no policy changes. Absent crises, more quantitative easing this year is unlikely. QE3 may anyway be more effective in theory than in practice. After the U.S. election, though, the Fed may face much tougher choices.

Looming US debt clash a safety check for investors

15 Jun 2012

Washington looks set to repeat last year’s battle over the nation’s borrowing limit. That was almost a debacle. But the messy spectacle serves to put reducing deficits in the spotlight, forcing Congress to ensure that borrowing remains manageable. That should be welcomed.