Fiscal Policy

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.

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.