Greg Ip

Articles by The Economist’s U.S. Economics Editor

Archive for July 2009

Rebalancing the world economy: America: Dropping the shopping

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The original article is linked here.

By Greg Ip

Jul 23rd 2009 | WASHINGTON, DC
From The Economist print edition

Can America wean itself off consumption? The first of a series on how the world’s four biggest economies must change to ensure sustainable global growth

 
 

GENERAL ELECTRIC has historically been a manufacturer, but in the long boom leading up to the financial crisis it became more like a bank. Half its profit came from its finance arm, GE Capital, which among other things had a lucrative business issuing mortgages and credit cards to American consumers. GE’s chief executive, Jeffrey Immelt, now talks like a man chastened. With GE Capital acting as a drag on the company, he vows that in the future finance will be a smaller part of the company. In its place GE touts its manufacturing and exporting prowess. Mr Immelt boasts of record aircraft engine orders at the Paris Air Show in June, none of them to American airlines.

Like GE, the entire American economy is at an inflection point. For decades, its growth has been led by consumer spending. Read the rest of this entry »

Written by gregip

July 23, 2009 at 1:03 pm

The deficit and health care: Falls the shadow

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The original article is linked here.

Jul 23rd 2009 | WASHINGTON, DC
From The Economist print edition


The enormous deficit is complicating the president’s ambitious plans

Illustration by Claudio Munoz
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IT WAS a rare victory for fiscal rectitude. On July 21st the Senate stripped the funding for seven more F-22 fighter jets from a big spending bill, bowing to Barack Obama’s threat to veto the aircraft.

But it was overshadowed by the much bigger setback Mr Obama had suffered a few days earlier. Three committees in the House of Representatives had presented a plan to provide health cover for the uninsured with the help of hefty tax increases on the rich. On July 16th Douglas Elmendorf, Congress’s chief budget scorekeeper, stunned Washington when he said the bill would not only fail to tame health-care costs, but would permanently shift them higher. It would add $239 billion to the deficit in the next decade and far more thereafter. The next day conservative Democrats joined Republicans on two committees in voting against the bill, though it still passed.

 
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That Mr Elmendorf’s comments made such an impact signifies the growing political potency of the deficit. By a big margin, Americans think Mr Obama is paying too little attention to it, according to one recent poll (see chart). The proportion who consider it the most important issue facing the country has risen from 12% last December to 24% in June, according to another poll by the Wall Street Journal and NBC News. Read the rest of this entry »

Written by gregip

July 23, 2009 at 12:37 pm

America’s Federal Reserve: On the mend

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The original article is linked here.

Jul 21st 2009 | WASHINGTON, DC
From Economist.com

 

The Fed’s chairman talks up the economy

AP
BenBernanke
 

 

IT HAS been a long time since comments on the economy by an official of America’s Federal Reserve comments could be described as cheerful. Yet there was no denying the upbeat tone of Ben Bernanke’s testimony to Congress on Tuesday July 21st.

Markets have experienced “notable improvements,” the Fed’s chairman told Congress. The fear of investors has “eased somewhat,” and “many markets are functioning more normally.” As for the economy, consumer spending has been stable, the drop in the housing market has moderated and many “of our trading partners are also seeing signs of stabilisation.” His fingers may be crossed but it is clear that Mr Bernanke thinks the recession, if not over now, soon will be.

That is a far cry, though, from seeing a threat from inflation and Mr Bernanke made it clear that the federal funds target rate, now near zero, will remain there for a long time. Read the rest of this entry »

Written by gregip

July 21, 2009 at 5:41 pm

Oversight of the Federal Reserve: Unwelcome attention

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The original story is linked here.

Jul 16th 2009 | WASHINGTON, DC
From The Economist print edition

Congress threatens the central bank’s independence

 
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WHEN Ron Paul ran for president in 2007, he was gratified to hear students at one of his rallies start chanting “End the Fed”, while setting dollar bills alight. Though the Texas congressman’s pursuit of the White House ended in failure, his campaign against the central bank is gaining some adherents.

Mr Paul has introduced a bill that would give the Government Accountability Office (GAO), the non-partisan investigative arm of Congress, the right to inspect the Federal Reserve, including its conduct of monetary policy, its lending and its relations with foreign central banks, all of which are now off-limits. Sixty percent of the members of the House of Representatives have signed on as co-sponsors. Read the rest of this entry »

Written by gregip

July 16, 2009 at 12:45 pm

The economy and employment: On the turn?

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The original article is linked here.

The economy and employment

On the turn?

Jul 9th 2009 | WASHINGTON, DC
From The Economist print edition

The gloom about jobs is overdone, but the outlook remains tenuous

AFTER ebbing steadily since the start of the year America’s monthly job losses figure abruptly jumped from 322,000 in May to 467,000 in June, deflating talk of an imminent exit from recession. Hand-wringing in Washington quickly followed. Read the rest of this entry »

Written by gregip

July 9, 2009 at 8:35 pm

Corporate tax: Escaping the shakedown

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The original article is linked here.

Jul 2nd 2009 | WASHINGTON, DC
From The Economist print edition

Governments are not raising corporate tax, but firms can no longer count on the taxman to treat them ever more kindly

Illustration by Claudio Munoz
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WHEN the Irish government, reeling from bank failures and a monumental property crash, unveiled an austerity budget in April, it socked individuals with higher taxes. But it left its corporate-tax rate—the lowest among OECD countries—unchanged at 12.5%. Last year Germany cut its corporate-tax rate from 39% to 30%. Canada is pressing ahead with plans to lower its combined federal-provincial rate to 25%. Russia has also reduced its corporate taxes, and Singapore intends to do so. According to the International Bureau of Fiscal Documentation (IBFD), an Amsterdam-based group that follows international tax developments, no country plans to raise its main corporate levy. Read the rest of this entry »

Written by gregip

July 2, 2009 at 8:48 pm

Posted in Taxes, The Economist

Economics focus: Put out

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The original article is linked here.

Economics focus

Put out

Jul 2nd 2009
From The Economist print edition

Uncertainty over the size of the output gap complicates the task of central banks

HAVING raised the alarm on deflation, the Federal Reserve has now begun to sound the all clear. The statement it released after its policy meeting on June 24th notably omitted the warning from its three prior meetings that “inflation could persist for a time below rates that best foster economic growth and price stability”. To be sure, with the economy gradually finding a bottom and the rate of decline in home prices slowing, the chances of a downward spiral of deflation and economic activity have diminished. Yet it seems premature to write off the threat as long as a large output gap persists. Read the rest of this entry »

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