Greg Ip

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

Archive for December 2012

A primer on central banking and QE

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Presented at a capital markets briefing on Capitol Hill, sponsored by Third Way

Written by gregip

December 19, 2012 at 6:20 pm

Posted in Uncategorized

Cliff talks: Relief in sight

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President and speaker draw near to a deficit deal

Dec 22nd 2012 | WASHINGTON, DC | from the print edition

[By Greg Ip] THE housing market has turned, Europe’s crisis is apparently in remission and the Federal Reserve has pressed its monetary accelerator to the floor. Yet as 2012 draws to a close, America’s economy is still growing at an annualised rate of only around 1%. That figure has been depressed by fears of the self-inflicted “fiscal cliff”: a package of tax increases and spending cuts, worth 5% of GDP in a full year, that is set to kick in on January 2nd.

That constraint may also be finally lifting. Read the rest of this entry »

Written by gregip

December 18, 2012 at 4:29 pm

American growth vs. the world: At the top of an underperforming class

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Dec 17th 2012, 22:13 by G.I. | WASHINGTON

[Greg Ip] FOR those who started out the year optimists on American growth (such as me), 2012 was sobering. It looks like America will end the year having grown about 2%, according to Deutsche Bank, marginally below the average pace since the recovery began in mid-2009.Why was it disappointing? In great part part because the rest of the world had an even worse year. Take a look at the nearby table. Of the world’s four major developed economies plus China, America was the only country to grow roughly as fast as the International Monetary Fund projected in the fall of 2011. Europe and the U.K. actually contracted, while China (and several other emerging economies) grew notably less briskly.

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Written by gregip

December 17, 2012 at 4:32 pm

Five myths about tax reform

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By Greg Ip, Published: December 14

As the nation’s leaders seek to keep the country from heading over the “fiscal cliff” — a set of mammoth year-end tax increases and spending cuts — nothing has proved more contentious than taxes. President Obama wants the rich to pay more; Republicans want to keep tax rates where they are. One popular proposal is to eliminate the tax code’s hundreds of loopholes and use the money to reduce the deficit without raising rates. But while tax reform is wonderful in theory, in practice it might not be as politically palatable — or economically effective — as advertised.

1. Tax reform has bipartisan support.

The night he was reelected, President Obama said “reforming our tax code” was among his second-term priorities. A few days later, House Speaker John Boehner said tax reform could help solve the national debt. Read the rest of this entry »

Written by gregip

December 16, 2012 at 4:26 pm

The Senate tax bill: A dreadful third option

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Dec 14th 2012, 19:54 by G.I. | WASHINGTON, D.C.

Negotiations over the fiscal cliff appear to have stalled. A meeting last night between President Barack Obama and John Boehner, the Republican speaker of the House of Representatives, produced no apparent narrowing in their positions.Since negotiations began, very little progress has been made: Mr Obama initially asked for $1.6 trillion in tax increases over the coming decade, later lowered to $1.4 trillion, and offered $400 billion in spending cuts.

Mr Boehner has, in return, offered $800 billion in higher revenue by eliminating tax expenditures (i.e., no increase in rates), and asking for $600 billion in entitlement cuts. Both sides say they are waiting for the other to specify details of their demands, in particular on spending. Mr Boehner is apparently headed home to his Ohio district for the weekend, a sign that no progress is being made.

Until this point there have been two likely outcomes: no deal at all and the country going over the cliff, or a grand bargain. But there is third option. Read the rest of this entry »

Written by gregip

December 14, 2012 at 4:34 pm

Posted in Blog posts, Taxes

America’s demographic squeeze: Double bind

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A falling birth rate and much slower immigration presage long-term trouble ahead

Dec 15th 2012 | WASHINGTON, DC | from the print edition

[Greg Ip] ALTHOUGH America’s fiscal problems are among the worst in the rich world, its policymakers long took comfort that, when it came to demography, its outlook was one of the best. Because Americans have so many babies and welcome so many immigrants, they had more room to deal with the coming burden of pensions and health care for the elderly.But the savage recession of 2007-09 and its aftermath have not just deepened America’s fiscal hole; they have weakened those demographic advantages. America’s fertility rate has been falling since 2007, as has net immigration. Compounding this, the share of the population that is active in the labour force has slipped, both because of ageing and because of the recession’s lingering effects.

Read the rest of this entry »

Written by gregip

December 13, 2012 at 4:51 pm

Posted in Demographics

The fiscal cliff: On the edge

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What the cliff means, and why America’s deficit woes are so intractable

Dec 15th 2012 | WASHINGTON, DC | from the print edition

[Greg Ip]  WHEN the dust from November 6th’s election settled, the re-elected Barack Obama and the re-elected Republican leaders of Congress had less than two months to avert the “fiscal cliff”, a collection of tax increases and spending cuts scheduled for the beginning of the new year. They proceeded to fritter most of it away by disparaging each other’s offers. When John Boehner, the Republican speaker of the House of Representatives, met reporters on December 7th, he moaned, “This isn’t a progress report, because there is no progress to report.”Now, with less than three weeks to go, the pace has at last picked up. Mr Boehner and Mr Obama (pictured above) have talked twice in the past week, and representatives of both have exchanged offers. Publicly they say they are still far apart, but that is to be expected: serious negotiations seldom take place in front of cameras.

The absence of failure, at least so far, is seen by some as good news. That certainly goes for the stockmarket, which has recovered all its post-election losses. The outside world has long assumed that Mr Obama and Congress would strike a deal, because the alternative is too awful. Starting on January 2nd, taxes would jump for almost all taxpayers; a payroll-tax cut and enhanced unemployment benefits would expire; across-the-board cuts to federal spending would begin; and a clutch of other tax and spending measures would take effect. The total fiscal impact equals roughly 5% of GDP over a full year, easily enough to tip America’s economy back into recession.

To the rest of the world, the fiscal cliff seems like a freak of nature, the unintended consequence of America’s adversarial system of government. But that is too simplistic. Read the rest of this entry »

Written by gregip

December 13, 2012 at 4:49 pm

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