Greg Ip

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

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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 »

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December 16, 2012 at 4:26 pm

Why a President Romney would have Obama to thank for an economic recovery

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The Washington Post, Outlook  section

By Greg Ip, Published: October 5

Cast your mind forward to October 2014. The economic rebound for which Barack Obamahad worked so hard and hoped so long is finally underway: Growth is humming, unemployment is steadily dropping, and the stock market is hitting one record high after another. But unfortunately for Obama, he’s not in the White House anymore — and President Mitt Romney is the man whose approval ratings are being carried aloft by the Dow.Romney is widely considered to have won Wednesday night’s presidential debate by attacking Obama’s economic record and promising, if elected, to restore job growth and middle-class incomes. The irony is that, if Romney wins the election and the economy rebounds on his watch, much of the recovery will be due to efforts undertaken during the Obama administration.Every president faces two painful, immutable truths about the economy: First, he has far less influence over it than voters think. Second, even when his actions make a difference, it is often not felt until after he’s left office, and not always in the expected way. Read the rest of this entry »

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October 5, 2012 at 10:00 am

The Republicans’ new voodoo economics?

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By Greg Ip, Published: August 19

When John McCain was running for the Republican presidential nomination nearly 12 years ago, he declared that Alan Greenspan was so critical to the economy that, if the then-Federal Reserve chairman died, he’d put sunglasses on the body, prop him up and hope no one noticed.

It’s safe to say that GOP opinions of the Fed have slipped a bit since. Texas Gov. Rick Perry, a newly declared candidate for president, said it would be “treasonous” for Greenspan’s successor, Ben Bernanke, to “print more money between now and the election” in an effort to boost the economy. Other candidates have been equally damning if slightly less extreme in their statements. Rep. Michele Bachmann of Minnesota has accused the Fed of “debasing the currency,” while Rep. Ron Paul of Texas has written a bestseller called “End the Fed.” The party’s economic standard-bearer in the House, Paul Ryan of Wisconsin, repeatedly charges the Fed with “bailing out” what he considers President Obama’s reckless fiscal policy and wants the institution stripped of its mandate to promote employment.

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August 21, 2011 at 12:49 pm

Five myths about the Federal Reserve

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By Greg Ip
Friday, November 12, 2010;

Washington Post Outlook

The Federal Reserve’s announcement on Nov. 3 that it will buy $600 billion worth of Treasury bonds to help boost the struggling U.S. economy reverberated around the world this past week, with condemnation from critics as varied as Sarah Palin and the president-elect of Brazil. Yet much of what the Fed and its chairman, Ben Bernanke, have done is shrouded in confusion and misperceptions.

1. By printing money, the Fed will create runaway inflation.

The Nobel Prize-winning economist Milton Friedman issued a famous dictum nearly 50 years ago: “Inflation is always and everywhere a monetary phenomenon.” His belief has become widespread over the years, to the point that even many non-economists assume that when the Fed prints money, higher prices inevitably result. But the link between money and inflation is weaker than people think. Read the rest of this entry »

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November 14, 2010 at 9:56 pm

Think this economy is bad? Wait for 2012.

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By Greg Ip

Washington Post Outlook, Sunday, October 24, 2010; B03

We’re barely two years past the banking crisis, still weathering the mortgage crisis and nervously watching Europe struggle with its sovereign debt crisis. Yet every economic seer has a favorite prediction about what part of the economy the next crisis will come from: Municipal bonds? Hedge funds? Derivatives? The federal debt?

I, for one, have no idea what will cause the next economic disaster. But I do have an idea of when it will begin: 2012.

Yes, an election year. Economic crises have a habit of erupting just when politicians face the voters. The reason is simple: They are born of long-festering problems such as lax lending, excessive deficits or an overvalued currency, and these are precisely the sort of problems that politicians try to ignore, hide or even double down on during campaign season, hoping to delay the reckoning until after the polls close or a new government takes office. Read the rest of this entry »

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October 24, 2010 at 12:00 pm

The Worst Ideas of the Decade: Housing Prices Always Rise

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by Greg Ip

[Washington Post Outlook Section, Dec. 20, 2009]

Countless delusions and mistakes brought on our financial crisis, but none did as much damage as the belief that home prices never go down.

People have long seen real estate as a safe investment. The notion is intuitive – the supply of land is limited, and the population is always growing – and until 2007, national home prices had not fallen significantly since the Great Depression.

Yet at the start of this decade, this belief became the lynchpin of an entire investment philosophy, as survivors of the dot-com bubble sought a refuge for their money. Read the rest of this entry »

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December 20, 2009 at 9:00 am

The use & abuse of economic history

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80 years after the crash that ushered in the Great Depression, we’re not repeating history’s mistakes. We’re making our own.

By Greg Ip

Sunday, October 25, 2009

 Book review of:

THIS TIME IS DIFFERENT: Eight Centuries of Financial Folly,  By Carmen M. Reinhart and Kenneth S. Rogoff, Princeton Univ. 463 pp. $35

THE CREATION AND DESTRUCTION OF VALUE: The Globalization Cycle, By Harold James, arvard Univ. 325 pp. $19.95

The Dow’s recent vault back to the neighborhood of 10,000 inspired a sense of relief far more than it did any urge for celebration. We have been through a dreadful recession, but at least, the market tells us, we have avoided a depression.

Or have we? This week marks the 80th anniversary of the crash that ushered in the Great Depression. In recent months, the Dow’s behavior has eerily mimicked those dark days when the index leapt from its 1929 lows to rally 48 percent into 1930. It was a false dawn: The worst of the Depression was still to come.

A popular refrain during our modern-day financial crisis is that we have forgotten the lessons of economic history. But Americans are not ignorant of the past: Many are obsessed with it. Countless investors scrutinize stock charts and bet on history repeating itself. However, few win this way. Our problem is not ignorance of history but an inability to know which bits are most relevant to the present. Read the rest of this entry »

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October 26, 2009 at 4:08 pm

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