16 Items

Blog Post - Views on the Economy and the World

How China Compares Internationally in New GDP Figures

| May 31, 2020

The World Bank on May 19, as it does every six years, released the results of the most recent International Comparison Program (ICP), which measures price levels and GDPs across 176 countries.  The new results are striking.  It is surprising that they have received almost no attention so far, perhaps overshadowed by all things coronavirus.

For the first time, the ICP shows China’s total real income as slightly larger than the US.  It reports that China’s GDP was $19,617 billion in 2017, in Purchasing Power Parity (PPP) terms, while the United States’ GDP stood at $19,519 billion.

Blog Post - Views on the Economy and the World

History Warns Us to Avoid a W-shaped Recession

| May 03, 2020

“Those who do not study history are condemned to repeat it.”  And the rest of us are condemned to repeat George Santayana.

Will the Coronavirus Recession of 2020 be V-shaped?  Or U-shaped?  If we fail to heed the lessons of history it is likely to be W-shaped, with incipient recovery followed by successive relapses into sickness and recession.

As has been widely noted, we would have been better prepared to cope with the Covid-19 pandemic in the first place if everyone had paid more attention to the past history of epidemics. Be that as it may, the world is now deep into the pandemic and its economic consequences, the most severe such events since the interwar period, 1918-1939.  As decision-makers in every country contemplate their next steps, they would do well to ponder the precedents of that interwar period.

Blog Post - Views on the Economy and the World

Six Practical Proposals for Progressive Tax Policy

Jan. 02, 2020

It was quite a surprise, three years ago, when Donald Trump won a majority in the US Electoral College, thus becoming the 45th president.  In the search for explanations, one immediately dominated:  Democrats had not been sufficiently aware of the problem of income inequality or had neglected to propose good solutions to it.

This is presumably the logic behind radical proposals coming from some of the leading contenders for the Democratic nomination in the 2020 presidential election. Senator Elizabeth Warren, for example, has proposed an annual tax on the wealth of the wealthiest Americans (originally to be 2 % per year, but now up to 6 %).

Blog Post - Views on the Economy and the World

Let’s Forget about 2% Inflation

| July 29, 2019

The Fed has some reasons for cutting interest rates at its meeting July 31, or subsequently if the US economy weakens. (And there are some good arguments on the other side as well, if growth remains as strong as it has been over the last year.)  But I find less persuasive one argument for easing: a perceived imperative to get inflation up to 2.0% or higher.

Federal Reserve Chairman Ben Bernanke set a 2% target for the US inflation rate in January 2012.  Some other countries had already done the same.  Japan followed suit a year later. Indeed Shinzo Abe’s successful accession to prime minister in late 2012 was predicated on the promise that monetary policy would raise inflation (Japan having previously suffered from negative inflation).

Blog Post - Views on the Economy and the World

Moore Troubles for the Fed

Apr. 30, 2019

Of the two men whom Donald Trump had intended to nominate to empty seats on the Federal Reserve Board, Herman Cain has now withdrawn his name.  This leaves the other one, Stephen Moore.

The Senate would have to decide whether to confirm Moore. He has some problems roughly analogous to Cain’s:  he is considered to be under an ethical cloud and he often gets his economic facts wrong.  Cynics might respond that he would thereby fit right in with the roster of Trump nominees throughout the government.  But Trump’s earlier appointments to the Fed have been people of ability and integrity and have been doing a good job, Chair Jerome Powell in particular. Perhaps Trump did not start paying attention to Fed appointments until recently.

 

 

Blog Post - Views on the Economy and the World

An Economic Platform for the Democrats

| May 29, 2018

Democrats are gearing up for the November mid-term elections, in which they hope to take back the US House of Representatives. Candidates are finding that the voters are not necessarily paying close attention to foreign affairs or even Trump scandals, and are more concerned about “pocketbook issues.” The conventional wisdom still stands: underlying the shock election of Mr Trump was the worry by the median household that it has been left behindby globalization and technological change and that the gains have been going to the rich instead.

Blog Post - Views on the Economy and the World

Seven Reasons China Won’t Yield in Trump’s Trade War

| Apr. 23, 2018

President Trump enacted steel and aluminum tariffs in March, citing national security.  China is the intended target, as most other major suppliers were eventually exempted. On April 2, China retaliated by imposing tariffs on 128 American products (representing about $3 billion of trade), ranging from 15% on fruits to 25% on pork.  Trump April 3 announced 25% tariffs on another 1300 Chinese products [representing some $50 billion of trade], citing forced transfer of US technology and IPR. China on April 4 responded with plans for retaliatory 25% tariffs on 106 US exports -- including soybeans, autos, and airplanes -- to go into effect when the US tariffs do.  On April 5, the White House announced it was considering $100 billion of additional tariffs on China.

If these tariffs go ahead, yes, it is a trade war. How will it end?

Blog Post - Views on the Economy and the World

Long-term Job Decline in US Manufacturing

| Nov. 13, 2017

What does international trade have to do with US jobs?  Surely the US trade deficit in manufacturing has reduced employment?  Not as much as you would think, on net.  Especially with regard to overall employment, which in the long run is determined by the size of the labor force.  But even if manufacturing jobs are considered more important than service jobs, trade policy has not been the main reason for their decline.  Perhaps the raw statistics can be made more intuitively convincing if one makes comparisons with other sectors.