Jeff Faux and Gene Sperling are two titans of democratic economic policy. Last week (February 23, 2006) they debated the core economic policy differences that define and divide old Democrats from new Democrats. Read the rest of this entry »
Old Democrats vs. New Democrats: Faux vs. Sperling
March 2nd, 2006Who’s Afraid of China?
February 16th, 2006In the early 1980s the U.S. suffered record trade deficits and severe de-industrialization as a result of an overvalued dollar. Those problems were tackled by the 1985 Plaza accord – an agreement between the U.S. and its major trading partners – which depreciated the dollar, reduced the trade deficit, and helped keep the economic expansion going. Read the rest of this entry »
The China Effect: A Reply to The China Business Forum
February 3rd, 2006The China Business Forum recently (January 2006) released a report titled “The China Effect†that claims “the long-term benefits to the United States of Trade with China are substantial and likely to endure (Executive Summary).†The top line conclusion of the report is that the average US household stands to be one thousand dollars better off by 2010 as a result of lower prices and increased productivity in the U.S. due to the China effect. The bottom line take-away from reading the report is that it is flawed and misleading. Here is why. Read the rest of this entry »
Asset-Based Stability: A Proposal for the Euro Zone
February 3rd, 2006The establishment of the euro represents an important step in the creation of an integrated European economy. Over time it should yield dividends as increased competition and lower transaction costs generate increased efficiency. However, member countries have had to give up their own exchange rates and interest rates, which has created problems for economic management by reducing the number of policy instruments. In particular, the European Central Bank (ECB) must wrestle with how to set interest rates when some countries are booming, while others suffer high unemployment. Asset based reserve requirements (ABRR) can fill this policy instrument gap. Read the rest of this entry »
Debunking the Saving Shortage Theory of the Trade Deficit
January 30th, 2006Americans are justifiably confused by what they hear from economists. On one hand they are repeatedly told that America has a saving shortage problem and it must increase national saving. On the other hand, no sooner do households increase saving and reduce consumption, economists start worrying about recession and possible need to lower interest rates to maintain spending. Read the rest of this entry »
Back to Basics: Progressive Economics for the 21st Century
January 18th, 2006Many Americans have rightly identified China, uncontrolled trade deficits, and Wal-Mart style competition as looming threats to the American economy. However, they remain hard-pressed countering the free market/free trade story of mainstream economists that these are all for America’s long run benefit. Read the rest of this entry »
Export-led Growth: The Elephant in the Room
January 13th, 2006Psychologists refer to the “elephant in the room†phenomenon as a condition where people talk about everything except the most important issue. I recently (January 10, 2006) attended a conference at Washington’s prestigious Institute for International Economics on the likelihood of a financial crisis in developing countries. All morning the elephant sat quietly in the room sipping coffee. Read the rest of this entry »
Silent Spring: How the Democrats lost their Economic Policy Voice
January 5th, 2006In 1962 Rachel Carson published her environmental epic, Silent Spring, which documented how chemical-based agriculture was killing the bird-life and birdsong of America’s countryside. Over the last forty years the Democratic Party has also slowly lost its voice and fallen silent on the economy, with Democrats substituting a laundry list of program plans for economic vision. Read the rest of this entry »
The U.S. Trade Deficit and Net Foreign Income: No Escaping the Problem
December 18th, 2005Economists have long had an obsession with physics, evidenced by the metaphors of utility indifference curves and production iso-quants that derive from 19th century force field physics. Recently (Financial Times, Friday 8 December – not The Onion, April 1), Harvard University economists Ricardo Hausmann and Federico Sturzenegger claim to have discovered financial “dark matter“ that shows that neither the U.S. nor the global economy suffer from international financial imbalances. Consequently, the U.S. trade deficit is no longer an issue of concern. Read the rest of this entry »
Exchange Rates, Labor Standards, and Democracy: Why China Must Change
December 10th, 2005For the past five years the global economy has been flying on one engine. That engine is the U.S. consumer who has been on a consumption binge financed by borrowing, in turn backed by a housing price bubble. This situation poses the threat of a serious hard landing when that engine eventually stalls, as it must. Ever inflating house prices and rising debt-to-income levels are not sustainable. And as the late Herbert Stein, Chairman of President Nixon’s Council of Economic Advisers, wryly observed: “If something cannot go on forever, it will stop.†Read the rest of this entry »