Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Feldstein’

The Debt Crisis Is Coming Soon

Posted by hkarner - 22. März 2019

Date: 21-03-2019
Source: The Wall Street Journal By Martin Feldstein

To avoid economic distress, the government has to reduce future entitlement spending.

The most dangerous domestic problem facing America’s federal government is the rapid growth of its budget deficit and national debt.

According to the Congressional Budget Office, the deficit this year will be $900 billion, more than 4% of gross domestic product. It will surpass $1 trillion in 2022. The federal debt is now 78% of GDP. By 2028, it is projected to be nearly 100% of GDP and still rising. All this will have very serious economic consequences, and the CBO understates the problem. It has to base its projections on current law—in this case, the levels of spending and the future tax rules and rates that appear in law today.

Those levels don’t match realistic predictions. Current law projects that defense spending will decline as a share of GDP, from a very low 3.1% now to about 2.5% over the next 10 years. None of the military and civilian defense experts with whom I’ve spoken believe that will happen, given America’s global responsibilities and the need to modernize U.S. military equipment. It is likelier that defense spending will stay around 3% of GDP or even increase in the coming decade. And if the outlook for defense spending is increased, the Democratic House majority will insist that the nondefense discretionary spending should rise to match its trajectory. Den Rest des Beitrags lesen »

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There Is No Sino-American Trade War

Posted by hkarner - 30. Januar 2019

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

Chinese negotiators recently offered to buy enough American products to reduce the bilateral trade deficit to zero by 2024. Why, then, have US negotiators rejected that as a way to end the dispute?

CAMBRIDGE – The current conflict between the United States and China is not a trade war. Although the US has a large trade deficit with China, that is not the reason why it is imposing high tariffs on imports from China and threatening to increase them further after the end of the current 90-day truce on March 1. The purpose of those tariffs is to induce China to end its policy of stealing US technology.

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Why Is the Fed Still Raising Interest Rates?

Posted by hkarner - 30. Dezember 2018

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

Given that the US Federal Reserve has long said that its interest-rate policy is “data dependent,” why has it pressed ahead with monetary tightening in the face of worsening economic indicators? Three reasons stand out.

CAMBRIDGE – Earlier this month, the US Federal Reserve’s policy-setting Federal Open Market Committee (FOMC) voted unanimously to increase the short-term interest rate by a quarter of a percentage point, taking it from 2.25% to 2.5%. This was the fourth increase in 12 months, a sequence that had been projected a year ago, and the FOMC members also indicated that there would be two more quarter-point increases in 2019. The announcement soon met with widespread disapproval. Den Rest des Beitrags lesen »

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Falling Share Prices and the Outlook for the US Economy

Posted by hkarner - 30. Oktober 2018

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

Three forces will cause US long-term interest rates to continue to rise. But, in all likelihood, short-term rates will not increase fast enough to give the Federal Reserve sufficient room for monetary stimulus before the next economic downturn begins.

CAMBRIDGE – The Standard and Poor’s 500 index of share prices has fluctuated wildly during 2018 but has returned to nearly the same level that it was at the beginning of the year. The absence of a net fall for the year reflects the combination of a rise in corporate profits and a 12% decline in the price-earnings ratio. And the fall in the price-earnings ratio is an indication of the likely evolution of share prices in the next few years.

The price/earnings (P/E) ratio is now 40% higher than its historic average. Its rise reflects the very low interest rates that have prevailed since the US Federal Reserve cut the federal funds interest rate to near zero in 2008. As long-term interest rates rise, however, share prices will be less attractive to investors and will decline. Den Rest des Beitrags lesen »

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The Fed Can’t Save Jobs From AI and Robots

Posted by hkarner - 12. Juni 2018

Date: 11-06-2018
Source: The Wall Street Journal By Martin Feldstein

The central bank’s employment mandate can’t be squared with coming tech disruption.

The day is coming, experts tell us, when artificial intelligence and robotics will massively disrupt the labor market. Autonomous vehicles will put 3.5 million truck drivers at risk of losing their jobs. Checkout machines may replace 3.4 million retail cashiers. That is only the beginning of the long list of jobs that will be destroyed by technological change.

The shift will not happen all at once, and most of the people who lose their jobs will eventually find new employment. The benefits of automation will include lower production costs, which will increase real incomes and job-creating consumer demand. But the technology will also cause individual hardship and frequent periods of increased unemployment.

These large supply shocks cannot be offset by monetary policy. They therefore will present the Federal Reserve with a new challenge. In 1978 Congress gave the Fed a “dual mandate” of price stability and maximum employment. This distinguishes the Fed from the world’s other major central banks. The European Central Bank, the Bank of England and the Bank of Japan, for example, are required to target only the rate of inflation (although they may informally pay attention to the level of employment). Den Rest des Beitrags lesen »

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Cutting US Corporate Tax Is Worth the Cost

Posted by hkarner - 28. November 2017

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

One of the main criticisms leveled at congressional Republicans‘ proposal to cut corporate taxes is that a higher budget deficit would amount to an undesirable fiscal stimulus. But with monetary policy turning contractionary, and most experts predicting a US recession in the next five years, stimulus should be welcomed.
CAMBRIDGE – The United States Congress is close to enacting a major tax reform. The plan’s most important provision reduces the corporate tax rate from 35% to 20% – from the highest among all OECD countries to one of the lowest – and allows US companies to repatriate the profits of their foreign subsidiaries without paying additional US taxes. Opponents of the legislation point to the resulting increase in the federal budget deficit, which will add $1.5 trillion to the government debt over the next ten years.

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The International Consequences of US Tax Reform

Posted by hkarner - 1. Oktober 2017

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

The proposed shift to a territorial tax system is likely to have far-reaching effects on US corporations’ behavior. But that change, together with a reduction in the 35% corporate-tax rate, could trigger another round of tax reform among developed countries seeking to improve their attractiveness to internationally mobile capital.

CAMBRIDGE – The United States Congress is likely to enact a major tax reform sometime during the next six months. Although the new rules will apply only to American taxpayers, they will have important consequences for companies and markets around the world.

The most important changes will apply to US corporations rather than to individual taxpayers. Of these reforms, the one with the most obvious and direct international impact will be the change in the taxation of US corporations’ foreign subsidiaries.

The current US rule is unique among all major advanced economies. Consider the example of a subsidiary of a US corporation that earns profits in Ireland. That subsidiary pays the Irish corporate tax at Ireland’s low 12% rate. It is then free to reinvest the after-tax profits in Ireland, in financial securities, or in operating businesses anywhere in the world – except the US. Den Rest des Beitrags lesen »

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Tax Reform and Budget Deficits in America

Posted by hkarner - 30. August 2017

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Trump’s Foreign Policy Reversals

Posted by hkarner - 31. Mai 2017

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