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Thomas Frank describes how things went wrong in America by drawing the contrast between Martha's Vineyard and Decatur, Illinois. In 1946 he says a typical executive's salary was only 2 times that of a worker at a Caterpillar plant in Decatur, Illinois. By 2016 this had changed to where the top executive at Caterpillar was making over 400 times the wage of a typical worker at a Caterpillar plant. Democratic politicians he said had moved away from their working class base towards places like Martha's Vineyard. For Republicans the embrace of tax cutting, the deficit, and cuts in education and healthcare, entitlements, to the exclusion of everything else in a recession environment led to the rise of Trump and the rejection of stands on these issues- including amazingly the embrace of a $5.3 trillion increase in the deficit under the Trump plan estimated by economists and a recession after a temporary boost.  Inserted into this were the culture wars, immigration, with the change to mass deportation as a solution to immigration problems. ...

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Problems with the CSeries project at Bombardier include cost overruns, and development problems delaying the first model from late 2013 delivery by 2 years. A Swedish carrier dropped out as a customer in August 2014. The effort to compete directly with Boeing and Airbus in larger planes was a risky move as the larger competitors are improving fuel efficiency and reducing prices. Bombardier, suppliers, and the governments of UK and Canada have increased the investment in the CSeries project from $3.4 billion to $4.4 billion. Bombardier's total aerospace sales are $9.39 billion. The project was started by Mr. Beaudoin, grandson of the founder and currently the CEO, when he headed the aerospace division in 2004. It started as an effort to tackle slowing sales by building a new passenger aircraft with 125-160 seats that was 20% more fuel efficient than existing aircraft using engines built by Pratt & Whitney. The competing versions in this market segment were the Airbus 320 and the Boeing 737. Airbus and Boeing responded by putting more fuel efficient engines on the existing A320 and the 737 instead of developing whole new models, something Bombardier had not expected. In Dec. 2010 Airbus launched the A320 neo line, single aisle jets with 124 to 240 seat capacity, promising 15% more efficiency using the same Pratt engine to be used on the CSeries. In 2011 Boing came up with the 737 Max line. Because these are a bit larger than the CSeries is a plus for airlines. Analysts say about 75% of the market is taken as airlines have placed large orders for the A320 neo and the 737 Max. With the CSeries Bombardier is now betting the company that the new aircraft will attract buyers....

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Jared Bernstein of the Economic Policy Institute points to trade barriers reducing competition and free trade that should raise an outcry when free trade and competition advocates focus alone on the Trump steel tariffs. He points to estimates that show $90 billion in additional costs to Americans from the barriers that prevent Americans from paying world market prices for surgeries and medical treatment, prices similar to what is paid in advanced countries like Germany, Britain and France. A bigger barrier in pharmaceuticals prices being sheltered from market competition worldwide costs a huge $370 billion in additional costs to Americans. These two costs in healthcare would help Americans by a magnitude compared to tax cuts that do not work for average Americans with the business tax cut going more into share buybacks than into increasing wages or capital investment in 2018.  Bernstein points to Neil Irwin's column in the NYT that flags statements such as Senator Mike Lee, Republican, that the steel tariffs are a huge job killing tax hike, as being misleading. Bernstein says two actions were never taken that would have used benefits of free trade to help affected communities that lost jobs in industries such as steel and textiles, other industries affected by foreign competition.  He lists these steps as sectoral employment training, apprenticeships ,and job creation efforts in the worst affected areas. Basically no one really knows what is good trade policy, the textbook concepts and theories are out of date when countries can subsidize particular industries such as steel and dump products into the American market. At a press conference on CSPAN with the Swedish prime minister Mr. Trump stated that China was exporting more than what is officially shown as there are transshipments from other countries, some of them with no steel mills.  As Mr. Trump stated at that press conference he was elected partly because of the worst affected communities- in places such as Michigan and other states in the midwestern U.S.- that suffered from unfair trade. Bernstein admonishes the economists and politicians, media, for the headlines that are misleading in showing that bad trade policy is being pursued and trade wars are being started. This deserves attention because the Trump administration and advisors such as Lighthizer who served in the Reagan administration seek fair trade, and the Commerce Secretary Wilbur Ross successfully pushed for NAFTA trade deal renegotiation not the outright rejection of NAFTA that was mentioned in the election campaign. Ironically no one is helped by this trade rhetoric and misleading headlines. In fact the strengthening of the U.S. currency as the huge trade surplus of China goes into U.S. assets, and with the election of Mr. Trump, gives foreign competitors a continued advantage. And in fact Japan, South Korea, China, had a mild response to the tariffs as reported, because these countries are aware of global overcapacity created especially by China which produces 50% of the world's steel, and as China shifts to higher technologically value added products closing many older steel mills. ...

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About $229 billion, three fourth of Greece's debt, is now held by the European Central Bank, the IMF and the European Commission. This is taxpayer money and the governments are making sure that they get back bailout loans in the form of interest payments. About two thirds of the $177 billion given to Greece as bailout loans since May 2010 actually came back to the ECB, IMF, and the EC, in the form of interest. The ECB is keen on recovering taxpayer money. The money route has been setup with an escrow account in Greece for bailout loans so that interest payments get paid, and this money cannot be used for any other purpose. Banking experts say this is a practice in risk management, and with Greece's poor record in finances the controls have been put in place to recover money the ECB invested in Greek bonds in an effort to calm nervous financial markets and now gets about 10% in annual interest payment. Under earlier debt restructuring for private creditors to Greece a haircut of over 50% on Greek bonds was taken, with the ECB insisting on receiving full payment. If Greece were to repudiate the loans under a new elected government losses would have to be taken by the ECB, IMF, and EC, and by private creditors. The ECB has Greek bonds in the range of $44 billion to $69 billion, and the European Financial Stability Facility $88 billion, by some estimates. Greece's exit from the euro would result in losses on these bonds .for the ECB and the EFSF, ultimately European taxpayers. It would also make the new bonds to private creditors under the restructuring of little value which is why European banks would not favor that outcome. Greece's tax receipts at some point, possibly 2013, would exceed basic operating expenses of the government, at which point a future Greek government might decide to exit the euro and stop interest payments on debt in its best interest....

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The Obama adminstration and Democrats start the U.S. "fiscal cliff" negotiations with a call for $1.6 trillion of additional tax revenues, twice the amount of $800 billion discussed in talks with Republicans in the summer of 2011. During the Obama-Boehner talks in mid-2011, the Republicans and Democrats neared agreement for a plan to cut the deficit by $4 trillion over 10 years, with new revenues of $800 billion. Obama then pushed to raise the revenue to $1.2 trillion and talks collapsed afterwards. The Republican side through GOP senior aides says $1 trillion in new tax revenues is where this could end up. The Republicans would agree to cap deductions for the wealthy as proposed by Feldstein-Romney, and the Democrats would agree to changing Social Security and increasing the Medicare eligibility age to above 65 as proposed by Rep. Chris Van Hollen (D., Maryland) in such a scenario.

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John Taylor, a professor of economics at Stanford, points out that the numbers being thrown back and forth in the budget debate can be confusing. He suggests a better way to look at this. The U.S. budget was 20% of GDP in 2007, and has been at or below that level in recent years, before the higher spending to counteract the effects of the 2008 financial crisis. As the economy recovers and private investment increases it makes sense to bring the spending back to levels where it has been- spending levels that do not endanger the country's credit rating and are a prudent way to manage the nation's finances. Taylor asks the question- if the U.S. got by by spending 20% of GDP in 2007, then why is it not possible to do this in future years when the GDP will be higher. In 2000 spending was actually 18.2% of GDP. Taylor says that with higher incomes people will be moving into higher tax brackets which should increase revenues in future years. In three years since 2009 the spending levels are up to 24.4%. Under this scenario private investment would make up for lower government spending and debt, leading to higher employment and GDP as business confidence rises. ...

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In comparison to industrial companies digital companies such as Google and Apple have more room to find gaps in the U.S. tax system which was designed for the industrial period. Apple paid a tax rate of 9.8% in 2011 on its global profits in 2011 of $34.2 billion, a total of $3.3 billion. Wal-Mart for instance paid a tax rate of 24%, on its booked profits of $24.4 billion, a total of $5.9 billion. The issue is significant because of the large U.S. deficit and spending cuts by local and state governments for essential services, especially in California, where Apple is located. Apple is able to avoid state taxes on some of its profits by locating an office in Reno, Nevada. Nevada has zero corporate taxes, California's corporate tax rate is 8.84%. In the current fiscal year Apple is expected to earn $45.6 billion which if taxed at the rates companies paid in the 1950's - 30% in the 1950's compared to 6.6% in 2009 for corporate tax receipts according to a New York Times report- would enable the state of California to avoids some of the sharp cuts in funding to community colleges such as De Anza College only minutes away from Apple, Google and H-P. De Anza College's president says he simply cannot understand this, how the whole psychology of corporations and the public itself has changed over the years, to where a college where one of the Apple co-founders Steve Wozniak got his education in 1969-74, is now struggling to survive with funding cuts. The California college system of the 1950's and 1960's was funded by other companies tax dollars creating the educational resources which helped create todays companies- one generations responsibilities transferred to another generation that has failed to understand what this is about....

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The increasing likelihood that Greece will exit the eurozone. This happens as the New Democracy party fails to form a coalition and the other parties are offered a chance to form a coalition. The other opposition parties gained far more votes than New Democracy and Pasok in the elections and some parties favor Greece exiting the eurozone. New elections will be held in June if no government is formed. The current government of Lucas Papademos says it needs an extra year to complete the privatizations, public sector layoffs and improvements in tax collection, giving Greece till 2015 to get the job done. As a senior advisor to Papademos, George Pagoulatos, put it: "There is a sense that Greece has passed its pain threshold... Greece needs some oxygen to breathe." Both the Ifo Institute's Sinn and John Taylor see the exit from the eurozone as the best option for Greece, as interest rates on Greek debt have been reduced and Greek banks recapitalized with the March 2012 bailout. John Taylor, WSJ, Feb. 22, 2012, A Better Grecian Bailout/ WSJ, Feb. 17, 2012, Interview: Ifo's Sinn: In Greece's Interest to Leave the Eurozone.This may already be the preparation the IMF, ECB, EU, and the Greece government has laid out as an option if the voters in Greece overwhelmingly rejected further austerity. This now appears to have happened and far more quickly than politicians in Athens, Brussels and Berlin had anticipated....

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The German Chambers of Commerce and Industry President Heinrich Driftmann told reporters in Berlin that the new government should overhaul the tax code and improve credit access for companies. The German chamber wants to see changes to the corporate and inheritance taxes. He said that even if it was considered taboo companies needed more flexibility in the labor market. Merkel has promised labor unions that keeping social protections will be a priority in her administration. Economists say it will be difficult to cut taxes because unemployment will rise to 11% in 2011 as Germany's economy contracts 5% this year, and this will mean less tax revenues and increasing costs for social spending.

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British budget cuts announced in Parliament by Britain's Finance Minister, George Osborne. About 83 billion pounds in cuts by 2015 were announced. But Joseph Stiglitz, writing in The Guardian, argued that the plan was a big gamble, as declining tax revenues with lower growth, would lead to smaller deficit reductions. The gamble is that the private sector will pick up, and make up for the reduction in public outlays. If this does not happen, this risks sending the economy into a tailspin. Osborne said that 490,000 jobs will be lost over the next 4 years, some from attrition. Payments to the long term unemployed will also be cut for those who fail to seek jobs, saving $11 billion a year. A new 12 month limit will be imposed on long term jobless benefits. Increase in the retirement age will start in 2020, from 65 to 66 years. At the same time free eye tests, prescription drugs and bus passes remain. Premier Cameron promised not to make cutbacks in health care in the period before the election. This was his way of helping the Conservatives make a comeback to power....

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The WSJ looks at Elizabeth Warren's Medicare for All plan that marks a major shift for the U.S. economy.  Households would see their costs go down by $11 trillion, boosting their ability to spend on other goods and services. Because income and wealth was highly skewed in the past three decades in one direction, the spending capacity of lower and middle income households was pushed down. This and other similar plans would help restore a higher level of spending and with it an essential element of inflation of 2-3% to the U.S. economy which was missing in the last decade. This sets the tone for the kind of broad based recovery that happened after 1950 that strengthened America's middle class and made it the core of the economy, the core of the post World War II recovery in America and Europe. The plan would be paid for by higher taxes on corporations, tax rate of 21% for corporations going back up to 35%, and reverse depreciation schedules in the 2017 Republican tax law. The argument that this would reduce business investment does not hold that much says the WSJ because amid new trade tensions business investment has declined over the last 2 quarters, and has been sluggish overall. The other source for the estimated $13 to $20 trillion cost of Medicare for All plan of Elizabeth Warren is a 6% annual wealth tax on billionaires, in an attempt to have all pay their fair share and reduce wide disparities in wealth. Mark Zandl, chief economist of Moody's Analytics, says his sense is at the end of the day from a macroeconomic view- because $11 trillion in the hands of 80% of households who could boost spending after lagging behind in the last decade- the negative effect on business investment will be cancelled out by the higher consumer spending. The overall effect and today's context is infused in this analysis. Private insurance, premiums for insurance, and out of pocket cost that the public pays would disappear in this new system where all health payments pass through the government. Health insurance premiums paid by employers would convert into a new employer Medicare contribution to the government starting at an amount employers pay now and adjusting gradually toward national averages over time. Smallest businesses are exempted. Mr. Zandl says the most important aspect of this now is that Mrs Warren has shown that her plan's revenue sources match the cost so that the plan would not lead to deficits increasing and pushing interest rates higher, leading to negative effects on the economy. Republicans under Mr. Trump have paid little attention to expanded deficits caused by their tax law, and economists across the landscape have also shown less concern. Still attacks are made if the plans don't add up. For this reason a sound assessment in today's context of depressed consumers and an overall impact becomes essential. The WSJ quotes from a pre- assessment of Warren's plan by Simon Johnson, a Massachusetts Institute of Technology economist who co-wrote it with Mr. Zandl and Betsey Stevenson of the University of Michigan. What they point out is that putting cash in the pockets of the lower and middle class for spending makes a lot of sense today, and taking money out of the pockets at the way upper wealthy end,  does not contract the economy at all. Other effects they say are constructive by letting all workers get health coverage from the government instead of employers, this makes it easier to change jobs increasing labor mobility and productivity. A worker getting a better job and better utilization of skills could then shift without looking at the employer health care plan. Warren says there would be a five year transition so that workers in health care insurance industry can work in other insurance fields and in Medicare, no one would be left behind. The important thing being to build America's middle class again. ...

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Reeves says Reagan ever the imaginative politician seized on the idea of "supply side " economics of a not so well known economist Arthur Laffer. Ideas that were simple and appealing- you reduce marginal tax rates and generate higher revenues. This worked for some time with higher economic growth for a number of years, but the arithmetic of higher spending and borrowing and lower taxes would eventually lead to large deficits at the end of Reagan's term, just as price controls worked for awhile and then led to a surge in prices at the end of Nixon's term. When Reagan became President the deficit was 2.5%, when he left office eight years later the deficit was 5% of the economy. Interest payments on debt jumped to $169 billion in 1988, from $69 billion in 1981. Reeves says American politicians know so little about economics, to which it could be added, winning presidential and congressional elections is always a big part of the picture when it comes to economic policy. Which is why Nixon even with Milton Friedman as an advisor shifted to Keynesian policies of higher fiscal spending in 1971, and why Reagan turns to intuitively appealing and effective in the short term policies of having it all- higher spending, growth, and lower taxes. During the years of the two Bush presidencies and the Clinton administration the success of Reagan policies leads to a general sense as Vice President Cheney put it referring to Reagan and Treasury Secretary Baker's belief, that "deficits don't matter." Which leads us to the current situation where 2012 presidential election politics again frame the terms of the debate on deficits and budgets, only now the deficit is much higher and on a unsustainable path. ...

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Reagan adminstration Budget director, David Stockman, faults the Republicans for not controlling runaway spending, and for tax cuts when the deficit was already growing to unmanageable proportions. The Republican party he says, has not acted responsibly by opposing tax increases for the nation's richest taxpayers of three percentage points. He adds in the municipal bonds and the $7 trillion of new deficits, and says with this the total debt reaches $18 trillion by 2015, a Greece style 120% of gross domestic product, which calls for much needed austerity.

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After suffering a deep depression Greece's economy is in 2019 24% smaller than in 2007. It may not be till 2033 that Greece recovers to its precrisis level GDP, says Oxford Economics, a consulting firm. With the creditors of Greece maintaining a tight control and requiring high taxes and high budget surpluses of 3.5% of GDP excluding interest payments, there is very little financial leeway to reduce taxes as the newly elected government of Mr. Mitsotakis of the New Democracy party has stated. Greece spent 8 years till 2018 under an austerity regime set by the European Union overseen by the IMF with eurozone authorites in return for a financial bailout loan package. Spending cuts and tax increases of 40% of GDP led to drop in GDP of 25%. Greece had misrepresented its official spending numbers to eurozone authorites in the years leading upto the crisis, leading to a lack of sympathy from ordinary German taxpayers for the country's situation. Unlike Portugal which was able to increase exports and find ways to reduce the austerity regime with sympathy from Germany, Greece lags behind in foreign investment and is 72nd in the ease of doing business ranking of the World Bank.  Unemployment is falling very slowly and is at 18%. Greece has returned to bond markets with 10 year bond yields of 10%. Growth is stuck at 2%. Pension spending takes up most of the budget, with little left for investment, education and other needs. No parties talk about cutting pensions anymore as a grandparents pension supports many families. The high taxes have hurt the private sector with the most productive people emigrating to other countries in northern Europe and to other parts of the world. About 500,000 left from 2010 to 2017, most are college graduates, and 64% have postgraduate degrees, a survey shows. Most of them will never return as it  is difficult to live and plan a life on a Greek salary. During the financial crises affecting Latin American countries such as Mexico, Brazil and Argentina for decades, the expression lost decade became common. Some like Argentina had repeat situations of lost decade before recovering. Even the U.S. suffered badly suffering close to a lost decade with faulty mortgages causing a crisis in 2009. Only Greece has proved that this can happen for nearly three decades. Greece's experience also sullied the euro currency's image, that was further damaged by the austerity policies across the eurozone's financially weaker countries. Lack of transparency and insider groups unable to take up the national interest and pursuing narrow interests left Greece in a bad position with little sympathy from stronger northern European countries such as Netherlands, Sweden, Germany. Today's political crisis for the centre right and centre left parties in Germany and other Northern European countries such as Scandinavia, Netherlands, also stems from this flawed entry of countries such as Greece into the eurozone with poorly managed finances. A combination of Tech creating low wage jobs, erosion of working class, failure of centrist parties free market policies to protect the working class, shift of jobs to low wage countries such as China, had already eroded the situation. The humanitarian response to what was both a economic and war related migration from North Africa  to Europe only worsened the image of these parties with working class people alienating them further. The eurozone countries and the European Union are only gradually recovering from these errors.     ...

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The major provisions of the Republican House healthcare bill that passed by a vote of 217-213 are- 1. To help people buy insurance coverage the bill offers $2000 to $4000 a year, upto $14,000 a year in credits based mainly on age, reducing them for families making $150,000, individuals making $75,000. 2.  Under the Affordable Care Act insurers cannot charge older Americans more than 3 times for same coverage they offer to younger people, the new bill makes this 5 times. This would increase premiums for older Americans and reduce it for younger Americans. This is the most controversial part of the bill. Older Americans supported the Republican party in the presidential election. 3. The new bill ends Medicaid as an open ended entitlement and places this on a budget with cuts of $880 billion over 10 years. 4. To mollify conservative Republicans a provision allows state to opt out some provisions of the ACA that requires minimum benefits such as maternity care and emergency services. It retains coverage for pre-existing conditions to mollify moderate Republicans. The bill provides states with $138 billion over 10 years to subsidize premiums, provide coverage for pre-existing conditions, mental healthcare and drug addiction. 5. The bill removes the taxes imposed under the Affordable Care Act (ACA) on high income people of about $300 billion over 10 years by repealing a payroll tax increase and tax on investment income. This bill and the ACA offer 2 competing visions on healthcare, both bills passed only by a margin of 4-5 votes in the House. The ACA overlooked the impact on premiums causing discontent among middle income Americans. The new bill lets premiums rise for older Americans in order to keep premiums down for other Americans. This shows the many tradeoffs involved and choices being made, and the lack of a consensus on the issue of healthcare in the U.S., becoming a highly politicized issue instead of the way it is treated in western Europe.     ...

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"Trees not Warehouses" read signs protesting the building of more warehouse space in the US as residents protest the bringing of more noise, pollution and heavy duty trucks to their neighborhoods.Companies added over 1.5 billion square feet of new industrial space across the US from 2017, says this report in WSJ. A similar wave of building industrial space is taking place in Europe for warehouses. Communities from Pittsburgh to Madison, Wisconsin and neighborhoods in expanding logistics regions in Southern California and eastern Pennsylvania. Many say their communities are under siege. To get goods to people faster companies are still planning but have not made the shift to bringing construction back home or closer to home so that this kind of huge warehousing space is no longer needed. Much of this warehousing space may no longer be needed as more sustainable, more reliable,  shorter supply chains take the place of current ones that have concentrated all manufacturing in one country, China, at the hidden costs to local communities and companies. Through many hidden costs that have not been fully quantified in terms of quality of living in communities, loss of jobs and infrastructure through loss of tax revenues, carbon footprint of products shipped over thousands of miles, hidden logistics costs, rampant inflation in logistics costs, and significant loss of manufacturing knowhow that cannot be easily replaced. This is a result of decades of building such supply chains that no longer fit the needs of today. ...

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Barley points out that the Euro-zone austerity plans in Greece, Ireland, Portugal, Spain, the U.K. and other countries are coming in the context of a potential global slowdown. This will make it even harder for these countries to reduce debt and deficits. Greece had to make cuts and tax increases equivalent to 8% of GDP just to reduce the 2010 deficit by 5% after GDP declined more than expected according to the IMF. To reduce debt ratios nominal growth has to be higher than the average interest rate on debt. Its hard to see this happening and debt not increasing in some Eurozone countries.

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This Washington Post editorial says Obama and the politicians, both Democrats and Republicans, want something for nothing. The Ryan budget, Obama's health care plan, all require paying for it with higher taxes, but the mention of the word "tax" is the last word any of the politicians will say. These comments come as the U.S. Supreme Court considers the mandate that young Americans and others be forced to pay for health care along with the rest, as required by the health care mandate, with the idea of keeping costs down. The idea of getting something for nothing was also emphasized in an op-ed in the WSJ, March 29, 2012, by Mayor Bloomberg of New York City, where he called for letting the Bush tax cuts expire for all income groups, and an up or down vote in Congress on the Simpson-Bowles deficit reduction plan, as part of a two step plan.

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A new Pew Research Center Survey shows prime minister Modi enjoying 88% popularity, very high ratings for a world leader. More unusual is that Modi's popularity was 87% in a Pew Survey in 2015, showing extraordinary resilience. This comes after moves to remove the large denomination rupee notes under what is called demonetization to take out some of the black money in India and increase tax revenues that were lost due to evasion. In South Asia tax evasion is rampant, much more than in countries like Italy of the eurozone. The move was difficult as it required being sudden, and a shift to use of debit cards and ATM's which required additional effort, slowing the economy. The other moves such as on GST tax were designed to facilitate doing business in India with one tax and free movement of goods replacing different state by state taxes. Business has not responded quickly to support Modi, and the Indian economy being prepared for the long term growth Modi hopes to generate is slowing in the short term. GDP growth has dropped to 6%. A bullet train planned in western India with help from Japanese financing and technology is being criticized unfairly because of the collapse of an old bridge near a railway station in Mumbai. Bruce Stokes, Director of Global Economic Attitudes at Pew Research, says the survey was done after demonetization but before the GST tax overhaul. This is not likely to change Modi's high ratings. The GST overhaul has been on the agenda for many years for all political parties in India. The views of Modi are not necessarily the same as for his BJP party which are lower for the party, the party gaining more from Modi's efforts and leadership, including in his home state of Gujarat. ...

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Diesel prices are regulated and subsidized by the Indian government, but gasoline prices are deregulated since 2010, resulting in gasoline costing 64% more than diesel in India. As a result buyers are staying away from gasoline cars and shifting to diesel creating distortions in demand. The government is considering a tax on diesel cars and SUV's of between $3000 to $4600 to correct the distortion. Because lower income people woud be hurt by increasing the price of diesel it continues to be subsidized. Because of the uncertainty car manufacturers are shutting down production to reduce growing inventory of gasoline vehicles. High interest rates of 12% on car loans also reduces demand. Suzuki Maruti sales declined 6% in May 2012, Ford and GM showed sales declines of 14% and 20%. The year ending March 2012 shows Indian car sales growing only slightly by 2.2% to 2 million cars. Sales were rising at 29% only about a year ago. Gasoline costs 68 rupees a liter in New Delhi after a 11.5% increase in May 2012, compared to 41 rupees per liter for diesel. The increase in gasoline prices is a result of the government having difficulty paying the rising imports of oil, costing $141 billion for the year ending March 31, 2012. The sharp slowdown in the car industry and the problems in the energy sector have affected India's growth rate....

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A major problem for President Hollande of France in the 2014 budget is how to handle the deficits in the country's Social Security System. Over the years the deficits were transferred to a vehicle called the Cades, which is approaching its legal ceiling of 270 billion euros. The vehicle was originally set up in 1996 with the idea of separating past deficits, so that the state could balance its budget every year for the Social Security System, which covers health care, pension and family allowances. Previous governments have for the most part bypassed this and added new deficits to Cades instead of making cuts in spending. The Hollande administration says it is controlling health care expenses and increasing pension contributions as a way to bring the deficits under control. It will not assess a special tax for the deficit in Social Security in 2014, as new taxes are highly unpopular. Cades lifetime has been extended twice, first in 1997 to 2014, and during the 2009 financial crisis to 2025. In 2010 following the crisis, Cades chairman, Ract Madoux says, the short term borrowing had reached 60 billion euros. It is down to 30 billion euros, which he still considers too high....

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S. Gurumurthy of the Hindu points out the dangers of economic growth without job creation in a country like India. He points out that demonetization- removal of high denomination currency notes- came at a critical time when the economic growth was not creating enough jobs. He points to the five year period till 2010 as having created 2.7 million jobs with 8.5% growth. Even though with lower growth of 5.4% in the period 1999-2004 the job growth was for 60 million jobs created. Had demonetization not happened he says, the economy could have seen the problems the U.S. faced in 2008 with a bubble developing in the real estate market. The fundamental shift of the economy to digitization of payments, increase in tax receipts brings more of the informal economy- with a size of 50% of the economy generating 128 million jobs ten times the formal sector - into the formal economy. A step that is key for India to see rapid growth in the decade ahead. The slackening of the economy for a year is part of  a needed long term plan, says Prof. Gurumurthy, visiting IIT faculty in Bombay, just as liberalization was in the 1990's.  Some errors were made in implementation and flow of credit to the informal economy, including by the RBI, yet the fundamental shift through demonetization served a good purpose. Gurumurthy says, sadly this is missing in the current politicized debate.  ...

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Senator McCain's vote for the Republican tax bill is uncertain, says this report in NYT. McCain opposed the 2001 and 2003 Bush administration tax cuts on the grounds of benefiting the rich and not doing enough for the middle class. McCain is known to oppose large spending that aggravates the deficit, and the current Republican plan would add $1.5 trillion to the deficit. In 2003 McCain said on the Senate floor he could not support the use of "billions of federal dollars to cut taxes for our nation's wealthiest." How will he vote this time? Holtz-Eakin, his policy adviser in the 2008 campaign says he is not sure, it all depends on what is better, the status quo or this change. 

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As the trade problems with the U.S. escalate in tit for tat tariffs, China looks back at its history for parallels. The period of the "unequal treaties" imposed by the Western powers on China in the period 1850-1900, the Korean War of the 1950's, and other analogies that come up to people. Yet China's planners and leaders are looking at another situation the Plaza Accord of 1985 in which the western nations pressured Japan into accepting a significantly higher exchange rate to reduce its trade surplus and the Japanese yen appreciated by 50%. Japan cut interest rates from 5% to 2.5%, and introduced huge fiscal stimulus, banks opened up to lend vigorously. The result was a boom by 1990's followed by a bust that led to another decade of lending to loss making firms called "zombie" businesses, that led to a stagnant economy. This has persisted for three decades. This China sees as an unacceptable situation when China has still not achieved developed economy status in terms of per capita incomes. It fears getting into a middle income trap as the economic growth slows and the aging population makes a recovery more difficult.  The difference with Japan in the 1985-1990 period is that Mr. Trump lacks the kind of five nation economic coordination that put pressure on Japan. Today there are differing views on China in Europe and the U.S. and different policies. Mr. Trump is known for his style of deal making and could settle early, as feared by some Republican leaders in Congress who see in China a challenge to America's technological dominance. There are no calls to appreciate China's currency. Only calls for China to change its state subsidies model and put in writing and through laws that change the way of doing business that does not require American companies to hand over advanced technology. This is also a concern for Japan and the European Union countries such as Germany, and is something all nations try to protect in global competition. Japan is still facing the consequences in creating a new competitor in high speed train technology after building the first high speed trains in China and transfer of the high speed train technology by Kawasaki. The Household Survey by the Federal Reserve showing the financial fragility of 40% of American families shown on this page today shows how this situation is likely to evolve as working class families in the U.S. support a trade stance that protects American jobs and technology. Job losses over three decades and a $891 billion trade deficit in 2018 are seen as unacceptable to the U.S. in 2019. A stronger U.S. dollar helped increase the U.S. trade deficit by 10% in 2018, nullifying some benefits of Mr. Trump's trade actions. Mr. Robert Lighthizer was a negotiator in the trade dispute with Japan in 1985, and runs the negotiations with China with support from president Trump. This alone has kept the Japanese situation in 1985 uppermost in the minds of China's leaders as they try to come up with a way to settle the trade dispute with Mr. Trump.     ...