LyrArc Article Gist
The Republican view supported by deficit commission panel members Paul Ryan and Jeb Hensarling, is that the proposals do not do enough to cut runaway health care spending. The Journal editorial says this is like doing a defense budget review and excluding Iraq and Afghanistan, and that Republicans should reject the report on these grounds alone.

LyrArc Article Gist
Spain's budget deficit as a percentage of GDP comes in at 6.7% for 2012, according to government figures. This means Spain is making significant progress in bringing down its deficit to reduce borrowing rates. This gives the government more flexibility with austerity measures at a time of rising unemployment estimated at 26%.

LyrArc Article Gist
This editorial in the Economist says Britain's economic recovery will not be complete until interest rates are well above zero and productivity growth is established. Without productivity growth and growth in wages, both lacking in the economic recovery since 2009, tax revenues will not be enough to reduce the deficit, requiring more spending cuts. That means the Bank of England will not raise interest rates, keeping a situation of no rate changes prevailing since March 2009 when the central bank cut rates by 0.5%. In the current situation the Bank of England is not expected to raise rates till 2016, only after the U.S. Federal Reserve increases rates to avoid appreciation in the pound and further deflationary pressure, according to Goldman Sachs. With inflation currently at zero, following the drop in oil prices, and 10% appreciation in the pound since mid 2013 making imports cheaper, there is little pressure to increase interest rates. In 2011 inflation with rising food and energy prices reached 5.2% , but the Bank of England did not raise rates because of the eurozone economic crisis affecting growth. Only since 2013 has economic growth picked up with 1.2 million jobs created since the beginning of 2013, bringing unemployment down from a high of 8.5% in 2011 to 5.6% in May 2015. Throughout the recovery productivity growth is falling behind- 2014 productivity measured by output per hour worked was 1.3% lower than in 2011, and 14% below the pre-crisis trend, according to the Economist....

LyrArc Article Gist
ECB president, Mario Draghi, is interviewed at his office in Frankfurt by the Wall Street Journal's Blackstone, Karnitschnig, and Thomson. Draghi quotes economist Rudi Dornbusch, who told him in the old days that the Europeans were rich enough to afford paying for it if everybody didn't work. Draghi, was head of the Bank of Italy, before becoming president of the ECB. He is acutely aware of the problems faced by Italy and other countries like Spain which have let labor markets become rigid, with extensive job protections and generous benefits for the unemployed. The result is that employers are reluctant to hire and young people face high unemployment rates- as high as 50% in Spain. For this reason Draghi sees the old social model in Europe as obsolete and already out. Draghi's sees austerity measures and spending cuts with the structural changes underway in Spain, Italy and other countries as the only way to generate economic renewal. On the Long Term Financing Operation launched by the ECB in Dec. 2011, Draghi says there was agreement within the ECB and the decision was unanimous. He makes it one of his objectives to achieve as much consensus as he can, to do what is right for Europe and to do it together with his colleagues in the ECB and the EU. That financing operation, and the binding deficit controls achieved at a recent summit of European leaders, he sees as all part of the pathway to fiscal union. ...

LyrArc Article Gist
Peter Bernstein, colleague of Robert Heilbroner, economic historian, communicator and developer of efficient market theory and portfolio theory. He wrote several books on capital, risk and Wall Street and diversified investing. He like Heilbroner was a Keynesian, who believed government spending was critical to supporting the economy, and disagreed with Reagan. He believed that the deficit was not too large relative to the nations output, and government's role in the economy should not be curtailed. Government spending was necessary to a healthy market economy in Bernstein's view. His other point was that regulation of markets was needed to prevent a market collapse. His view was that the wealth and entrepreneurial energy generated by arising stock market were worth the risk. In a semimonthly newsletter he published for many years he said a week before he passed away at 90, that "with hindsight, most readers today would find our position in 2005 to have been a prescription for tragedy." He went on to say quoting Alfrd Tennyson, " tis better to have loved and lost than never to have loved at all. There was wisdom in Tennyson's words. Who can say he was wrong beyond debate? That would be asorry world indeed." Whats is interesting this that unlike many who get blinded to dangers such as selfinterested behaviour like that of the ratings agencies, the mortgage innovators who were more selfinterested than innovators, and banking executives interested in their bonuses, Bernstein, Heilbroner and others like him take positions on either side on the merits and on ethics, leaving out ideological bias. He is for financial innovation but is cautious at the same time, preferring to build theory he says. Its interesting that in 2005, he wrote the book "Wedding of the Waters: The Erie Canal and the Making of a Great Nation," a subject that another financial industry leader from that period, Felix Rohatyn, also talks about in his book "Bold Endeavours." There is a difference in the kind of selfinterested and reckless "innovation" of Mozilo, Prince and Moody's successors in the ratings agencies, and the innovation, watchfulness and entrepreneurial energy that Moody, Rohatyn and Bernstein have in mind....

LyrArc Article Gist
The tough job President Obama faces as he faces opposition from politicians who have interests to protect, and healthcare businesses with interests to protect. The President has to come up with a plan that is deficit neutral, because financial markets could see a healthcare bill that further widens the deficit as a signal for higher interest rates that would deepen the recession. At the same time each of the three sources of revenue puts him at loggerheads with political leaders in Congress or groups with interests to protect. Limiting income tax deductions for high earners could raise $267 billion in 10 years. It would require taxpayers in the top tax brackets deduct their mortgage interest, state and local taxes, and charitable donations, at the 28% tax rate instead of the 33% and 35% tax rates. The opposition is with democratic leaders that it would hurt charities, universities that depend on tax deductible donations, and taxpayers in high tax cities like New York city that are the home base of Democratic leaders. Yet only 1.4% of households would be affected says the nonpartisan Tax Policy Center. The Center on Philanthropy at Indiana University, says charitable giving would decrease by 2%. The other opposition on this comes from the preference of Senators Baucus and Grassley, who head the Senate Finance Committee, for tax increases or cost savings to come from the health sector. Specifically they want to see the value of workers' employer provided health benefits subject to income taxes. It is a situation in which every sensible person admits the need for healthcare reform and would see the current pace of healthcare costs as unsustainable and dangerous; and after that will just go back to his group and try to preserve as much of the status quo as possible, so as not to disturb by much the benefits or compensation they have secured from the system over the years. Then there are political leaders in Congress with their own preferences, and Congressmen who are the subject of heavy lobbying by these interests. The administration and the Presidents job is to navigate this stream with a workable deficit neutral plan, without any requirement for any group to make sacrifices, and in some situations even small sacrifices for the public interest. Would charitable institutions be hurt that much, what if charitable institutions were exempted, why would other interests the try to obtain the same exemption. Its like the unions trying to keep the old unsustainable goldplated healthcare and other benefits at GM even as the ship was going down. Taxing employer provided employee health benefits as income would raise $2.5 trillion over a decade. The opposition here is from unions which are a force in the Democratic party and which count tax free health benefits as a legacy of the labor movement. Employer provided health insurance covers 160 million American employed and their dependents under the age of 65, so it has a wide impact. Yet most economists favor ending the tax break. They say it mainly goes to upper income taxpayers, and discourages cost consciousness among consumers of health care, thus encouraging excessive spending and surging health care costs. Senior Obama advisors, Peter Orszag, the budget director, and economist Jason Furman favor this approach. So do Republicans in Congress. Senators Baucus and Grassley are not asking for the complete removal of the tax break, what they want to see is capping the value of benefits that go untaxed. If the tax-free limit is $13,000, a policy worth $15,000 would pay income taxes on $2000. A third spource is to spend less on Medicare. About two thirds of the $948 billion in savings Mr Obama has proposed over 10 years comes from a number of reductions in Medicare spending. $177 billion comes from insurance companies bidding for government reimbursements for offering private plans to seniors. $106 billion comes from cutting the subsidies to hospitals serving the uninsured as universal coverage should remove this need. And $110 billion in reduced payments to hospitals and doctors because of productivity gains. A range of industries insurance companies, hospitals, doctors drugmakers, nursing homes, home health care companies and medical device makers, all stand to lose from reduced payments from Medicare and Medicaid. And these groups with interests to protect are another factor in this process of working out a healthcare plan. ...

LyrArc Article Gist
Why rebalancing the world economy will not be easy. Rebalancing depends on the success of American companies selling goods in China and Germany. China and Germany report large gains in exports through August 2010. The US trade deficit in 2010 is up 40% from 2009. One reason is that it involves changing behaviour of consumers. Another reason is each percentage point reduction in the annual savings rate in Germany and China would increase consumer spending by $42 billion. By comparison each percentage point increase in the annual savings rate for the US reduces spending by $100 billion, according to estimates by McKinsey Global Institute.

LyrArc Article Gist
WSJ's reporters Meichtry, L, Pokharel, and Soon look at the extraordinary rise of Gautam Adani through his efforts to develop reclaimed land at Mundra port in the state of Gujarat. Adani who started with a small family owned plastics maker in Ahmedabad developed Mundra port around 2001 with the help of the Modi administration. Modi saw the electricity shortages in Gujarat as an opportunity to tackle India's chronic electricity shortages. Adani's early development of a deep water port at Mundra offered both Modi and Adani the opportunity to tackle the electricity shortages by bringing coal in large ships to Mundra in the way that China was already doing by 2005 in its own efforts at industrialization. So deeply immersed was India under the Congress Raj of licenses and closed economy that India's established business failed to see what China was doing to break into the ranks of industrialized nations. India's first prime minister Nehru had build a command economy where not much happened without government licenses and approval often riddled unwittingly with corruption. Modi needed someone outside the established companies operating under the Congress Raj command economy and with a vision of an India with abundant electricity to take the risks Chinese companies were taking to build an entirely new economy. By 2005 Guangzhou was importing coal with large ships from Indonesia and Australia. State owned companies moved slowly and would take years to develop the port capacity. Using China's example Modi pushed ahead with Adani on a rapid time delivery making Mundra a Special economic Zone and helping to connect Indian Railways to the port of Mundra for coal deliveries. Adani Enterprises built the thermal power plants near Mundra and build electricity transmission lines on a rapid mission mode giving Gujarat abundant electricity supplies and giving Gujarat state in northwestern India a great leap forward in the way China was already doing right in front of everyone's eyes by 2005 with world class ports built at Guangzhou, Shanghai, Shenzen, Hong Kong and logistics connections set with the help of Maersk.  Maersk is now doing the same for modern logistics in India in collaboration with the Modi administration.  Modi and the younger generation of aspirational youth in India see a New India that can break into the ranks of the largest industrialized nations with world class infrastructure in the way China has done, and use new technologies with innovation that will speed up the process in a way that the world has never seen. A quick look at Mundra Port in Wikipedia shows the timeline, It starts in 1998 when Adani Port Ltd was setup and Mundra port work began, 2002 the port integrated with Indian Railways, 2003 when it was made a Special Economic Zone by the Modi government in Gujarat, 2007 when IPO of 40 million shares at price band of around Rs 400 was done.  The Biden administration and the Trump administration support India's efforts to build a new modern economy with a rapid shift to renewable energy. As India is building the ports and logistics with the help of Maersk and other companies in the European Union, president Biden is working with prime minister Modi to build a new supply chain that removes the overconcentration of manufacturing and supply chain logistics in China. This means new ports with the latest technologies in India to handle shipment to the US and the EU. Jake Sullivan set out the goals for president Biden to accomplish this task in meetings with his Indian counterpart Ajit Doval this week on iCERT. President Biden and Republicans, Germany and the EU, see India as a critical part of the Initiative on Critical and Emerging Technologies, and the new supply chain. For the Adani Group the IPO pause offers an opportunity to do what Nirmala Sitharman has done in the Indian Budget this week- build a stable growth path ahead for the long term in line with India's Amrit Kal the next 25 years to centenary of freedom in 2047. Nirmala Sitharaman set a goal of rapid capital spending and investment increasing capital spending in 2023 by 33% in 2023 over 2022, yet maintaining a stable fiscal path by keeping the deficit below 6%. ...

LyrArc Article Gist
Former U.S. Secretary of Defense, William Cohen, on what the automatic spending cuts from the sequester- after the failure of the Supercommittee in Congress to reach agreement- will mean for the Defense Department and defense preparedness.

LyrArc Article Gist
Atul Gawande in the New Yorker shows how doctors in McAllen, Texas prescribe half the tests that doctors in other comunities in Texas do. Frank cites the effectiveness of the salaried model used by the Mayo Clinic. This battle has been postponed for another day the current halth care reform bill. But crucially the failure to tackle this program and have the country shoulder another deficit burden for healthcare leaves the country with a serious liability of overspending, with guns and butter if the Afghnistan war adds up another big bill to the Iraq war bill.

LyrArc Article Gist
It is too early to say it is a playbook. Trudeau's action may be more effective in the long run. The issue of fentanyl from Mexico is different in 2025 from the first term of DJT in 2016, 8 years later with 490,000 deaths from fentanyl in the US, a part of America's younger generation- unprecedented in American history and since the settling of the American continent since 1600. Fentanyl smuggling into the US from Mexico is the biggest issue facing the US along with closing the US Border. This report in the WSJ says Sheinbaum tried to deflect 25% tariffs by making the offer of sending 10,000 troops to the US Border. This was similar to her predecessor saying he would send 28,000 troops to the Guatemala Mexico border to stop migrants. DJT raised the issue. The week before the Feburary 3, 2025 call between Sheinbaum and DJT the White House said Mexican drug-trafficking organizations “have an intolerable alliance with the government of Mexico.” These are aspects of the problem that the White House needs addressed in effective ways to stop the flow of fentanyl into the US. Action from the first term of DJT has not solved the problem so that DJT will have to find real effective solutions. The Canadian government followed its own approach. It set $140 million for a new unit to gather intelligence on organized crime. And appointed a head for an organization on stopping fentanyl from entering the US. Canadian PM Trudeau followed the US and DJT in labelling the Mexican cartels as terrorist organizations. Issues the US faces with Mexico that remain unresolved are the $150 billion deficit and bringing home US manufacturing in the auto industry back to the US.   ...

LyrArc Article Gist
Rep. Dave Camp, House Ways and Means Committee chairman, representing northern Michigan, says every deduction in the tax code is there because of a reason, and powerful lobbies will oppose any changes. The best he can do is work himself out of this job as he will have to tackle the Democrats on entitlements, the business lobbies on tax loopholes, and other lobbies protecting their preferences in the tax code. He plans to achieve a simpler tax code with lowered rates of 25% for business and earners above six figures, and 10% for everyone else. The approach he is taking is to be revenue neutral when tackling tax reform, in the belief that the economic growth generated from a simpler tax code and lower rates would generate revenues of 18 to 19% of GDP, up from about 16% today. He says the economc cost of not getting this done to get the economy rolling again is so high that he is upbeat that both sides can come together after the election no matter who wins. He is also looking at a repatriation tax of 5% on profits kept by American companies overseas, which would boost revenues for business which could be reinvested in stead of sitting idle. Today the much steeper tax rate on repatriation makes businesses reluctant to bring it back....

LyrArc Article Gist
India replaced a patchwork of 15 state and federal taxes with a unified single Goods and Services Tax to ease the hurdles for businesses to operate nationwide across state boundaries. This is a major a accomplishment for the Modi government as it is expected to increase economic growth by between 0.5% to 2%, according to experts. This removes the obstacles to growth and doing business when companies had to comply with a maze of different tax policies by individual states. Ironically the GST was introduced by the Congress party government in 2011, but opposed by opposition parties then and the Congress party in opposition now in the upper house, Rajya Sabha. By winning the support of smaller parties the Modi government was able to reduce the influence of the Congress party and get the constitutional amendment passed for the single GST tax system replacing the old patchwork taxes. The amendment has to be approved by the majority of state legislatures in India and by the president. Parliament must pass legislation to setup the new tax system, and state legislature pass their legislation. Issues at what rate to set up the GST remain to be solved, with the need to avoid sparking inflation and thereby hurting slow job growth with millions of young people entering the job market each year. ...

LyrArc Article Gist
President Obama in his speech at Georgetown, April 13, 2009, describes the thinking behind the decisions made in the first 12 weeks of his administration- why the actions are not aggressive and overreaching as some critics say, and why they are not timid as other critics have said. This was not a typical downturn of the business cycle, but a perfect storm arising from irresponsibility and poor decisionmaking in Washington, Wall Street and Main Street- in effect several crises colliding for something like an explosion, if not dealt with at once, and with strong action. He says "the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs, not to stand idly by as the economy goes into free fall." The recognition that the crisis itself brings with it new possibilities, the opportunity for coming to grips with and forging a good solution to health care, energy and education issues that were neglected while Wall Street directed investments to areas other than investment in building for the future. To the critics like Krugman, Rosenfeld and others who say that the takeover of insolvent banks should be done quickly before the situation worsens, he says it is not because of any ideological or political judgement he has made about government involvement in banks, but because it is more likely to undermine than create confidence at this point. He goes on step by step, through the process of decisionmaking, first to step in and boost spending vigorously, second to get lending flowing again to businesses and families, strengthening the non-bank credit market for consumer purchases and loans, the housing plan, the auto plan, and the work at the G-20. Then President Obama goes on to project his vision and the road to getting there. The five pillars he sees for the future are: redirecting Wall Street and banking to constructive investments for the future, investments in education, investments in renewable energy and technology to create new industries and new jobs, investments in health care to cut costs for businesses and families, and new savings in the federal budget to bring down the deficit. Obama says he will look for savings line by line in every corner of the budget, and has already identified two trillion dollars in deficit reductions over the next decade. And the goal is to reduce discretionary spending for domestic programs as share of the economy by more than 10% over the next decade. Procurement reform will greatly reduce no-bid contracts and save $40 billion. Secretary Gates is attacking th problem of hundreds of billions of dollars in waste and cost overruns that have bloated the defense budget, without adding to the nation's safety. And education programs that don't work will be removed, and waste, fraud and abuse in the Medicare program will be controlled. Finally, Mr Obama points to the nation's political system as one more reason we are in this perfect storm- "a fundamental weakness in our political system." He cites the putting off hard decisions for another day, scoring political points instead of rolling up up sleeves to solve real problems, an impatience that is only worsened by the 24 hour news cycle, and a short attention span that focusses on the immediate results and on poll numbers. And there is too much responding to the "tempest of the moment until the furor has died away and the media coverage has moved on, instead of confronting the major challenges that will shape our future in a sustained and focussed way." After these 12 weeks President Obama says, for the first time there are glimmers of hope, and way off in the distance can be seen a vision of America's future that is far different than its troubled past. And citing the parable in the Sermon on the Mount about that "house built on a rock", he sees America's house built on a rock, a house for which we use this moment to lay a new foundation, come together and begin the hard work of rebuilding, persisting and persevering in the face of disappointments and setbacks that surely lie ahead. Then he has no doubt "that this house will stand and the dreams of our founders will live on in our time." Its a remarkable speech in its directness, its simplicity in approaching the subject, and its borrowing from the Bible for that story of that house built on a rock, and its Lincolnesque reference to the house that will stand. And more than a speech, it describes a vision, and the set of actions and steps taken and to be taken to get there. ...

LyrArc Article Gist
New rules for euro currency nations in Sept. 2011. The rules provide for sanctions against countries with budget deficits exceeding 3% of GDP, and national debt exceeding 60% of GDP. Countries that break the rules will be required to make a cash deposit in a non-interest bearing account for an amount that is 0.2% of GDP. If the situation continues the deposit becomes a fine. The European Commission will still require finance ministers permission to impose sanctions, but the voting system makes this harder to block. The European Parliament will consider 6 pieces of legislation to make these changes.

LyrArc Article Gist
This report in the WSJ points out that president Trump's much hyped infrastructure plan is not the $1.5 trillion federal spending plan as reported, but more in the range of $200 billion over a decade. This means fixing the crumbling infrastructure in transport, energy and water systems remains uncertain under the Trump administration, and will leave this problem to a future administration to tackle. Jakab cites the basket of 10 infrastructure stocks that lag behind the broader market in Feb. 2018. Further evidence cited is the ratio of four to one of nonfederal money to federal money under the Trump infrastructure plan, and that much of the nonfederal  money has to come from state and local governments than private entities.  Additional problem is that with the tax cut leading to a growing federal budget deficit, rising bond yields would make borrowing more costly for state and local governments.  About $100 billion will be needed for the Highway Trust Fund over the next decade to keep it solvent. Jakab of the WSJ sees overall spending stagnant, with the $100 billion Trump Incentives program for infrastructure offset by cuts elsewhere. Bottom line the revenue side is absent making this more hype than substance for much needed infrastructure spending, that is once again being postponed in America. ...

LyrArc Article Gist
What were the stories in the Economist magazine that were the most read stories of 2019? Not on president Trump. On Malaysia, China under Jinping, and exodus from San Francisco and Silicon Valley. The most read article was on the newly elected president of Brazil, Jair Bolsonaro. The mismanagement of the economy particularly extravagant state spending on the Olympics and soccer stadiums for the World Cup at the expense of basic sanitation services, bus and transport services, health services, led to the result of a majority of Brazilians rejecting the Workers Party and its leader former president Lula. Unfortunately most of the media including the Economist did not draw attention to this gap. During a period in which income from mining with export of iron ore, and soyabeans to China, enabled Brazil to live beyond its means, there was no effort to draw attention to glaring gaps in development of public services such as sanitation, bus services and transport, lack of building infrastructure other than to support mining. Glaring gaps in education and health services made the situation worse. The second most read piece in the Economist  was on March 10th- Malaysia's PM is about to steal an election. Here the Economist magazine joined the Wall Street Journal which originally broke the story on the 1MDB fund and irregularities in Malaysia where a development fund was misused by the government. Najib actually lost that election and the WSJ covered the story of the developments that followed in which Malaysia's new governemnt led by a returning former prime minister in his nineties Mahathir Mohammed, ousted his own protege Mr. Najib.  The third most read piece in the Economist magazine was - How the West got China Wrong.  Unfortunately the Economist magazine and most of the media covered China in the two decade long boom years without covering the other emerging story as well in which Mr. Lighthizer (now president Trump's top trade adviser) and others questioned the huge unsustainable trade surpluses in U.S. trade with China. With the economy facing huge downside risks and rising trade tensions with the U.S. Chinese president Jinping's move to remove the limit on terms in office in the Constitution was considered a shift from the notion that China was likely to turn into a democracy. Mr. Jinping had already completed his first term in office and the anti-corruption campaign, managing the economic boom for a soft landing, was carried out with the central leadership of the party, after the destabilization evident in the early part of Xi Jinping's first term. Much of China's path was predictable and rational behaviour in its national interest, what was not clearly defined or defended was the way the U.S. could sustain the trade deficits that had reached a billion dollars a day. Leading to Mr. Trump seizing on this as an election issue to form a bloc of voters separate from the two main parties, the Republicans and the Democrats. The fifth most read piece was on Oct 11, 2018- the next recession. It pointed out that with low interest rates central banks in the U.S. and Europe and America could not cope effectively with a recession. The sixth most read piece was on June 29, 2018- Bullshit jobs and the yoke of managerial feudalism. It cited Prof. David Graeber of the London School of Economics, who wrote a short essay that went viral on the prevalence of work that had no social or economic reason to exist, work he called "bullshit jobs". Graeber said people want to feel they are transforming the world around them in a way that is leading to a positive difference. No. 7, 8, 9, were on Bitcoin, Netflix and programming language Python. No. 10 most read was on Aug. 30, 2018- Why startups are leaving Silicon Valley. It showed that in 2017 more people left the county of San Francisco than entered. The main reason the cost of living was burdensome and out of control. As Amazon shifts attention to India and Brazil, and Apple pulls back from India, social media companies coming under fire for disinformation, this period of Tech is making way for a shift in a new direction. A direction that focuses on people's lives, wages, spending on much needed infrastructure and services. ...