LyrArc Article Gist
Italy's prime minister, Mario Monti put it best when he said in a speech in Brussels in April 2012: "If a country becomes more productive and competitive, but there is no demand for its products domestically or around it, growth will not materialize." There is a new shift in opinion towards a balance of fiscal discipline with growth measures to get Europe back on track. The feeling in different parts of Europe is that the German view of austerity alone will not work for Europe. And the view is coming from the far right to the far left, from Marie Le Pen, far right presidential candidate in France, to the far right leader whose move to withdraw support to the government in Netherlands on the issue of austerity measures led to its collapse. Geert Wilders, leader of the Freedom Party in the Netherlands, said: "we don't want our pensioners to bleed just to meet the dictates from Brussels." The IMF has put out research that questions what is now called "the German hypothesis." The "German hypothesis," is based on the unique experience of Germany with the Hartz reforms under chancellor Schroeder which were based on wage restraint by workers, the German "kurzarbeit" program of government support for retaining workers with lower pay during cyclical downturns, improving competitiveness of German companies, and conservative budget practices. There appear to be two exceptions to this. One is that demand has to be strong outside or domestically for a country to reduce unemployment and improve productive capacity utlilization as it increases competitiveness. This was the case as Germany made the Hartz reforms under Schroeder. Wage restraint acts as a form of devaluing currency for reducing the cost of its products to improve exports. All leading parties and the unions are now in favor of wage restraint and lowering wages to preserve jobs to improve France's competitive position. Germany had the benefit of a decade to implement these reforms to reduce unemployment, because demand was not declining domestically or around it during its reforms. The situation is different in Spain where in all likelihood demand would shrink further with unemployment rising from 25% to higher levels, and higher sales taxes. This is why Francois Heisbourg, special advisor at the Paris based Foundation for Strategic Research, says about the current situation in Europe, that destroyiing Greece with strict austerity alone wasn't something the EU can look back at with the sense of having done the right thing, for Spain it appears misguided and lacking careful thought. The editors of the Wall Street Journal expressed the same sense when they described the March 2012 bailout of Greece as a tragic sideshow, because the main purpose was to buy time and insulate the other larger economies in the EU by giving the French, Spanish and German banks time to improve their financial position. The Journal called it bad for Greece leaving it with debt at 120% of GDP till 2020 and no economic growth, and bad for democracy as it was done against overwhelming Greek public opinion- The Tragic Greek Sideshow, Feb. 22, 2012. Volker Perthes, director of the German Institute for International and Security Affairs, a Berlin think tank, says the Germans have always viewed German leadership in Europe with discomfort, and would prefer a leadership where several states, France, Italy, Spain, and other countries in the EU coalesce around consensus positions. This is historically true for the German position since chancellor Adenauer. With the Free Democrats in decline, and the Social Democrats and the Pirate party doing well in recent German elections and favoring consensus in Europe, Merkel's Christian Democrats need to rethink their policy to give greater weight to economic growth for a consensus position in Europe. ...

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
The tense atmosphere in the talks between the Obama White House and Congressional leaders to achieve deficit reduction and raise the U.S. debt ceiling.

LyrArc Article Gist
Senate Minority Leader Mitch McConnell offered a way out of the stalemate in talks between the Obama White House and Republican leaders Boehner and Cantor. McConnell's proposal designed to meet the August 2nd 2011 deadlinefor raising the U.S. debt limit is to give the President new authority to raise the federal debt limit. It would place the entire responsibility for raising the debt limit on the President. Under this proposal Republicans would not have to vote to raise the debt limit. Republicans can then shift the effort for large spending cuts to the congressional appropriations process.

LyrArc Article Gist
U.S. Speaker Paul Ryan and Senator Tim Scott describe the event on poverty organized by the Jack Kemp Foundation in Jan. 2016, in which both Congressmen are moderators. Ryan and Scott point out the importance of upward educational and economic mobility for working class and middle class people. The 2 Republican leaders say education, work, opportunity and accountability for federal spending in anti-poverty programs are critical parts of their program for addressing the problem. They suggest trying different solutions by giving states more opportunity to try different solutions.

LyrArc Article Gist
Michael McConnell, was Assistant General Counsel of the Office of Management and Budget from 1981-1983. He is now a professor of constitutional law at Stanford University. Here he tries to throw light on how the budgetary process that is required by law, and which makes the formal budget proposed by the president available for public scrutiny, was circumvented through a sequence of events starting in February 2011. The Budget Act of 1974 sets specific deadlines and a process for generating revenue, setting spending priorities, and setting the debt limit. The President first submits his administration's budget by the first Monday in February. The Congressional Budget Office has until Feb. 15 to score the budget using identical metrics for all proposals for a consistent scoring. The budget President Obama put forward in February did not take into account the growing deficit and was rejected by the Senate 97-0. The President proposed a new plan in April 2011, but the proposed budget was so vague that CBO Director Douglas Elmendorf said he could not score it. The subsequent efforts in June and July 2011 were carried out in closed door negotiations between senior Republican leaders and the Obama White House. This subverts the original intention of the law. The Budget Act says that both the House and Senate hold hearings on the proposal, with testimony from the administration, "national organizations" and the "general public." Transparency, openness and accountabilility are key aspects of a proper process that is democratic and prevents the parties from engaging in blame and competing claims. The closed door negotiating sessions and the lack of a concrete written budget proposal from the President has turned the current budget process into an effort by each side to see how it can best position itself for the 2012 presidential election. ...

LyrArc Article Gist
Krauthammer quotes Congressional Budget Office Director, Elmendorf, who said "we don't estimate speeches," when Elmendorf was asked about President Obama's April 13 debt plan speech. President Obama has failed to come up with specific ideas for debt reduction and not taken up any position on debt reduction, including removing tax expenditures as recommended by the President's Bowles-Simpson Commission report. Krauthammer says the President is using the discussion on debt reduction and the debt talks as a way to move forward with his reelection campaign. This President Obama has done by not putting forward any new ideas of his own or backing the ideas of the Bowles -Simpson Commission, and by putting Republicans on the defensive for coming up with any new ideas which may be unpopular. He calls the President's February 2011 efforts on debt issues a farce, and the April 2011 efforts empty, lacking any substantial specifics.

LyrArc Article Gist
Defense spending under the new Obama 2012-2013 budget for the fiscal year starting Oct. 1, 2012, is $525 billion, and an additional $88 billion for Afghanistan. This is $6 billon below the $531 billion budget for the 2011-2012 budget of $531 billion approved by Congress, $22 billion less than the Obama administration's proposed budget. An additional $115.1 billion was for Afghanistan. In a move to bring financial discipline to additional appropriations for foreign conflicts, the Obama administration is proposing in the 2012-2013 budget proposal a limit to "overseas contingency operations" appropriations. The total proposed is $450 billion for fiscal 2013 to 2021.

LyrArc Article Gist
Krugman points to the connection between the failure to achieve debt reduction through debt forgiveness and the sluggish economic growth in the eurozone and U.S., five years after the global banking and financial crisis of 2009 and four years after the beginning of the eurozone debt crisis in 2010. In the U.S. debt reduction for homeowners was delayed with a wave of foreclosures, and in Europe austerity budgets were the norm as Germany pushed hard for austerity policies. In 2014 small relaxation of austerity to give relief to voters took place in Greece, France, Italy and Spain, with austerity budgets still in place. Growth also slowed in Germany to slight contraction in the third quarter and no growth in the fourth quarter of 2014. This is leading to the formulation of new policy to address growth challenges in the eurozone. Debt to GDP is growing in eurozone countries and Britain because of lack of growth, even though spending cuts have been made, showing the need for rethinking policy. ...

LyrArc Article Gist
Support for the centre right Moderate Party of Mr. Reinfeldt declined to 23.2% in Sweden's 2014 parliamentary elections. A trade union leader, Mr. Lofven, led the coalition of centre Left parties including the Green Party to a narrow win over the centre right parties, with 43.7% of the vote. Votes to an antiracism and womens issues party Feminist Initiative was expected to go above the 4% needed to enter parliament and provide support to the centre left parties, yet reached 3.1%. The strain on funding for schools and other public spending, as a result of immigration support spending on Middle East refugees by the Reinfeldt government, led to a siphoning off of significant voter support to a far right anti-immigration Sweden Democrats Party which doubled its vote to 13%.

LyrArc Article Gist
Erskine Bowles, a former chief of staff under President Clinton, and Alan Simpson, former senator from Wyoming, say the U.S. Supercommittee members should remember that their personal priorities and the common good are not at odds. The authors of the Bowles-Simpson Presidents Commission for deficit reduction say there is growing discontent among voters with politicians who are obsessed with gaining partisan advantage. Using issues of national importance that require a common approach from all parties as a way to score political points will only backfire on these politicians. Personal priorities of members of Congress are now no longer at odds with the common good, they are converging. It is upto the Congress, members of both parties, to push back against the special interests and partisan politics, and show leadership on the deficit. The eurozone crisis has shown the dire consequences of any sluggishness or procrastination. The failure of the political class and leadership in Italy and Greece, and in other nations of the EU, has put the fate of these countries in the hands of markets, which have relentlessly pushed up the borrowing rates of Greece, Italy, Spain and other countries, and taken future direction out of the hands of politicians. Erskine and Bowles say don't wait for a fiscal crisis to take action because it will be disastrous economically and politically, with everyone as losers and no winners. Timidity is not an option, leadership is required to take action that is big and broad, tackling tax expenditures, entitlement expenditures, defense, across the board....

LyrArc Article Gist
House Majority Leader Eric Cantor rejects the McConnell plan for raising the debt ceiling. Senate Minority Leader McConnell says on a conservative talk show- "all of a sudden we have co-ownership of a bad economy. That is very bad positioning going into an election." McConnell's plan is to shift the responsibility for raising the debt ceiling to President Obama, by separating debt reduction talks from debt ceiling talks. Cantor believes its best to push on with cutting back spending. Obama's response was to offer $1.7 trillion in spending cuts, at which point he expected Republicans to support tax increases, telling Cantor in negotiations "enough is enough." The McConnell plan is supported by Senate Majority Leader Harry Reid and Republicans in the Senate. The details of the plan are being are being worked out, with one strategy being to add to it the $1.5 trillion in spending cuts identified in bipartisan talks with Vice President Biden. Both sides are looking at this jockeying for advantage for the 2012 election. At one point in the talks with Cantor, Mr Obama is reported to have told him- "Eric, don't call my bluff. You know I'm going to take this to the American people." Cantor for his part, wants to limit the duration of the debt ceiling increase so that it would be a short term extension and would come up for a vote before the 2012 presidential election....

LyrArc Article Gist
The U.S. Supercommittee in Congress fails to reach an agreement to come up with $1.2 trillion in savings to reduce the deficit by the Nov. 23, 2011 deadline. This shifts the focus to the sequester or triggering automatic cuts in Jan. 2013, as mandated in the Congressional deficit reduction deal of August 2, 2011. These automatic cuts would reduce defense spending by 10%, cut social programs without touching Medicaid and Social Security, by 7.8%, and reduce Medicare payments by 2%.

LyrArc Article Gist
The skills to navigate different personalities and work patiently on the issues surrounding changes to the U.S. tax system of Rep. Dave Camp (MI), chairman of the U.S House of Representatives Ways and Means Committee, will be immensely useful in the effort to make changes to the U.S. tax system. Camp works well with fellow House Republican leaders Boehner, Ryan, Cantor, and his Democratic counterpart in the U.S. Senate Max Baucus. Camp is a good listener, refuses to engage in partisan criticism, and has the patience to work through difficult issues of achieving savings and keeping fairness in the the tax changes. Earlier efforts to achieve consensus in late 2011 failed, making it even more important to have leadership which can create productive debate and bridge the differences. The tax changes are part of the overall effort for U.S. economic recovery by reducing the deficit.

LyrArc Article Gist
Estimates by the Congresssional Budget Office in January 2011 show the federal budget deficit in the US at nearly $1.5 trillion in 2011. The deficit would equal 9.8% of the US gross domestic product. In 2009 the budget deficit was $1.4 trillion or 10% of GDP. The CBO estimates show the debt held by the public increasing from 40% of GDP at the end of fiscal year 2008 to about 70% at the end of fiscal year 2011. Republican senators Orrin Hatch of Utah and John Cornyn of Texas called for a constitutional balanced budget amendment in an op-ed published in Politico.