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Sheila Bair says she fears the next crisis will start in Washington. Bair points to the need for urgent action along the lines recommended by the Bowles-Simpson Deficit Commission. Areas identified by Bowles-Simpson should be tackled as early as possible, she says - tax subsidies for housing and health care that lead to misallocation of resources, defense spending, special-interest provisions. She points out that the increase in the deficit is a result of the unwillingness of governments over the last two decades to make the hard choices necessary to control the structural deficit. Total federal debt doubled in the last 7 years, to almost $14 trillion, or about $100,000 for every American household. Bair, as Chairman of the FDIC, played a critical role in the efforts to control the US financial crisis of 2008-2009. Relentless federal borrowing she says, undermines the confidence private investors have in US government obligations. The cost for bond investors and others to purchase insurance against a default by the US governmet went up from 2 basis points in January 2007 to 100 basis points in early 2009, and is now at 41 basis points. With 70% of US Treasury obligations held by private investors scheduled to mature in 5 years, a decline in investor confidence would lead to higher government and private borrowing costs. She writes this just as the debt crisis in Ireland is taking place, following the one in Greece, and contagion to Portugal and Spain is feared. Bair fears a similar loss of confidence in US public debt. High and volatile interest rates could lead to losses for financial institutions holding Treasury debt and raise funding costs for depository institutions....

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For the first time since 1998, Russia, which has relied on large foreign exchange reserves from oil exports, has issued new sovereign debt. Russia issued $2 billion in five year bonds at 3.625% at a risk premium of 1.25% over U.S. Treasurys. And $3.5 billion in 10 year bonds at 5% with a risk premium of 1.35% over comparable Treasurys. In 2010 Russia expects a deficit of 6.8% of GDP.

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Experts in both the USA and China say that the trade deficit will remain a problem in US-China relations, as China now wants to see not an appreciation of its currency but some devaluation of its currency to promote its exports. Additionally both Congress and Mr. Obama are looking at trade relations carefully. Obama has been critical of how unfettered free trade has not been beneficial to both countries.

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Comments by Seidman, Volcker, Shiller and Soros on thie mortgage crisis. How will it afffect economic growth and for how long. Soros points to a complicating factor the dollar if the Fed has to cut interest rates and the current account deficit. Volcker points out that its to early to tell not knowing what will happen in 2008. Volcker says its potentially approaching the scale of the savings and loan crisis.

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Greece passed what prime minister Samaras called the last of the austerity cuts in November 2012 and called for action by lenders in the EU. The EU's Rehn says it is time to dispel the notion that Greece has not made progress in making the economic changes needed. Finance ministers of the eurozone meeting in Brussels agreed to give Greece two more years to reach deficit reduction targets. The cost of this to the eurozone will be 32.6 billion euros. A $40 billion payment to Greece is still on hold till Nov. 20, 2012. The cuts passed in parliament in November 2012 by the Samaras government will raise 17 billion euros over 4 years. The 2013 budget passed in parliament has cuts of 9.4 billion euros to salaries pensions and benefits, and raises the retirement age from 65 to 67. As of Nov. 2012 the bailout packages to Greece from the eurozone countries are at $240 billion.

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The key people in the effort to implement DJT agenda of the Border and renewing the Tax cuts that expire on Dec 31, 2025 are Senate Majortiy Leader John Thune, Deputy Senate majority Leader. Alos playing a part are the Budget Committee chair Lindsay Graham and Mike Crapo of Idaho who chairs the Senate Finance Committee. Here is the approach Tohn Thune plans to use. He will do it two step, first getting the Border right by committing additional resources including offsets of cost from clean energy tax credits. Only after enough technology and resources for Border Patrol are made to secure the Border will the second step of tax cut renewal be taken up.  The process Thune plans to use is budget reconciliation which requires only a simple majority in the US Senate. Things are tight in Congress, in the House very tight with 217-215 and in Senate 53-47. Budget reconciliation means cannot add to budget deficits beyond 10 year window and bill have to budgetary. ...

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How the failure to maintain government spending (in the face of higher deficits) hurt Portugal with economic growth at 1.3% in 2006 as the rest of Europe surged ahead at 3%, especially Spain.

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A weaker dollar is good for US exports. It also increases the prices for foreign goods sold in the US, increasing incentives for Make in the USA, and reducing the huge trade deficits with EU countries and China, Japan, South Korea. The US dollar has gone in April 2025 from 145 yen to the dollar to 157 yen to the dollar.

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Bob Woodward's recent book "The Price of Politics," gives an inside account of how the Obama White House handled the U.S. deficit crisis. In an intervew on Bloomberg television channel, Woodward told Charlie Rose President Obama showed a lack of leadership in using his presidential authority to pull together various points of view for an agreement. Obama failed to provide presidential leadership in achieving the needed compromise, as past presidents had done.

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In talking about the systemic risks of the failure of GM, about 3 million jobs depend on the auto industry with 1,187,000 employed by dealerships of which 325,000 are employed in GM dealerships. Another concern is that GM's pension obligations are underfunded by $18 billion at the end of 2008 according to Deutsche Bank. This would be added to the $11 billion deficit at the Pension Benefit Guaranty Corp. were GM to fail.

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Mr. Trump proposes a 10% tariff on all goods imported into the US at Columbia, South Carolina, says this report in WSJ. A universal tariff of this type is similar to Herbert Hoover's Smoot Hawley that brought on the Great Depression in the 1930's in outright beggar thy neighbor policies which don't work, says WSJ. This opinion describes the impact of such a tariff in failing to reverse the trade deficit which is $951 billion in 2022, but fails to point to the lack of effectiveness of tariffs alone in bringing back American manufacturing jobs. As president Biden has pointed out the Trump administration made much talk about returning American jobs but did not accomplish much for American manufacturing to lead the world in the way the Biden administration has done. To do this the Biden administration passed laws to fund a entire new electric car industry, renewable energy industry, and promoting other industries in advanced technologies, including aerospace, to bring back America's leadership in manufacturing of most of the twentieth century with a bold vision for the future. Mr. Trump lacks the experience on this issue and is simply playing the rhetoric to his base without any plan to deliver the goods to sections of the American public that have already suffered the most from decades of neglect of manufacturing by Republicans going back to Reagan and Bush, Democrats Clinton and Obama. ...

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About 30 rail routes in Germany will be renovated under a massive renovation program of Deutsche Bahn that begins July 15. Repeated delays and cancellations of an antiquated rail system is causing frustration for rail users in Germany. Deutsche Bahn's deficit is euros 2.4 billion and the debt euros 34 billion. It paid 133 million euros just for delays over 60 minutes to customers last year, up by 43%. Germany is not investing in the rail system as it should because of a culture that has spread since the 1990's that investment in public infrastructure and public services is not essential. The CDU party and the FDP have adopted this culture as their own, and the people have not voted this out as the FDP is part of the currrent coalition of the Socialists and the Greens under Scholz and FDP's Lindner controls the Finance Ministry. This is the challenge facing Europe and the US, dismantling a culture step by step that does not believe in investment in public services and infrastructure for far too long allowing it to fall apart when financial markets invest and waste capital in dubious projects. In the US inventing a new golf ball gets 100 million dollars in this dysfunction in financial markets in the EU and US, the list is endless which adds up to tens of billions of dollars.  ...

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As to financing of $6000 child tax credit costing about $100 billion a year as estimated by Office for Responsible Budget some of it would come from the $360 billion in tax savings over 10 years by Medicare negotiation of prices with Pharma, other would come from taxing corporations and high incomes at rates that are similar to what firemen and teachers pay of 20-25%. In his speech at North Carolina Aug 15, 2024 at Wake Tech in Raleigh, president Biden said- "You know how many billionaires there are in America?  There’s now a thousand billionaires.  You know what their average tax they pay — federal tax?  8.2 percent.  Anybody want to trade with a billionaire — their tax rate?  (Laughter.)  Well, guess what?  If they just paid 25 percent — it’s not the highest bracket by a longshot — 25 percent — do you know what that would do?  That would raise $40- — $400 billion over the next 10 years.  Imagine what we could do with that.  We could fundamentally sh- — slash the federal deficit.  We could make sure there’s home care.  We could do so many things — consequential — including finally making sure that we take care of Ukraine from that butcher Putin.  (Applause.) ...

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Vanguard economists using the work of Stanford Unversity economists Bloom and Baker and University of Chicago economist Davis have developed their own estimates of the cost of overall uncertainty to the U.S. economy. Bloom, Baker and Davis show the level of overall uncertainty in 2011-2013 is about 50% higher than the level seen since 1985. Vanguard's estimates are for a drag on the U.S. economy of about $261 billion in deadweight losses from this uncertainty- uncertainty in monetary policy, uncertainty in deficit reduction, uncertainty in business investment. Their estimates show 1 million jobs not created, job growth per month lower by 45,000 in the last 2 years, and gdp growth of about 3% per year in 2011 and 2012 in place of the 2% average recorded, in the absence of these uncertainty shocks experienced by the U.S. economy. McNabb points out that the market gains of the S&P 500 are based on an unstable foundation as long as this overall uncertainty is not lifted and create a serious disconnect....

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The Wall Street Journal looks back at president Trump's first year in office from the inauguration speech to the passage of the new tax law. Race and immigration issues form the background of much of the domestic politics as Democrats prepare to shutdown government by December 2017 over a comment by the president. This happens during a meeting between the two parties on the Dreamer legislation to allow children of people illegally in the U.S. to stay in the country, when the president makes a derogatory remark about immigrants from Haiti and says he prefers immigrants from Norway. Efforts to repeal the Obama healthcare legislation fail during the first year. Democrats win a Senate seat in Alabama. A special counsel, Mr. Mueller, is appointed to investigate the Russian meddling in the U.S. presidential election. The tax law is skewed towards more tax cuts for the wealthy than the middle class, with the increase in the deficit not justifying the cut as infrastructure and other needs in health and education require funding. In international affairs Trump recognizes Jerusalem as the capital of Israel, and takes a strong stand on Iran and North Korea.    ...

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The Big Beautiful Tax and Spending Bill in the US Congress faces close votes in the US Senate with Senators Rand Paul of Kentucky, and Thom Tillis of North Carolina, both Republicans against it.  The Senate version has additional cuts to Medicaid funding. Tillis expressed concern about these cuts. Senator Rand Paul is opposed to increasing the deficit for enlarged spending and tax cuts. Republicans and DJT have close votes in the Senate and in the Congress. Republicans Murkowski of Alaska and Curtis of Utah want to change the early phaseouts of tax credits to the renewable energy industry in the Senate bill, and the excise tax after 2027 to avoid buying from China and develop American manufacturing in renewables. Senator Collins of Maine has an amendment to add $25 billion for rural healthcare and rural hospitals to offset the effects of large Medicaid cuts. Collins plan also lets taxes revert to 39.6% from 37% for married couples incomes over $50 million.  The bill then heads back to the House for changes by Wednesday, July 2, for a goal to have it on the president's desk by July 4th, Friday. ...

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After sanctions were lifted in 2016 on Iran India and China increased oil imports from Iran. China and India ramped up imports each country importing 900,000 barrels of oil per day in 2016. Since then China has reduced imports from Iran to 500,000 and India has reduced imports to 600,000 in anticipation of possible sanctions. India received a limited waiver from sanctions for oil paid in rupees before sanctions were lifted. 

Chinese officials say alternatives for importing oil are available, and that it is more concerned about the price of oil.

Oil prices affect development because as in the case of Indonesia and India reduced oil subsidies and savings can be diverted into infrastructure development in Asian countries. The recent surge in the price of oil adds to the pressure on budgets and fiscal deficits in developing countries.

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The logjam continues between the French and German banks- represented by the Institute of International Finance and its negotiator Charles Dallara- and the governments of Germany and Greece, supported by the IMF. The position of the Greek government is that the interest rate on new bonds stretching out over a long time period that woud be exchanged at 50% face value of existing bonds should be set at rates well below 4%, because Greece faces a growing deficit and rapidly worsening economy. The German government which is faced with the prospect of providing additional funds to Greece supports this. The IIF position is for an interest rate of between 4-5%.

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Ip's point about the actions of previous president's in promoting a recovery long after they are in office has to be qualified by the uncertain economic outlook for 2013, with a slowdown in the eurozone, China and India, and the efforts to control the deficit in the U.S. also affecting the economic outlook. The process of deleveraging has still to work itself out and the economy is still being supported by the Fed's continual easing of monetary policy.

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The IMF commmittment to troubled European economies is large, at $320 billion, 40% of its theoretical financing capacity, and exceeds its role in the 1997 Asian financial crisis. Concern that the IMF is now helping politicians protect the eurozone. And fears that the lack of the option of devaluing currency leaves too much of the burden on cutting spending in the midst of a recession. Deficit reduction in the current situation will take years to happen.

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French 2025 Bayrou budget compromise deficit of 5.4% target is a fragile one. Le Monde says PM Bayrou is dependent on the goodwill of his opponents the RN National Rally and the Partie Socialiste PS. Cutting the budget slightly is not popular with RN or PS and it remains a compromise to avoid the worst of not passing the budget for 2025, a responsibility the public places on all politicians and parties. As in Germany France with fragile coalitions and lack of clear voter support for one program, is not able to invest in its economy as Biden and Trump have done in the US, slowing growth in the European Union.

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Feldstein says that for the 85% of the people who have healthcare the Obama proposals are not a good deal. The Obama proposals mean higher taxes in the long run to pay for the $1 trillion cost of healthcare for the uninsured group over 10 years. This lower income group has no coverage despite the $300 billion Medicaid program. Feldstein says there surely must be better and less costly ways of getting this lowincome group healthcare. Raising the top income tax rate to 45% from 35%- as a result of letting the Bush tax cuts expire and adding aproposed health surcharge on higher income individuals- would actually lower revenues for the government, as it would change behavior of high income individuals in ways that lower their taxable inome. The result is higher deficits and higher taxes when even without this large deficits are projected for the future. How to slow the rapid growth in healthcare spending? The Obama plan is to cut spending on Medicare. Feldstein sees the govenment's effort aimed at reducing the amount of medical services, as reduced spending comes from fewer services, not reduced payments to providers. Will this result in enough of acost reduction to make the system work. And if the cost reductions are too heavily weighted towards reduced services and not reduced payments to providers would this result in large cuts to services to affect the quality of healthcare for the 85% who are accustomed to a different pattern of healthcare, even though it is structured to allow cost escalation. Feldstein offers no solutions to the problems of cost escalation except to suggest that the Obama plan does not really tackle the cost escalation issues directly with providers, and instead burdens the national finances to an extraordinary degree. And the need for apause and reflection....

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This report from Sicily, describes the situation in this region as comparable to Greece, with budget deficits, high unemployment, young people leaving the region, and corruption. This Der Spiegel report cites the deteriorating situation after the centre right parties won the election on Nov. 5, 2017, making the region hard to govern.

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The New York Times editorial says the constitutional option looks better than the recession option, now that huge cuts in spending including Medicare and Social Security are planned in the budget talks between the Republicans and the Obama White House. The Times points to $4 trillion in defict reduction in 10 years, that is being discussed as part of a grand agreement in White House talks. It reminds the Obama White House that it is not likely to win independent voters if unemployment increases as a result. The constitutional option is for the President to to point to the 14th Amendment that the public debt cannot be questioned, in effect saying the debt limit cannot be controlled by Congress as it is today. See the piece by Krugman on the same subject in today's New York Times. Krugman asks why Obama's economic advisors have not cautioned him about the size of the cuts and the potential impact on unemployment in a fragile economy. And he points out that most of the senior economic advisors have left and it may be Obama's political team that is looking for a way to win points with independent voters for next years election....