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Krugman points out that the federal tax rate for the top 1% is 34% in 2013, according to the Congressional Budget Office, because president Obama let the high end Bush tax cuts to expire. It is the number to remember says Krugman- 34. In 2008 the figure was 28.2. Under Hillary Clinton the average tax rate for the top 1% would go up by 3.4 percentage points, according to the Tax Policy Center. Some of this would help pay for the tution plan to provide access to the middle class to public universities. Under populist Trump, Krugman points to the elimination of the inheritance tax and tax rates going down substantially, and no such programs to promote the upward mobility that everyone is talking about, and no way to pay for a big infrastructure building effort for growth and jobs- upward mobility that is the focus of every candidate's election campaign including Sanders, Trump in appealing to older white working class families, Clinton, Ryan, Bush, and others in both parties.   ...

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The political risk in China as the change of leadership takes place in 2012, and with the removal of Chongqing party chief Bo Xilai. The slowing of manufacturing activity and slowdown in growth expected in 2012-2014. Export growth declines to 6.8% from 14.2% in the fourth quarter of 2011. Quarterly surveys by the central bank shows demand for loans is dropping. And the HSBC purchasing managers index shows a reading of 48.1 in March, declining from 49.6% in February, showing shrinking manufacturing activity in China- anything less than 50 means contraction is taking place.

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Did U.S. Treaury Secretary, Timothy Geithner, ignore a key request by President Obama to present plans for the restructuring of Citigroup after the government bailout of Citigroup? Ron Suskind says this is what happened in his book on the Obama administration and how the White House operated to make key decisions. Ron Suskind, intervewed key members of the Obama White House economic policy team, Lawrence Summers, Christina Romer, Peter Orszag. In all Suskind conducted 700 hours of interviews for his new book in Sept 2011: "Confidence Men: Wall Street, Washington and the Education of a President." According to the book, in early 2009 after Obama authorized a series of stress tests for banks he told Geithner to develop a plan for restructuring Citigroup. A month later at a meeting not attended by Geithner Obama raised a question about the status of the plan. He was told by Romer that no restructuring plan had been developed for Citi. Suskind says Geithner disagreed about a plan to restructure Citi and decided to ignore the request. Geithner and the Treasury Department say Obama asked Geithner to develop a backup plan to overhaul banks if the government was forced to keep a big ownership stake in the companies, and "there was fortunately never a need to put them in place." Geithner told Suskind that he doesn't slow-walk the President on any matter. Other aspects of the operation of the economic policy team that Suskind covers are a series of memos from top aide Pete Rouse raising questions that ongoing communication between some members of the economic team and Summers was giving Summers power to shape policy. Summers, Director of the National Economic Council, is shown as trying to keep out the views of Romer and budget director Orszag from reaching the President without going through him. When Orszag gives a private report to the president on the deficit, Summers objects saying that this was immoral. Obama lacked the fresh ideas needed to tackle the problems created by the mortgage and banking crisis of 2008, when he used the Clinton administration economic policy team of the 1990's- Rubin, Bernanke, Summers and Geithner. Fresh approaches were needed two decades after Clinton's election in 1992, and the Bush administration that followed, as many of the problems developed during this period. The similiar embedded thinking was shared during the Clinton and Bush administrations and the economic advisors about dealings with the banking sector, but the situation for deficits, unemployment, housing, and the economy had completely changed requiring fresh approaches. ...

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This editorial in the New York Times is strongly critical of former president Barack Obama for accepting $400,000 in speaking fees from Wall Street for a single speech. It says the news is causing people to question the ideas and words presented by Obama in his books about the dangers of losing sight of the interests of ordinary people. It gives the impression says the NYT, that Obama is cashing in like everybody else, and that his talk was empty. The editorial says the millions raised by Hillary Clinton led to her defeat in the election. Obama is reported to plan a foundation with the work of training a new generation of political leaders. This NYT editorial says it would be better to stay true to vision and purpose, to walk the talk for president Obama, especially now that a recent poll shows two thirds of voters, including about half of Democrats say that the Democratic Party is out of touch with the interests of the American People. By associating this closely with wealthy donors leading Democrats contributed to this. During a period when some of the remarkable achievements of the last fifty years such as the European Union are being called into question, when ordinary working people, young people and older people are struggling, this is all the more a tone deaf approach by politicians. The idea of helping train a new generation of political leaders through a foundation sounds bizarre in this context, and seems to suggest politicians believe there is always a solution through marketing their audacity and money.   ...

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"China's Superbank," by Henry Sanderson and Michael Forsythe looks at the rise of China Development Bank to provide insights into the two decade real estate boom in China, and the trillions of dollars in loans made by state owned banks to finance China's state owned industries and infrastructure development. The authors say these loans based on land owned by the state, improved with roads and other infrastructure and then sold to industry, have helped finance China's urbanization and industrial development. But it has also created problems including eviction of farmers from the land by local government authorites increasing inequality, led to misallocation of capital on bad projects, and an unsustainable model of development focussed on state owned companies. A major side effect of this is not covered in the book. This is the impact of crowding out of credit for private industry in China, with privately owned business having to pay higher rates in the underground loan market or lacking financing. A major focus of the report "China: 2030" by the World Bank and China's official think tank Development Research Center is on reversing this development to come up with a sustainable development model. The report was supported by World Bank chief Zoellick and China's new prime minister Li Keqiang. "The Great Rebalancing," by Pettis, a finance professor at Beijing University, looks at the other side of the financing of China's boom- the low interest rates on savings for China's consumer. This reduces household incomes and reduces purchasing power as the interest rates are lower than the rate of inflation. Lower value of China's currency also reduces the purchasing power for China's consumers. Estimates show the low interest rates cost China's workers and consumers somewhere in the range of 3 to 8% of GDP annually in bank deposit income. This money is funnelled through the banking system to make more loans for infrastructure and growth at the state owned companies, concentrating exraordinary level of financing in one direction. As a result the consumption share of GDP in China has actually fallen in the two decades of hyper development. This is about 34% compared to 50-55% for other Asian economies....

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A slight shift in American opinion favoring a deal with Iran is shown in a WSJ/NBC poll in July 2015 compared to the poll in April 2015. Support for reaching a nuclear deal with Iran remains stable at 36% in both polls, the opposed drops by 6 percentage points to 17% from 23%, and the percentage of people who say they do not know enough to formulate an opinion goes up to 46% from 40%. The intricacies of a nuclear technology deal and the sites involved lead to a high percentage of don't know enough to give an opinion. Factors hindering a deal include inspection of military sites, and Iranian intentions. Factors favoring reaching a deal now is the risk that this would mean Iran would go back into isolation and the opportunity to work with moderates might be lost. The Rouhani administration was an effort by voters to elect a government that could ease or remove sanctions to improve the economy and living conditions- its failure would lead to Iran losing an opportunity to open up to the world. The pressure from the U.S. Congress and Israel served to push for a verifiable and effective agreement to control development of nuclear technology for weapons systems. Behavioural factors involved are the very young population in Iran which has no memories about the period before the revolution in 1979- 70% of the population of 74 million are people under the age of 35. This group is eager for ties to the outside and could change Iran's outlook and policies int the future towards moderation. Risks in not reaching a deal also include the possibility of the Saudis developing nuclear technology and nuclear proliferation. Winners from a deal because of the flow of Iranian oil to world markets and a period of extended low oil prices are the U.S., Europe, China and India. Germany gains new markets to replace the growth in the Russian market after sanctions. Lifting of an arms embargo, an added risk in the last days of the talks, would be mitigated by making the lifting of that embargo very gradual....

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WSJ reporters Corkery and Yoon give a remarkable account of the individual homeowners and investors inside one toxic subprime mortgage security from Countrywide Financial Corp. named CWABS- 2006-2007. There is Amanda Gavini of Fort Myers who continued making mortgage payments against the odds after a illness and death in the family. And a couple Donald Mudd- Patricia Starr who were approved by Countrywide for a $171,000 adjustable rate mortgage loan at 8% with a $10,000 down payment for a home in Port Charlotte, Florida. The approval came only 3 months after the couple emerged from personal bankruptcy in 2006, and by 2009 Mudd was missing payments. Other borrowers such as Mrs. Gavini in Florida took out two loans at 7% and 11% in 2006, have continued making payments and are still unable to refinance under the HAMP or HARP government programs. It is because of these homeowners who continue to make payments helping the security price recover, that one of PIMCO's funds which owns a stake in this security has made good returns. Hedge fund Marathon Asset has also made good returns on this security because of the U.S. government's Public Private Investment Program to help banks recover by providing government incentives for purchase of these securities from banks. This was a way to get banks holding these subprime securities to resume normal lending in financial markets....

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Efforts to boost the share of national income that goes to rural households and workers in China. The share of income taken by state owned enteprises and taxes paid by the enterprises would have to change for reducing the gap in incomes and reducing inequality in China.

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Jerry Muller, professor of history at the Catholic University of America, offers some useful insights into the nature of inequality in advanced capitalist societies and other parts of the world, and a clear eyed way to tackle the problem of inequality. Tackling the problem should be done in a way that preserves the economic protections for the middle class and the poor which are needed for capitalism to work- unemployment insurance, Medicare, Medicaid, Social Security, Earned Income Credit, and the Affordable Care Act. Much of this system is already in place in advanced capitalist societies. Incremental gains in this area will be much smaller and it is important to recognize the need for strengthening the economic engine that supports these benefits, says Muller. Economic dynamism has to be preserved and nurtured with human capital deployed in the best possible way, and competitiveness of countries increased. Each country and society has to find its own way of achieving this. The family matters, and matters a lot in taking advantage of educational opportunity, says Muller. The culture of different ethnic, immigrant groups, also matter. These differences were present in earlier periods in the nineteenth and twentieth century and are likely to remain. Strengthening the pool of human capital and deploying it is essential to progress. In an earlier book "Adam Smith In His Time and Ours- Designing a Decent Society," Muller emphasized the importance Smith placed on the civic duty of citizens to promote the welfare of the whole society, and the importance of education, family and moral character, with no substitute for the "general prevalence of wisdom and virtue." ...

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The home ownership rate for the U.S. in March 2012, is 65.4%, the same rate as in 1997 before the housing bubble, according to the U.S. Census Bureau. The irony of this is that the housing bubble was inflated by politicians in Congress and mortgage lenders and purchasers of mortgage securities. Fannie Mae and Countryside worked together ostensibly to promote home ownership while pursuing profits. In the case of politicians they pursued goals of raising employment and growth without understanding the risks of artificially inflating home ownership, and without consideration for incomes of subprime borrowers. A less benign view of the interests and goals of politicians comes from reflections on the impact of political lobbying by Fannie Mae and other housing lenders in the U.S. Congress. The consequences in terms of foreclosures have been devastating for minorities as well as other middle class homeowners. It has also damaged the U.S. banking system, credit growth in the economy and prospects for recovery, which will take years to correct. The federal government is also saddled with large losses at Fannie Mae because of its quasi government agency role. That role led to inflation of the bubble. Most of the consequences will be borne by middle and lower income households in the U.S. The pass-through effects in a global economy affect Europe, and emerging market countries. ...

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U.S. Federal Reserve governor Daniel Tarullo tells the Council on Foreign Relations that so much remains to be done four years after the financial crisis. The law firm of Davis Polk says 67 percent of deadlines were missed for new rules required to be set in place by the Dodd-Frank legislation, including the Volcker Rule. Tarullo said: "It is sobering to recognize that more than four years after the failure of Bear Stearns began the acute phase of the financial crisis, so much remains to be done." Tarullo fears that crucial momentum may be lost because of the long delays stemming from resistance by the banks. Tarullo met with bank CEO's in April 2012. Banks have protested that Fed stress tests have not revealed the parameters for the testing. Tarullo's response given at a recent Fed conference in Chicago were that this would let banks game the exercize by running the Federal Reserve model and not improving risk management and capital planning, making this a mechanical compliance exercize. Banks have particularly opposed a requirement that limits the risk in business between two banks to 10% of their credit risk....

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A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

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U.S. Federal Reserve chairman Bernanke, says the Fed will keep interest rates low till unemployment reaches 6.5%, as long as inflation remains at about 2%. If unemployment reaches 6.5%, and this is because more people are dropping out of the labor market, he will take this into account. If unemployment stays high the Fed indicated in its statement that it would tolerate a higher inflation of 2.5%, as long as the longer term outlook was for inflation to be at 2%. Bernanke said this doesn't mean monetary policy is on autopilot, because the Fed will watch conditions carefully and will leave room for flexibility- keeping an eye out for new asset bubbles that could develop, and monitoring labor market conditions and inflationary pressures and inflation expectations. If inflation falls well below 2%, or unemployment rate falls mainly because of people dropping out of the labor market, the Fed may continue to keep interest rates low. This policy was announced as U.S. fiscal cliff deficit negotiations continued in Dec. 2012 with one scenario being considered by both political parties being going over the Jan. 1 deadline before coming to an agreement. Bernanke pointed to this, saying "this is a major risk factor right now." The Fed's activist policy in economic policy has given financial markets and business a measure of stability not provided by government and Congress. Fed policy is to buy $40 billion of mortgage securities, and $45 billion of long term Treasury securities for each month in 2013. It will fund the purchases by adding reserves to the banking system, which is to say that it will print money to buy more bonds. This is a major decision by the Fed in that the Fed has shied away from unemployment targets in the past. Bernanke described this action as a new"automatic stabilizer" in the U.S. financial system- if unemployment rises investors know this pushes the Fed's interest rate increases further down the road and would drive interest rates down, if unemployment drops sooner than expected, investors anticipating Fed's rate increases would drive long term interest rates up, to keep stable growth....

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Porter of the NYT points out that the figures released from census information that the U.S. median household income increased by 5.2% in 2015 to $56,500 is good news for Americans including minority and working class families at the lower tiers. However more needs to happen compared to previous recoveries in the mid-90's, and for people who suffered during the recession to finally put that experience behind them, says Porter. 

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Spain's central bank was lauded for macroprudential supervision before the housing bubble burst. Will China's central bank and financial authorites which have managed the housing bubble upto this point face similiar problems? Can China be the sole exception even as housing bubbles burst with wide repercussions in the U.S., UK and Spain? Nicholas Lardy, of the Peterson Institute of international Economics, says urban housing stock makes up 41% of Chinese household wealth in 2011. The same figure for the U.S. is 26%. Chinese buyers invest in homes because low interest rates on savings accounts cannot keep up with inflation. Real estate investment was 13% of GDP in 2011. Home ownership is a recent development in China, only since 1990, Chinese have never experienced large price declines. Household debt as a percentage of disposable income has increased significantly in recent years, up to 53.6% in 2011 from 31.3% in 2008, according to Lardy.