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U.S. president Trump's 2017 budget is an effort to reshape spending priorities by the Republican party. Apart from Medicare and Social Security all other entitlement programs from the days of Lyndon Johnson's Great Society are subject to cuts. Deep cuts to Medicaid and food stamps, including introducing work requirements. The philosophy behind it is that compassion will now be measured not by how large these programs are but by how much the government can get people "off these programs and back in charge of their lives,"  according to Budget Director Mulvaney.  The cuts are $616 billion to Medicaid and Children's Health programs, $193 billion in cuts to Food Stamps, $143 billion in student loans, $72 billion in disability programs. The overhaul of the Affordable Health Care Act is part of this change. The reallocation would put more money into infrastructure for $200 billion, and in tax cuts, $19 billion in a parental leave program and $29 billion for veterans programs, plus added spending on the military. William Hoagland of the Bipartisan Policy Center, a Republican who worked on budget issues says it will be politically difficult as the cuts to lower income groups come with tax cuts for small businesses and higher income individuals.  Beyond the policy priorities there is an area where both Republicans and Democrats are skeptical of the budget. This is how it impacts the U.S. debt. Under Congressional Budget Office estimates the U.S. debt as a percentage of GDP which rose to about 75% after the Great Recession starting in 2008, is projected to grow to about 85%. In sharp contrast the Trump administration estimates of the Office of Management and Budget are for it to drop to 65% based on rosier estimates of 2% inflation, 3% growth for the decade ahead. Experts say this is unlikely once the Fed raises interest rates and the unemployment rate currently at 4.4% leads to rising inflation, undercutting growth which has remained below 2% for a long period. These concerns are also voiced by Hilsenrath in the WSJ based on the experience of other countries such a Britain that cut corporate taxes without seeing an uptick in economic growth. ...

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According to Census Bureau data analyzed by the Pew Research Center, 6.1 million Hispanic children lived in poverty in 2010. The poverty line is defined as a family of four living on $22,314. Of the total poor children in 2010, 37.3% were Hispanic, 30.5% white, and 26.6% black. Hispanics were hit hard by the 2008-2009 recession because many are employed in construction and the hospitality industries or blue collar jobs. A majority of the Hispanic children were born in the U.S. 4.1 million have immigrant parents and 2.0 million have U.S. born parents. Of the total U.S. population Latinos are 16%, yet they comprise 23% of all the children in the country. With a quarter of America's children being Latino -and with these numbers expected to grow in coming years because of higher birth rates- the fact that many of these children are less likely to get a college education or acquire technical skills because of poverty levels, has serious implications for America's future competitiveness.

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The Economist points out that China's total debt of government, corporate and households has grown by about 100% of GDP since 2008. The 2009 crisis led to rapid increase in debt. It is now about 250% of GDP, according to the Economist. Slower growth of below 7% risks reducing China's ability to service this debt. About half of this debt is owed by state owned companies and property developers. China can use its sovereign reserves to continue supporting bank and state owned companies. Investor's are pricing bank shares to reflect about 10% of this debt as bad debt even though government estimates are much lower. The reserves provided China time to fix the banking system since 2008, yet the debt keeps growing and China has failed to take strong action in the last 6 years. Complacency is a problem, and the incentives for local governments to continue prior practices that increase debt continue. As Krugman and other experts have pointed out at some point the rules of finance will apply to China as they have for other countries that faced a debt crisis- Japan in the late 1980's, South Korea and other Aisan countries in 1997, and the U.S. in 2008. Even without a crisis through deft managemen and use of reserves China risks zombifying the economy as old loans are backed up by new loans, with the further risk of misallocation of capital or poor use of capital. This lowers productivity of capital and hurts development. With poor statistics such as the figure of 1% of debt being bad debt cited here, the problems of complacency can be magnified, as there is less reason for a strong response....

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The decline in fertility rates in Brazil from 6.1 children per woman in 1960, to less than 1.9 children per woman in 2010, has astounded experts. Especially because this is observed in all parts of Brazil, in poor and affluent areas. The tend is observed throughout Latin America, from Chile and Mexico to Ecuador. The fertility rate in Latin America has declined sharply from about 6 children per woman in 1960, to 2.3 in 2010. The rate in the U.S. is 2.0, which is enough to keep the population at a level where it remains stable.

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China's shadow banking system of trust companies and insurance companies with trust company units and other informal lenders are the fastest growing part of its banking system. Between 2010 and 2012 trust companies and other shadow banks doubled outstanding loans to 36 trillon yuan ($5.8 trillion) or about 69% of China's GDP, according to J.P. Morgan Chase & Co. Hidden debt that is likely to default in this poorly regulated sector is seen as a large risk in the banking system by the central bank and China's government planners. Tightening of credit by the central bank, the People's Bank of China, sent interbank lending rates from 3% to as high as 25% in late June 2013, finally settling on June 24 at 6.64%. China's state owned banks lend to trust companies in this market. Trust companies get additional financing by selling wealth management products promising investors returns of 8-10%. Even with China's high savings rate and large government reserves, the hidden debt and large unknowns about the loans in default, are seen by the central bank as posing risks to the target rate of economic growth of 7.5% if the government has to bailout a significant number of troubled banks. Much of the money funnelled through the trust companies since 2008 has been poorly invested. The trust companies such as Citic and Ping An Trust channel lending to borrowers for projects ranging from steel mills to infrastructure projects, such as highways and property developments that cannot obtain the financing through the large state owned banks. Fitch Ratings estimate is that since the financial crisis of 2009 these loans generated only one third of the economic growth per yuan as they did before 2009. ...

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Former World Bank chief Zoellick points to the need for investments in human capital and productivity improvements in emerging markets such as India, China and Brazil to overcome the problem of slow growth in 2013.

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Prof. Peterson of Harvard and Hanushek of the Hoover Institution, authors with Woessmann of the book "Endangering Prosperity: A Global View of the American School," offer some startling reminders about the importance of education to economic growth and incomes in countries. Simply by raising the math standards in the U.S. to the higher standards in Canada would raise GDP by three fourths of one percentage point. One advantage that the U.S. enjoys comes from its good university systems, open markets, rule of law, tax rates, and open immigration policies, which give it about two thirds of a percentage point in higher GDP growth per year. The estimates are from the authors calculations. For the period 1960-2009, a period of rapid growth in Asian countries Korea, Taiwan, Singapore and Hong Kong, higher test scores in math and reading compared to the wrold average as measured by NAEP test and PISA, have led to 2% higher GDP growth. NAEP shows only 32% of U.S. high school students proficient in math compared to 45% in Germany and 49% in Canada and 63% in Singapore. By contrast to Korea and Taiwan, Peru, Argentina, the Philippines and S. Africa have about 2% less in GDP growth because of lower scores compared to the world average....

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The current economic expansion in the U.S. in April 2014 is at 58 months from the beginning of recovery in 2009. In this exceptional account Josh Zombrun of WSJ compares the current expansion to previous expansions since 1950, with the views of experts such as Stan Hall of the NBER committee, which studies turning points. This expansion is forecast to go for 90 months into 2016 by the U.S. Federal Reserve, and 102 months into 2017 by the CBO. Sooner or later, says Stan Hall, some adverse unpredictable event takes place that ends the expansion. So far the expansion has been slow and protracted, as predicted by economists Reinhart and Rogoff from previous financial crises in the last century, giving it room to grow as corporate earnings continue to improve. Fed chairwoman's sense of slack in the economy also provides room for employment and incomes to grow in the later stages of the expansion. This is good news for the emerging market economies such as India and China, and for the European Union, faced with slowing growth. So how does this expansion compare with earlier ones. The expansion of the 1991-2001 of the tech boom was 120 months, 1961-1969 of the Sixties 106 months, 1982-1990 of the Reagan era 92 months. The controversial one on shaky foundations is the recent housing boom 2001-2007 of 73 months ending in a huge bust with the 2008 financial crisis. The shorter expansions are the 1975-1980 Post-Vietnam one for 58 months, and the 1970-1973 spurt before the OPEC price surge. Figures are from the NBER, CBO and the Federal Reserve's Summary of Economic Projections....

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India's demographics show one startling fact. By 2020, the average age of Indians will be 29. This is happening just as the rest of the world is aging very fast. In the next 15 years India will have 130 million more people in the 20 to 49 age group. This compares with a shrinking in population of 100 million in that age group in developed countries and China, according to the U.N. Population Division. The problem facing India is malnutrition that runs as high as 43% for children with half the mothers anemic, weak educational system at the primary and secondary school levels especially in the government run schools, lack of good governance in the most populated states such as Uttar Pradesh in the Ganges plains which has 200 million people, the consequent overburdening of cities which have no plans to manage the migration of the rural poor to the cities. India has to find ways to fill the huge gaps in getting better nutrition, education, dignity and sense of opportunity, and work for the growing numbers....

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The appointments to key economic positions in the Jinping-Keqiang administration in 2013 reflect continuity and importance given to experience. Zhou Xiaochuan continues as head of the central bank PBOC, to keep an experienced person in the the event of a financial crisis. Lou Jiwei, chairman of the sovereign wealth fund, is now the new finance minister. Xu Shaoshi, minister of land and resources, is the new head of the National Development and Reform Commission, the economic planning agency. Xiao Gang, chairman of the Bank of China, one of four state owned banks, will be the new head of the securities regulator, China Securities Regulatory Commission. Zhang Gaoli, a member of the Political Standing Committee of the Communist party, and Wang Yang, party chief of southern Guangdong province, also join the economic team. Li Keqiang, the new prime minister emphasized the agenda for the next decade telling a press conference: "Talking the talk is not as good as walking the walk. We need to pursue market oriented reforms." This means giving the private sector and consumers a signficant role in the Chinese economy....

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This article in DW.com cites experts who point out that the Republican Party always had tensions within it because of the diverging interests of three groups that have allied together to form the party- Wealthy businessmen and corporate interests, evangelicals, and white working class people who have seen their incomes decline for several decades. The interests of each group have some overlap, are sometimes masked but frequently they diverge. Nigel Bowles, former director of the Rothermere Institute at Oxford University, says there is no particular reason that this coalition would hold together, that it was unstable to begin with, a wonder that it did not split up earlier. Scott Lucas, an expert on American Studies at the University of Birmingham, says that Reagan showed great skill in holding this coalition together, and Donald Trump has taken it apart by mobilizing only one constituency of white working class voters and leaving out others. The break between Republican party leaders Ryan, McCain, and state party leaders, with Trump is unprecedented in post war American politics, and putting it back together now looks like a lost cause in the medium term.  ...

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Jim Dwyer discusses proposed legislation in the New York City Council in November 2011, to set a "living wage" of $10 per hour, plus benefits, for workers at new developments receiving more than $1 million in public money. Under this legislation employers who do not include benefits would pay an hourly wage of $11.50. Discussion in the City Council has led to questioning this legislation on the grounds that the developments would not be built under the new rules. Dwyer points to San Francisco, which has set the minimum wage at $10.24 for January 2012, plus mandatory contributions to health insurance funds. The number of low wage workers in New York City with some college education has increased by 70%, according to the Fiscal Policy Institute. Wages at the bottom were $10.85 an hour, adjusted for inflation in 1990, in 2010 the wages were $10. What this does is further increase the income disparities and inequality in the U.S. Because of the demographic changes in America with Hispanic children representing a large proportion of young children, and the high rate of dropouts from highschool in the Mexican American community in New York, this means more children in New York City growing up below the poverty line....

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A study by Prof. Peter Petri of Brandeis University, shows the Trans Pacific Trade Agreement boosting economic output in the U.S. by about 0.4% by 2025 or $77 billion. Winners are biologic drugs which get long term patent protection, tech firms and software engineering services. Losers are the Detroit auto industry with higher auto parts imports, light manufacturing, and some heavy manufacturing sectors. Prof. Douglas Irwin of Dartmouth College and other experts say it is not clear how U.S. consumers and businesses will benefit. The import duties as a percentage of total imports are now at about 1.4%. Experts say about 4/5ths of the benefits of TPP for the U.S. are from opening up trade in services and new rules for investment and commerce. TPP includes Pacific countries Canada, Australia, New Zealand, Chile, Mexico, Malaysia, Singapore, Vietnam, and Japan. Issues are environmental rules, worker protection and standards, agricultural imports in sensitive countries such as Canada and Japan, affordable drugs in poor countries....

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Stevenson and Caselli describe the mood in Buenos Aires as negotiations with hedge fund holdout bondholders fail in July 2014.

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Krugman points out the gains on three fronts evident from the Census Bureau report of 5.2% gain in median income of households in the U.S. He says the first is the growth in incomes of ordinary working class and middle class families, second the large decline in the poverty rate, and third the further rise in insurance coverage in 2015 for people without health insurance. He points to the steady efforts of the Obama administration to improve lives of ordinary families as working based on the Census report though results have taken time, and could have been better. The Stimulus, says Krugman could have been larger following the blow of the 2009 financial crisis and increased unemployment at the time. Janet Yellen at the inequality conference of the Boston Fed in 2014 pointed out the problems of 62 million households having net worth of about $10,000, and why this was running against the American idea of a better life for all Americans. In that sense the Census report is a movement in the right direction but a lot remains to be done.   ...

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This commentary in the WSJ says it is essential that the U.S. get back manufacturing of all technological goods back to the U.S. or its allies. The dangers of depending on China or other countries not clearly allied with the U.S. is quite clear especially after the pandemic. The U.S. and European supply chains need to be completely remade, restructured, to avoid dependence on China or countries that are not allies. This is what supply chain renewal is about. Yet initiatives alone with hundreds of billions of dollars price tag re not the answer to the problem. What is needed are specific targeted actions such government direct assistance to key sectors to ensure U.S. technological advantages in worldwide competition. Giving a hole range of incentives and direct financial support to industries making everything from electronic and computer components to high tech parts that go to defense and civilian production.   The U.S educational component in this puzzle is university students in all high tech courses which should be kept for U.S. citizens or from key allied nations at American universities. The manufacturing base would mean securing incentives and aid to manufacturing industries, component by component, part by part, to secure American leadership and distinct advantage.  Job losses have to be reversed and industries relocated back to the U.S. And only in cases where it is advantageous to manufacture overseas to relocate in allied countries India, Japan or South Korea. U.S. labor has to be brought into the picture as a key participant in the national interest and given an important role. R& D efforts have to be developed component by component, technological part by part, and technology by technology, so that a systematic plan can be followed to secure American leadership for the rest of this century, is what experts including this one say is required today. ...

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U.S. Senate majority leader Mitch McConnell tells the Washington Post in an exclusive interview that the dynamics surrounding the Trans Pacific Agreement pushed by president Obama have changed. He sees little prospect of it passing Congress before president Obama leaves office, and says it will be up to the next president to take it up after Obama leaves office in Jan. 2017. McConnell said that there is a lot of pushback all over the place. The Republican frontrunners Trump and Cruz both oppose the TPP, and all Democratic candidates including Hillary Clinton oppose it. In addition tobacco interests in McConnell's home state of Kentucky and pharmaceutical interests backing Senator Orrin Hatch, the Republican Finance chairman also oppose aspects of the negotiated deal. Labor unions, the automobile industry, environmental groups, and public interest groups, have strongly opposed provisions of the TPP that hurt workers and the public interest from the beginning, making it a risky proposition for Congressmen coming up for reelection in 2016. The divergence between the Republican establishment and the presidential front runners Trump and Cruz also have diluted support in Congress on the Republican side, making it a no win proposition....

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Andy Grove makes this passionate plea for the dignity of workers in America in 2010. It is worth reading in 2020 what this founder of Intel Corp and pioneering spirit of Silicon Valley has to say. Andy Grove of Intel says there is something seriously wrong when the unemployment rate in the Bay Area is higher than the 9.7% national average for the USA. American companies have added jobs like crazy in Asia, but things are sputtering back home. Hon Hai has 800,000 employees and makes most of the electronic and computer products for American companies. Grove says startups are not the answer, unless they scale up and create jobs the way Intel did starting back in 1968, with a $3 million capital infusion by investors. The move from the first production model to mass production is critical, as companies hire thousands of people. Innovation and scaling up have to go together. He makes his point clearly by pointing out that Apple has 25,000 employees. For every Apple employee there are 10 employees in China working on Apple iMacs, iPods, iPhones. And he adds that the same 10 to 1 relationship applies to other U.S. tech companies. And here Grove asks the tough question by first posing an answer. He says it sounds like- no big deal, we keep the high paying jobs, we keep most of the profits, but what kind of society are we going to have with highly paid professional workers and lots of people unemployed? And he doesn't mention that there are a lot more young people unemployed. He says the US has become very inefficient at creating tech jobs, and it would be a great mistake not to act decisively early on. And adds that the investments in such areas as solar power and electric car batteries have to be made early on to maintain leadership in these areas. Grove faults academics like Alan Blinder and others who say loss of manufacturing jobs and whole industries was no big deal. The U.S. has forgotten the value of manufacturing jobs. He wants to see America focus on jobs and rebuild its industrial base. And less of transferring engineering knowhow and new technologies overseas, technology that can help bring innovation and scaling up of factories at home. In his view individual companies doing their own thing, in a misguided fashion that jobs don't matter, is not the answer to the situation we face. The industrial economies of Asia, China at the present day, have focussed on jobs and technology, and scaled up. Grove reminds readers of the situation in America in 1932, when jobless veterans demonstrating outside the White House in large numbers were dispersed by soldiers with live ammunition and fixed bayonets. This makes him shudder at the very thought of it, and brings back memories of his early years in Hungary, as a young man in 1956. Are we listening? ...