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Ruth Marcus looks at the assumptions behind Romney's tax plan and questions whether simplifying the tax system with lower rates would help create the climate for higher economic growth and lower unemployment. Much of the differences between Republicans and Democrats revolve around this assumption, a core belief on one side and skepticism on the other. An effort to obtain a bipartisan assessment was made with the Simpson-Bowles commission recommendations, which advised closing loopholes and reducing deductions. The work done by Martin Feldstein on the Romney Tax plan builds on this approach of limiting deductions, and reducing taxes across the board. An issue for Democrats is inequality. Lower wages to improve competitiveness in manufacturing industry is a trend in Republican and Democratic administrations, because of the effort to improve U.S. competitiveness against other trading nations and has played a large part in lowering incomes in manufacturing oriented midwest and eastern states. The other cause of increasing inequality is the housing crisis and the effects on the economy through foreclosures and unemployment. The housing crisis developed under a Republican administration, and the lack of effective measures to prevent foreclosures under the last 4 years of a Democratic administration worsened the economic condition of the middle class, and especially so for minorities. During the housing and foreclosure crisis the proposals put forward by Republicans Martin Feldstein, a Harvard economist, and Sheila Bair, head of the FDIC who calls herself a "populist from Kansas," for bold government help to homeowners under water would have helped the middle class financially, and especially minorities, far more than the efforts of the Democratic Obama administration, and under Feldstein's plan even turned aound the housing market and boosted a recovery. Trends in world trade and industry have large effects outside what administrations of either party can control, and a lot depends on the temperament, wisdom and leadership provided....

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Krugman says the kind of spending on helping the US economy never happened. That is relative to the size of the US economy, not much happened uder the Obama administration. As evidence, he cites the figures that total government payrolls have declined by 350,000 since January 2009. And he says government purchases of goods and services increased only by 3% in the last 2 years.

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A ZDF poll in Dec. 2016 shows 64% of the German people support chancellor Merkel's decision to run for fourth term. Of CDU supporters 89% support Merkel. If the election were held today CDU/CSU would win 36%, SPD 21%, Greens 11% and FDP 5%. Schulz is a lot more popular than Sigmar Gabriel in the SPD. About 51% of the German people support Martin Schulz, current head of the European parliament, Gabriel gets only 29%. With SPD supporters Schulz has 64%. Merkel could form a government with Greens and FDP support. See the related article on Greens and CDU positions coming closer.

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A government watchdog in Germany keeps track of what members of Germany's parliament the Bundestag earn in secondary income from speaking fees and other sources. The watchdog is called Abgeordnetenwatch or parliamentarian-watch. German parliamentarians are now required to list what bracket they are in with the highest at 250,000 euros with no ceiling set. One exception is for lawyers, consultants and farmers who can avoid transparency for upto 3.3 million euros. Unusually these professional backgrounds are left as exceptions. Still Germany is making an effort in this direction where such an effort is absent in the U.S. leading to a credibility gap for established parties and politicians, and leaving an opening for criticism from outsiders who can say they have no connection to lobbyists. German members of parliament earn an income of 9300 euros a month.

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The authors, Becker, Davis and Murphy, are from the University of Chicago. They point out that the uncertainty created by the Obama administration's programs including healthcare and social investments in education, energy conservation, and the desire to reduce carbon emissions, all tend to slow business expansion and investments to create jobs by putting additional costs on business. The expanding federal deficit and national debt also create additional uncertainty. Their point is that it was a mistake to start making major changes to transform the U.S. economy at this time, and that it would have been wiser to do these changes after the economy had recovered completely from the crisis. All efforts they say should have been concentrated on establishing conditions for a strong recovery. When combined with the lack of regulatory reforms to fix problems left behind from the crisis, and other failures, serious questions arise about how things will turn out in coming years. See Krugman- The Feeling of 1937, where Krugman takes this up from another angle, again with concerns about the future....

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Republican presidential candidate Rick Perry tells an audience in Cedar Rapids, Iowa: Printing more money to play politics at this particular time in American history is almost treacherous- or treasonous, in my opinion." He was referring to Federal Reserve chairman Bernanke when he said: "I know there's a lot of talk and what have you about if this guy prints more money between now and the election... I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas." Perry's spokesman said Perry feels strongly about printing money, and "got passionate" in his comments.

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Krugman cites Apple as the largest company in the U.S. in terms of its valuation but having only 43,000 employees in the U.S. He asks the question- why does Apple get most of its manufacturing done in China? Apple indirectly employs about 700,000 people at its suppliers, with most of them in China. Companies contribute to a country's economy by creating successful clusters of research, innovation and manufacturing. In Apple's case, to the great detriment of the U.S. economy, the manufacturing part is being done entirely overseas. If cost is the only factor for this, then the question remains how German manufacturing has managed to surivive and grow with wages that are higher than in the U.S.

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The NYT Editorial on June 2, 2009, says the Obama anti-foreclosure plan is woefully inadequate, and can't stop the wave of foreclosures. The administration's foreclosure plan that went into effect in March 2009, offers upto $75 billion in incentives to lenders to reduce loan payments for homeowners facing foreclosure. Lender participation is largely voluntary under the Obama plan, making it weak. Since March about 100,000 homeowners have been offered a modification according to the Treasury Department. This is a small dent in the plan's intent of preventing 4 million foreclosures. And it continues the Bush administration's apathy and lack of effective action to prevent foreclosures. The Mortgage Bankers Association reported that in the first quarter 2009 5.4 million mortgages were delinquent or facing foreclosure. There are 15.4 million "underwater" homeowners, those who have no equity in their homes, and with average person deeply in credit card and other debt, these people have little to fall back on if they lose their jobs or have a medical crisis. The simple arithmetic of these 15.4 and the 5.4 million, adding upto 20.8 million households, shows that anywhere near a fifth of American households are in deep financial trouble. The same numbers, or another fifth of American households, are approaching foreclosure. Drawing concentric circles of these homeowners inside a circle showing all American households, and seeing these concentric circles increasing in size with every quarter of job losses, one can clearly see why this is the biggest problem facing the economy. Job losses in January 598,000, February 681,000, March 699,000, April 539,000, totalling 2.5 million for Jan-April 2009, and 8.9 million working parttime. The underemployment rate at 15.8%. Till this foreclosure situation exacerbated by rising under employment is addressed, the credit easing and the small recovery thats been managed since December 2009, is like a mirage in the desert. A false sense of comfort. The NYT editorial makes the point that the foreclosures prevention efforts focus entirely on reducing monthly payments. Even here it falls short, in not reducing the payments enough, or programs not big enough in scope to address the millions of homeowners needing help. But an even bigger problem remains unaddressed, says the NYT, and this is not reducing the principal. An effective anti- foreclosure plan has to reduce the principal for the 15.4 million homeowners under water. This as Martin Feldstein has argued repeatedly in the oped pages of the WSJ since early 2008- the homeowners under water or approaching that situation have no incentive to hold onto their homes- has to be addressed by government taking responsibility for loan principal reduction in a carefully designed plan requiring participation of lenders. NYT points out that the mortgage industry has resisted taking this approach, and the Obama plan does not emphasize this important part of an effective plan to reduce foreclosures. By opposing this, the banks with the toxic mortgage assets and the government by going along with this, are shooting themselves in the foot. This makes any recovery at best weak, and more likely a false hope lacking fundamental support, foresight and vision....

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Speaking at the Economc Club of Indiana, U.S. Federal Reserve chairman Bernanke, says responsibility for fiscal policy lies fully on Congress and the administration. Monetary easing through QE I,II and III, which reduces the borrowing costs of the U.S. government by keeping interest rates low, cannot be seen as taking pressure off Congress and the administration, as critics claim. He countered criticism by saying: "Suppose notwithstanding our legal mandate, the Federal Reserve were to raise interest rates for the purpose of making it more expensive for the government to borrow. Such an action would substantially increase the deficit, not only because of higher interest rates, but also because the weaker recovery that would result from premature monetary tightening would further widen the gap between spening and revenues." Lawmakers would be no more inclined to come up with a program to reduce the deficit in this situation argues Bernanke. This statement of Bernake only reaffirms that low interest rates are an important goal here in the U.S.,- just as they are for France and other countries in Europe that are faced with tackling large debt and deficits- and are part of the overall solution for the government to manage its finances....

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Feldstein's thoughts in April 2009, on Treasury's Public-Private Investment Plan. First, he says this plan will only remove $500 billion of impaired assets. The banks he says now own $3 billion of residential mortgages, $1.5 trillion of corporate real-estate loans, and $1 trillion of consumer debt. Not all of this is impaired but the banks will have to sell much more than $500 billion to regain confidence in their solvency. And with one third of all residential mortgages exceeding the value of the houses, and thie many homeowners under water, likely to default, the negative feedback loop of foreclosures begetting falling prices begetting foreclosures, threatens the whole effort to shore up the defences. If no workable solution is executed quickly to prevent this then even larger pools of mortgage debt will be impaired irretrievably. Feldstein suggests that the Obama administration seriously look at his plan suggested in March 2008 to provide government loans at low rates of interest like 1- 2% for 20% of the principal amount of the mortgage and then reduce the mortgage principal by 20%, thus keeping millions of homeowners above water. But this needs to be done quickly. All voluntary efforts have failed and have become asmokescreen for banks and lobbying groups with support from Congress to make it appear that this problem is being addressed. Thirdly Feldstein says that if banks sell these impaired mortgage assets at a loss- say 40-60 cents on the dollar on the upside with government and the FDIC picking up alot of the risk and financing for private investors under the new plan- they will now have to show the loss whereas they could have previously shown these assets at unrealistic price levels but still not taking losses. This might push banks into insolvency, so banks will need more injection of capital by the government to make this possible. What are the risks in this situation? Without an effective plan to prevent the negative feedback loop of foreclosure waves and falling houseprices, the quantity of impaired assets will simply grow larger. In effect even if some private investors take out some of the impaired assets from the banking system, it is possible that a new set of assets equal to or larger than these assets that are taken out are added to impaired assets in the banking system as house prices fall steeply from new foreclosures. That only means the economy is in the same hole as before, or in a slightly larger one, even with all the well intentioned steps. At some point the private enterprise argument has to be seen in the correct light. It is not that there is any argument that private enterprise can function better or far superior, it is only that the banks as private enterprises are in such an enormously stressed situation that the bank executive's cannot execute a way out of this mess. ...

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Krugman is critical of ECB president Trichet's decision to raise interest rates in 2010, because of the way it affects Spain, Italy, and Portugal. Increase in interest rates by the ECB affect the entire eurozone and this means, he points out, that inflation in Germany would be extremely low -about 1% for the next five years- and the result being that inflation would be much lower in debtor countries like Spain. A decrease in interest rates with inflation at 3-4 % in Germany would be better for the debtor countries (Spain, Italy, Portugal, Ireland) as this would enable them to cut prices and costs relative to Germany and other creditor countries. The first step taken by the new ECB president, Mario Draghi, was a small increase in interest rates. Krugman asks if the private demand is affected negatively by the end of a debt financed boom in the debtor countries, and austerity programs reduce any growth in the public sector, then where are the new jobs supposed to come from? A policy that reduces the prices of the products of debtor countries relative to creditor countries like Germany- so that exports can generate necessary growth- is needed says Krugman. ...

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Spain provides 14 public holidays that are mostly Catholic holidays, and an additional 22 vacation days, which is similiar to the the EU average. Unlike the practice in the U.S. and Britain to have these holidays fall mostly on Fridays and Mondays, in Spain many of these holidays fall in the middle of the week. This disrupts productivity as Spaniards use bridge days or puentes to create long weekends during which many offices and factories are empty, disrupting productivity. Most companies cannot plan for meetings and work because counterparts may be using the bridge days during these holidays, and working with international clients is difficult and hard to explain. Spain's new prime minister is determined to increase Spain's competitiveness, and bring Spain to the level of competitiveness of countries that do well in this measure, including other European and Asian economies. He describes this in his book "En confianza. Mi vida y mi proyecto de cambio para Espana." ("In confidence. My life and project of change for Spain") In his inauguration address he said Spain should correct "the work calendar to make the rights of workers compatible with the competitiveness of our companies." Vacations are a sensitive issue in Spain because tourism generates 10% of GDP and employs 10% of the workers. Alberto Nadal, who addresses labor issues at the main business association in Spain, says a change of mentality is needed in Spain, and doing away with bridges shows Spain is grasping the idea that things should be done differently for the eurozone community of nations. This also shows some of the differences in the Iberian peninsula countries of Spain and Portugal, where the countries are embracing the change and there is less unrest even with high unemployment, as compared to Greece. In Greece the changes are being resisted by politically connected groups, where political parties enjoy little support and there is much unrest, making the project difficult. Mariana Rajoy, Sarkozy and Merkel are from centre right parties in Spain, France and Germany, and have had a close association for years before Rajoy was elected- during EU meetings of centre right parties, as is evident in Rajoy's book. They also share a similiar business and political orientation. ...

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How will countries like India generate jobs when technology enables manufacturing and other activity to do work with fewer and fewer people. Even Hon Hai in China is shifting work to robots. Technological progress is leaving more people unemployed and widening income gaps with the benefits going to a few people, says the Economist in this research based essay. It will require carefully managed governance to invest in infrastructure, raise skills of less skilled workers through education, and wage subsidies for those left behind to ensure our current system works in the future.

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Edward DeMarco is head of the Federal Housing Finance Agency (FHFA), which is the independent regulatory agency overseeing U.S. housing lenders Fannie Mae and Freddie Mac. The FHFA was formed in 2008 after merging two existing agencies. Later that year Fannie and Freddie were taken over by the government. FHFA head, DeMarco, is reluctant to help homeowners with underwater mortgages on their homes with reduced payments because this would mean losses to the taxpayer. He sees his mandate as protecting the taxpayer. Sheila Bair, former head of the FDIC, says she understands DeMarco's mandate is not to provide fiscal stimulus, and the Obama administration has been all over the place when it comes to providing homeowner assistance. The result is that there is little help by the U.S. government to homeowners with underwater mortgages since 2008, and this creates larger headwinds for the Federal Reserve Bank to provide momentum to the U.S. economy. Many experts see this as a serious problem and a well respected economist, Martin Feldstein, has made repeated proposals for structuring the help to homeowners since 2008. ...

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Applebaum describes how Obama as president took action on the stimulus after the 2008 financial crisis, but did not take the necessary action to stem foreclosures and aid a recovery in housing. This now appears to be one of the critical failures of his presidency.

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Mexican president Nieto's poll numbers are at all time low of 24%, according to Reforma newspaper. He took office in late 2012 and has been hurt by human rights scandal of the murder of 43 students in the state of Guerrero, corruption issues, and failure to improve the economy. The invitation to Trump to visit Mexico left even people close to the president surprised, and was criticized widely inside Mexico. It is not clear what Trump or Nieto gained from the trip. As Trump continued his talk about building a wall on the Mexican border and having Mexico pay for the estimated $23 billion it would cost. He did this in a speech to supporters in Pheonix on the same day he met Nieto, showing the use of teleprompters and prepared script was not his way of campaigning. Just as the message to black people that Democrats take them for granted cannot resonate without the basic message delivered with compassion and understanding- such as done by the presidents Bush and Reagan- so also the message to Hispanic people is suffering from the same lack of empathy. Recent polls show only 3% of blacks support Trump. McCain and Romney gained only 4-6% in the U.S. presidential elections of 2008 and 2012. The message of the wall is also baffling as an election strategy. A Gallup poll in July 2016 shows only 15% of Americans opposing a pathway to citizenship for illegal immigrants, and only 24% of Republicans. There is another problem in the strategy. The rhetoric about walls and mass deportations, and the Trump temperament combined with handling of nuclear weapons is not winning college educated women in the suburbs with polls showing Trump lagging behind Clinton by about 20 points or 4 million voters with this group. It is hard to undo the damage done by this kind of rhetoric used in the primary elections as it gains distrust of voters. It would require a bad economy with illegal immigrants taking local jobs, and handling of immigration seen as weak, for such a message to gain some national traction. Both are absent for the most part with a steadily improving economy since 2012, lower unemployment, a tough enforcement policy on deportatons under Obama that exceeded that under Geoge W. Bush, and the talk of a wall comes with illegal immigration having declined steeply since the 2008 financial crisis. The real culprit appears to be elsewhere, the triple hit taken from hollowing out of the manufacturing economy that hurt the Conservatives in Canada, the insecurity created for older whites from the job losses and hits to net worth from the 2008-2009 financial crisis, and the increasing loss of access to health care and educational opportunities with high  costs. About 62 million households or the bottom half of the distribution in the U.S. have a net worth of about $10,000, a quarter of this group having zero net worth, according to the Federal Reserve's Janet Yellen at an Inequality Conference in Oct 2014. Problems no wall is going to solve, problems that built up over 2 decades, problems that will take a generation to fix.  It shows the tech miracle of the last 2 decades as a mirage for quality of life of the middle and working class. Tech as a tool to a goal, not a goal in itself, is the better way forward. ...

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The Labor Department reports that there is no U.S. productivity growth in the 4th quarter of 2014 over the prior year. U.S. productivity growth is about 1.3% for the period since 2009, showing a weak expansion. Job gains of 295,000 in February 2015 show an improving jobs picture, yet wage gains are tepid. This is partly due to slack in the labor market not reflected in the official unemployment rate of 5.5% for Feb. 2015, with a large number of part time workers who do not have full time work. The low productivity growth is another reason for low wage gains in this economic recovery. Economic growth is also weak with economists estimating GDP growth for the 1st quarter 2015 at 1.5% annualized. GDP growth is in the 2-2.5% growth range since 2009. Hourly wages are up less than 2% since 2009, with hourly wage growth in Feb. 2015 at 2% over the prior year. Weak business investment is part of the reason for the sluggish economic growth. Macroeconomic Advisors estimates the capital investment for equipment software and buildings is seeing growth of only 0.3% in the last decade, much lower than in the last forty years. With most of the gains from the internet technology advances already made there is less prospect of a sudden increase in productivity....

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Prime minister Matteo Renzi focussed on some critical aspects of how other Europeans see the negotiations in the Greece bailout in June 2015. Considering that the EU had relaxed conditions for the surplus, a critical condition for reducing austerity programs in Greece and focussing on reforms, and considering the high unemployment not insisted on further cuts to the public sector employees, the conditions put forward focussing on reforms such as collection of taxes are seen as essental by other eurozone countries, including Spain, Portugal, Ireland and Italy. Renzi told II Sole 24 Ore- "The point is that Greece may get different conditions, but it has to abide by the rules. It's not the case that we have taken early retiremnt pensions away from the people of Italy just to allow the Greeks to have them! We have brought in labor reform, but it is not the case that, with our money, a number of Greek shipowners can continue not to pay taxes.. I could go on." If he went on he would cite the tax collection laws and methods in Italy which were changed under prime minister Monti to tackle tax evasion in Italy, with no effort to collect the $11 billion in estimated taxes that are not collected in Greece. Italy banned cash payment above 1000 euros and started a cross referencing initiative to tackle tax evasion under premier Monti. Greece took up tax evasion legislation in 2010 in parliament but opposition from many groups led to no action. In 2012 Labor minister Elsa Fornero broke down in tears as she described raising the retirement age for women to 66 in the private sector from 60, saying this was to prevent "collective impoverishment." Italy lacks childcare and older women help with childcare for grandchildren. Renzi was probably thinking of these changes in Italy. He went on to say- " If there is a mass get-out clause over the rules, what will happen in Spain in October? And in France in a year and half? It is one thing to ask for flexibility amid abidance by the rules. It is another thing to think that one is the craftiest of them all, in other words to be the that does not abide by the rules. We want them to save Greece. But the people of Greece also have to want that." On tax evasion and other issues for long term financial health Greece is seen as not following basic financial rules for sustaining the euro....

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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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Oil prices in the U.S. drop to $55 a barrel on the New York Mercantile Exchange, and $65 a barrel for Brent crude price. Earlier expectation of the impact of reimposed sanctions on Iranian oil shrinking global oil supplies have been reversed with increased production from Saudi Arabia, Russia and the U.S.

Another new development that caused this reversal in sentiment is that the Trump administration granted waivers to some buyers of Iranian crude oil. The U.S. trade dispute with China has also added to this with lower growth forecasts. Unlike in previous years OPEC or Saudi Arabia cannot by itself shrink global supplies with production cuts. The U.S. and Russian output also plays a significant part.