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A 15% minimum corporate tax on large, profitable corporations is part of the global minimum corporate tax proposed by US central bank chairwoman Janet Yellen, and the tax proposed by US president Biden. The tax would not apply to companies making $100 million as earlier proposed. The threshold has been raised to $2 billion and affects the companies that have avoided taxes the most. This report says there are 45 such companies in the US.  A US Treasury report on the tax says "the 15% minimum tax is a targeted approach to ensure that the most aggressive tax avoiders are forced to pay meaningful tax liabilities." The Biden agenda on corporate taxes would raise more than $2 trillion over 15 years to pay for essential infrastructure renovation to replace decaying infrastructure in the US. This means roads, bridges, airports, ports, transit systems, electricity grid, broadband systems, school systems, health systems, would all be targets for investment for the first time in 50 years in a concerted drive. The tax drive would partly reverse the Republican Congress's 2017 reduction in corporate tax rate to 21% from 35%, boosting it to 28%. European Union countries such as Britain are also following similar policies after decades in which a race to the bottom led to the lack of funds to finance essential infrastructure rebuilding. As a result China which was a nation of bicycles back in the 1980's now has some of the newest infrastructure, while the US and the EU countries have what might be considered crumbling infrastructure badly in need for renovation. As the shift in mood to a competitive world not only in technologies but in infrastructure and ease of living happens there is more and more awareness of what has been lost in the last 40 years.  ...

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Democrats Reid and Schumer say Eric Cantor is a stumbling block to an agreement on the debt ceiling and deficit reduction. Plan B suggested by Senate Minority leader Mitch McConnell, and supported by Senate Majority leader Reid, includes setting up a debt reduction panel of 12 members from both parties to draft a long term framework for reducing the national debt. The new debt committee would have a deadline to make recommendations, probably by the end of 2011. The recommendations would then be fast tracked through the House and the Senate without amendments. The McConnell plan is to separate the task of raising the debt ceiling from talks on deficit reduction.

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Senator Patrick Toomey (Pa.) and Rep. Jeb Hensarling (Tex.) are lobbying Republican party members in Congress behind the scenes to accept $300 billion in taxes as the only way to get an agreement on debt reduction in the Supercommittee. This would be part of a plan that addresses entitlements, and changes the tax code to lower rates and reduce tax expenditures by closing deductions and loopholes. This is leading to an intense debate in the Republican party about the wisdom of a purely ideological position on taxes that does not take into account current realities, and risks letting markets take control of the nation's future.

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Senator Mitch McConnell, the U.S. Senate Majority leader, and Speaker Ryan, achieved a win in the U.S. Congress which is expected to set a new trend of bipartisan cooperation, as the House passed the bill in Dec. 2015 for $1.1 trillion spending with a vote of 316 to 113, and the Senate with vote of 65 to 33. The persuasion on the Republican side was based on giving Speaker Ryan a strong hand in negotiations with the White House in 2016. Ryan secured a lifting of the oil export ban for the Republican side in return for flexibility in spending. Ryan deftly sent the issue of Puerto Rico having access to bankruptcy laws to the committe chairmen to come up with a plan in March to get the needed votes. Democrats had pushed for aid to Puerto Rico. Also included in the bill that passed is giving more voice to emerging market countries China and India in the running of the IMF.

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The NYT editorial says the negative feedback loop of foreclosures begetting falling house prices, which beget more foreclosures, and further weaken banks, is well under way. One way to have broken this, was to enable good types of loan modifications, which reduce the principal for homeowners and reduce payments significantly. Sheila Bair at FDIC says 32% of prior payments is about the right amount. The bad types of loan modifications that lead to no reduction in principal, and put homeowners back in redefault because of large payments that homeowners "under water" or a lost job cannot afford, have so far been the dominant kind of loan modification. At present 14 million homeowners are "under water," in that their homes are worth less than what is owed on the mortgage. One of the crucial measures which would have enabled this, has not been pushed by the Obama administration through Congress. This was to pass an amendment that allowed bankruptcy judges to modify troubled mortgages. Banks which have taken billions of dollars in loans from the federal government were allowed to lobby aggressively to kill this amendment, and the Obama administration did little to push this amendment in Congress. 12 Senate Democrats joined 39 Senate Republicans to block a vote on the amendment. Says the NYT editorial "when the time came to stand up to the banking lobbies and cajole yes votes from reluctant senators-the White House did'nt. When the measure failed there wasn't even a statement of regret." This could turn out to be a major mistake, because as the NYT points out voluntary loan modifications have shown poor results. The administration's plan to provide incentives for loan modification is untried and tested, and may not produce significant results. With 14 million homeowners under water, and spiralling foreclosures, the situation may get out of control and seriously damage the economy. After the moratorium in home foreclosures ended there is expected to be a big surge in foreclosures, with estimates of 290,000 to 341,000 foreclosures in March, 2009. If this is allowed to continue it will undo all the good work in other areas, the stimulus spending, rebuilding the auto industry and other steps. It will also be more difficult to reverse as valuable time passes and the cost of the crisis escalates. A consensus among many experts was that stronger action in connection with the banks was required, and Martin Feldstein has warned about the danger posed by foreclosures since early 2008, see links....

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The problems with a second phase of quantitative easing, go back to asking why the first phase hasn't worked to prevent the economy from sliding back. So far the Fed has engaged in buying $1.7 trillion in bonds in that first phase. This shows the limitations of this approach. A lot of money was injected into banks. And the banks have $1 trillion on their books that is not being used for lending. The reason being its hard to find borrowers, as borrowers are cautious and concerned about the economic future. The Quantitative Easing in this second phase is supported by the reasoning that deflation risks remain. But this raises another question, what level of quantitiative easing would work, and would such enormous levels itself cause bigger problems.

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U.S. President Lyndon Baines Johnson was committed to spending on a war overseas and domestic priorties for the Great Society program at home. Johnson struggled with Congress to meet the costs of both. He even suggested a 10% tax surcharge to pay for the war and domestic programs. Dallek says 79% of American opposed a tax increase in 1968. Republican Richard Nixon was elected U.S. president that year.

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The author Li Congjun, is head of the Xinhua News agency, official press agency of the People's Republic of China. He calls for rebalancing the global economy with China depending more on domestic consumption, efforts to restrain the excesses of property and asset price bubbles, and renewed focus on technology and investment.

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U.S. Treasury Secretary Geithner says Republicans are working to thwart the Dodd-Frank legislation- by slowing down and diluting the impact of rules required to be written under Dodd-Frank, crimping the resources of regulatory agencies, and blocking the nominations of heads of regulatory agencies such as the Consumer Financial Protection Bureau.

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A dispute in Brazil between the government committing part of the oil royalties from new oil discoveries in coastal oil producing states such as Rio de Janeiro to improving education in Brazil. Coastal producing states fear the loss of an estimated 3 billion dollars under this plan. Some of the money goes to states in the interior of Brazil such a Goias lacking educational facilities and funding for teachers.

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Former U.S. president Bill Clinton's address at the 2012 Democratic National Convention in Charlotte, N. Carolina. He endorsed President Obama for reelection in an impassioned speech.

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The National Assessment of Educational Progess (NAEP) test scores in the U.S. for K-12 show a lack of progress since 2013. Scores for math and reading dropped for 8th grade students, and scores for reading were stagnant while dropping in math for 4th grade students. The test scores reflect progress in rural, suburban, urban environments, for communities that are affluent, less affluent and poor, different ethnic backgrounds. The test started in 1990 is the only one measuring national progress. The new results of NAEP are on a scale of 0 to 500, and show that in 2015 64 percent of 4th graders and 66 percent of eighth graders were not reading proficient, 60 percent of 4th graders and 67 percent of 8th graders were not math proficient. Massachusetts, Vermont, New Hampshire, do much better in the tests than Mississippi and New Mexico. Experts say a state to state comparison should separate the non native English speaking students from native English speaking, especially in states like Texas. With about two thirds of students failing the math and reading proficiency levels, growing proportions of minority Hispanic students in many states, larger proportion of less affluent students, the tests show the challenges facing America's K-12 education even after the changes introduced by Education Secretary Duncan since 2008....

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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.

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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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Corruption in the election and democratic process in India.

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After over two decades of focus on GDP growth targets, China under prime minister Li Keqiang is giving more emphasis to job growth and problems of air pollution, education, and quality of life indicators. Premier Keqiang tells a news conference in Beijing in March 2014 that China needs to create 10 million new jobs each year. More bond defaults can be expected as the financial system is being changed with new rules. Li says China will no longer be "preoccupied" with GDP growth targets. Li made the new priorities clear-"The GDP growth we want is one that brings real benefits to our people, helps raise the quality and efficiency of economic development and contributes to energy conservation and environmental protection."

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Roosevelt say experts was a great crisis manager but not great when it comes to policies to create jobs. His achievements were stabilizing the banking system with deposit insurance, government investment in banks, and restrictions on banking practices, creation of the SEC, and fireside chats that steadied the national mood. Unemployment when he took office in 1933 was 25% from 3% in 1929, and industrial production had dropped 40% since 1929. So FDR took office when a lot of the damage had already been done, compared to that Obama takes office earlier in this downturn. And Roosevelt did not fully grasp John Maynard Keynes's advice when he visited the White House in 1934. Keynes complained to Labor Secretary Ms. Perkins that he had thought the President was more literate economically speaking, while the President felt Keynes had a rigmarole of figures he did not understand. Roosevelt said of Keynes: "He must be a mathematician rather than a political economist." It took some time for government spending to take hold. Throughout the 1930's government spending remained around 20% as a share of the economy. Today its 35%. And the average unemployment stayed at stubborn 17% on average for the decade of the 1930's. It was not till the 1940's that things changed. Total government spending as a share of the economy reached 52% in 1942 with the onset of the war, and peaked at 70% in 1944 when the unemployment rate dropped to 1%. One lesson experts say is that its easier to stem unemployment and job losses by action earlier in the downward spiral through vigorous action by government. In retrospect because industrial production fell by 40% during the 1930's experts say Roosevelt was actually timid in his response. U.S. Fed chairman Bernanke is a student of this period and draws a similiar lesson from that period for vigorous action early in the crisis....

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David Brooks of the NYT describes the approach taken by British prime minister David Cameron and his Conservative Party government to help the working class poor in Britain, and tackle the social roots of poverty. He says an American adaptation similar to this is badly needed in the Republican Party, with the candidates in the election providing solutions from an old rulebook. Only after Trump's popularity with appeals to less educated older Americans has the Republican leadership responded, with Speaker Ryan helping organize a forum on poverty under the Jack Kemp Foundation- emphasis was placed on education, work, opportunity and accountability for anti-poverty programs in the discussion moderated by Ryan and Senator Tim Scott. Less attention was paid to the other social aspects mentioned here by Brooks, and cited by Cameron when he described the inadequacy of traditional solutions from the right and left of the political spectrum. Cameron outlined the principles of his anti-poverty plans called "Life Chances Strategy," in a speech on Jan. 11, 2016, in north London, with the entrie transcript on the gov.uk website. Cameron acknowledged in the speech that social issues including single parent families, and other social problems such as long term unemployment, can make it harder for some people to use self-reliance and personal responsibility in a growing economy as a way to grasp opportunities. Cameron proposes a combination of economic, social and job growth strategies. His second term plans include 30 hours a week of free childcare for 3 and 4 year olds so both parents can work, parental maternity leave, expansion of Troubled Families Program, in addition to the introduction of National Living Wage, tax cuts, universal credit. In tackling social aspects of the problem Cameron cited the need for development in the early years of childhood, the huge importance of family, social connections and experiences, informal mentors, cultural experiences, broadenend horizons, that enable young people to acquire language skills, character and resilience. Second term projects include expanding reach of high performing schools to deprived areas, emphasis on core English, math, science, history, geography Ebacc skills, a 1 billion pound investment in the National Citizens Service by 2021, a plan to transform housing estates including rebuilding from scratch, additional 1 billion pounds to provide mental health treatment including treatment within 2 weeks in homes and communities. Throughout Cameron's "Life Chances strategy" is aimed at tackling not just the material dimensions of poverty, but also what he describes is broken in Britain- "the paucity of opportunity."...

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Private companies such as Reliance Power and Tata Power control only 27% of India's power generating capacity of 205 gigwatts. The government controls most of the capacity in this sector for generation and transmission of power and has failed to invest enough to keep up with growing needs. The government has failed to achieve even modest expansion goals for power generation. A target of 78.7 gigawatts of additions to the national grid were planned for the five year period ending March 31, 2012, but only 70% of that target has been met. China during the same five year period added 418 gigawatts. State utilities sell power at discounted rates resulting in large losses, making it difficult to invest in upgrades in transmission technology and facilities. Rate regulations make it unattractive for private investors. Another problem is the shortage of coal, with coal production concentrated in one state owned firm Coal India that has failed to invest in new technology and improvements. The result is the kind of massive outages from overload of the national power grid in July 2012, affecting most of northern and eastern India....