- 'King Stands by Inflation Targeting'
- America’s Fiscal Policy is Not in Crisis
- Higher Marginal Taxes Reduce Economic and Political Power
- Links for 01-23-2013
- NGDP 'Targetry' Skepticism
Posted: 23 Jan 2013 12:33 AM PST
I don't get this argument from Bank of England governor Mervyn King:
The governor of the Bank of England... Sir Mervyn King ... dismissed suggestions made by his designated successor, Mark Carney, now governor of the Bank of Canada, for the Bank to ease monetary policy further by abandoning its inflation target if meaningful growth continues to elude the UK. Mr Carney succeeds him at the start of July. ...
With the UK government pursuing fiscal consolidation, monetary policy has been the mainstay of policy makers' strategy to boost economic output... But the governor, speaking in Belfast, warned against over-reliance on monetary easing. "In many countries, including the UK, fiscal policy is constrained by the size of government indebtedness, and monetary policy has come to be seen as the only game in town," Sir Mervyn said. "Relying on monetary policy alone, however, is not a panacea."That says nothing at all about whether monetary policy should be easier, tighter, or is currently just right. Actually, he does offer this:
The governor suggested the government should introduce supply-side reforms to support the UK's shift towards higher exports and lower imports.
"It cannot be for a central bank to design a programme of such supply initiatives, but in economic terms there has never been a better time for supply-side reform," he said.He is suggesting that the UK's problems are entirely on the supply-side, and that further demand side measures cannot help (e.g. through further monetary easing). Bluntly, I think that's wrong. I have my doubts about nominal GDP targeting as the solution to our economic problems, but that doesn't imply that the current policy approach is optimal, or that deviating from a strict inflation target in the short-run (or the path to the target) cannot help.
Posted: 23 Jan 2013 12:24 AM PST
Healthcare is America's real problem, by Peter Orszag, Commentary, FT: Healthcare costs are the core long-term fiscal challenge facing the US... This is why the recent deceleration of these costs is so encouraging...
The good news is that recent developments in health costs are better than many appreciate. Cost growth has slowed dramatically...
Last year, the Congressional Budget Office estimated that the gap between revenue and expenditure in the next 75 years would amount to 8.7 per cent of GDP. Since then, enacted revenue increases and an improved underlying budget outlook have reduced the gap to perhaps 7.5 per cent.
Achieving the lower health-cost growth would knock another 2.5 per cent of GDP off, bringing the long-term fiscal hole down to 5 per cent of GDP – a greater impact than any policy change currently being debated in Washington. ...Martin Wolf:
America's fiscal policy is not in crisis: ...The federal government is not on the verge of bankruptcy. If anything, the tightening has been too much and too fast. The fiscal position is also not the most urgent economic challenge. It is far more important to promote recovery. The challenges in the longer term are to raise revenue while curbing the cost of health. Meanwhile, people, just calm down.By the way, where were the deficit hawks during the Bush years? Here's what Martin Wolf means by "If anything, the tightening has been too much and too fast":
Posted: 23 Jan 2013 12:15 AM PST
... Higher marginal taxes reduce the ability of high income people to accumulate power, which may mean they work/play less. I don't know that this is entirely a bad thing.(The post is: Do higher marginal tax rates lead superstar athletes to play less often? See also Barry Ritholtz who asks Who the Hell Are Phil Mickelson's Financial Advisers?)
Posted: 23 Jan 2013 12:06 AM PST
Posted: 22 Jan 2013 06:30 AM PST
I guess that should be scepticism:
Monetary targetry: Might Carney make a difference?, by Charles A.E. Goodhart, Melanie Baker, Jonathan Ashworth, Vox EU: The Bank of England's Governor-elect has argued for a switch to a nominal GDP target. This column points out problems with nominal GDP targets, especially in levels. Among other issues, nominal GDP targeting means that uncertainty surrounding future real growth rates compounds uncertainty on future inflation rates. Thus the switch is likely to raise uncertainty about future inflation and weaken the anchoring of inflation expectations. ...