When our grandchildren study economics one day, will they systematically have to add a dummy variable* to their econometric equations for the period covering the Trump administration? Will the US economy over this period have something of a “special status” due to Trump’s and Congress’ decisions? This question is worth raising in light of moves to cut taxes and raise spending, with the ensuing effects on the appalling US public deficit.
The state of public finances is the trickiest of questions. The sustainable rise in the public deficit seems to show that the economy is undergoing a severe recession, yet this is far from true as Janet Yellen took the economy to full employment (see analysis from Jason Furman). So economic stimulus moves from the White House and Congress raise very real questions on the rationale behind this policy. Governments do not embark on economic stimulus programs when the country is running on full employment, otherwise major long term imbalances are created, which are bad news for all concerned. Continue reading
The world balance is changing under the influence of China as it seeks to establish a different path for globalization. America is trying to stage a response at Davos with the White House realizing that America needs its partners in order to be great again. Meanwhile, French growth is running into physical obstacles: the 2% trend is a peak, at least in the short term.
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We saw a surprising development in Davos last week when the US President backtracked on world trade and his global economy model, as the White House indicated that it no longer sees the economy as a zero-sum game, contrary to its stance so far. Continue reading
The US administration’s partial shutdown marks a first in the country’s history: this is the first time that we have witnessed this type of situation when the same party occupies both the White House and Congress. It was somewhat different during Barack Obama’s presidency in 2013, as Congress was not in Democrat hands, and looking further back, President Jimmy Carter came up against difficulties in financing his budget with his Democrat majority at the end of the 1970s, but there was no shutdown.
This failure for President Trump and Congress to get along has been the hallmark of the current Republican administration’s first year. The power dynamics between the two institutions ends up creating a puzzling sort of inefficiency. The disagreement of the moment is on the Deferred Action for Childhood Arrivals program, which involves young foreign-born individuals who arrived in the US as children. It turns out that Trump is in favor of a law to welcome them in the end, but the Republicans are unhappy with a bill partly drafted with Democrat agreement. This is a power struggle and not a cooperative political relationship between the President and Congress.
We had already witnessed this dysfunctional situation during attempts to repeal Obamacare, when Congress rejected Trump’s proposals. Continue reading
European citizens are now optimistic on the future of Europe and they feel European. A survey published in a report this month by the Pew Research Center testifies to this, with favorable views of Europe increasing everywhere in 2017, even in the UK. The only country that saw a deterioration was Greece, but this is understandable given the austerity measures imposed on its citizens by the hefty economic adjustment process from Brussels. We can also read the French presidential election result as a referendum primarily fought and won on Europe.
The old continent is regaining greater political strength at a time when growth is also picking up speed. The planets are finally aligning and the outcome is positive. The region’s political environment is more stable and the risk of populism has dwindled.
In a complex, tough and unpredictable world, Europe is now a safe haven of stability, and this haven looks more assertive, particularly with Germany’s impetus.
We all heard Angela Merkel indicate that Europe should take its fate into its own hands as yesterday’s allies look less reliable and yesterday’s enemies are still there, and talking about the need to reform Europe, even if that means setting up a finance ministry and having a joint budget. Continue reading
Is the Paris accord on Climate so unfair for the United States? Donald Trump said it was the main reason to exit from it.
Using three different measures Professor Peter Singer shows that the Paris accord was not disadvantageous for the US.
To take just the first of them, Singer says that the US population is 5% of the world population but the gas emission by the US is 15% of the total. It means that current US emissions should be one-third of what they are. Obama commitment was just 27% below 2005 level in 20125. Is it unfair?
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Donald Trump thought that it was an easy task to replace Obamacare by Trumpcare. It was a mistake and Obamacare will remain the framework for millions of americans. He also said in his campaign that the US trade was a source of concern due to unfair trade agreements. He is currently understanding that it is more complex than expected and we can expect that probably nothing important will change.
There was a risk of trade war with Mexico or with China. It’s no longer the case. The press release of the Trump-Xi Jingping in Florida doesn’t show the revival of a trade war. It’s just a discussion with concessions made by China to the US. It’s not the beginning of a conflict and the very large Chinese surplus with the US will not disappear in a foreseeable future.
In one word, Trump’s campaign as candidate was based on the repeal of the Obamacare and on the possibility of trade war. Both strategies have already failed in less than 100 days. What will happened then? What could be the credibility of the White House? Who will care? The next 4 years may be very long…
The failure of Trump’s strategy is clearly explained by Paul Krugman in a NY Times op-ed published earlier this month.
“During the campaign, Donald Trump talked loudly and often about how he was going to renegotiate America’s “horrible trade deals,” bringing back millions of good jobs. So far, however, nothing has happened. Not only is Trumpist trade policy — Trumptrade? — nowhere to be seen in practice; there isn’t even any indication of what it will involve.”
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