Korea may have an opportunity to exercise historic leadership, when it chairs the G-20 meeting in Seoul, November 11-12. This will be the first time that a non-G-7 country has hosted the G-20 since the larger, more inclusive, group supplanted the smaller rich-country group in April of last year as the premier steering committee for the world economy. With large emerging market and developing countries playing such expanded economic roles, the G-7 had lost legitimacy. It was high time to make the membership more representative. But there is also a danger that the G-20 will now prove too unwieldy, in which case decision-making might then revert to the smaller group.
Category Archives: budget
The US & Europe Could Look South to Re-learn Countercyclical Fiscal Policy
During much of the last decade, U.S. fiscal policy has been procyclical, that is, destabilizing. We wasted the opportunity of the 2003-07 expansion by running large budget deficits. As a result, in 2010, Washington now feels constrained by inherited debts to withdraw fiscal stimulus at a time when unemployment is still high. Fiscal policy in the UK and other European countries has been even more destabilizing over the last decade. Governments decide to expand when the economy is strong and then contract when it is weak, thereby exacerbating the business cycle.
Republican Congressmen Pledge to Repeal the Laws of Arithmetic
The National Journal asks what would happen if the Pledge to America, proposed last week by congressional Republicans, were fully implemented.
As I understand it, the authors of the “Pledge to America” want not just to renew permanently all Bush-era tax cuts, but also to balance the budget while exempting social security, Medicare, and military spending. To ask what would be the effects if the Republicans put this pledge into law is to ask what would be the effects if they repeal the laws of arithmetic. It can’t be done. All the money is in the parts of the budget they are putting off limits. (That is what we all assume they mean by “common sense exceptions for seniors, veterans and troops” when cutting spending. Admittedly, it is hard to tell what they are really proposing, due to the usual lack of specifics in the 21-page document.)
