When it comes to economic performance, US presidents have considerably more influence over long-term trends than over short-term fluctuations. And it is by this standard that Donald Trump’s administration should be judged.
President Donald Trump regularly thumps his chest and claims credit for each new uptick of the fast-growing US economy. But when it comes to economic performance, US presidents have considerably more influence over long-term trends than over short-term fluctuations... Still, it is not easy to speed up a $20 trillion economy, even by running a budget deficit of nearly $1 trillion, as Trump’s administration is doing... In a cantankerous political environment, it is not easy to think about the long term. But, thanks to the magic of compound interest, measures that marginally raise long-term growth matter a lot. For example,
- the transportation deregulation policies of President Jimmy Carter’s administration in the late 1970s set the stage for the Internet retail revolution.
- President Ronald Reagan’s massive tax cuts in the 1980s helped restore US growth in the ensuing decades (but also exacerbated inequality trends). And
- President Barack Obama’s efforts (and before him President George W. Bush’s) to contain the damage from the 2008 financial crisis underpin the strong economy for which Trump wants to take full credit.
.. The end-2017 corporate tax reform was one of those rare instances where the US Congress comprehensively streamlined and improved the US’s Byzantine tax system, though the corporate tax rate should have been set at 25%, not 21%... Obama would likely have been very happy to pass a similar bill. But, during his presidency, the Republican-controlled Congress insisted that any proposal had to be “revenue neutral” even in the short term, which is a tough political hurdle for any fundamental tax reform... a wide range of studies – from the work of the late economist David Landes to more recent research by MIT’s Daron Acemoglu and the University of Chicago’s James A. Robinson – find that.. institutions and political culture are the single most important determinants of long-term growth... political culture in the US may take years; if so, the economic costs could be considerable... Moreover, in accordance with the administration’s disdain for science, the proposed budgets for basic research, including for the National Institutes of Health and the National Science Foundation, were reduced sharply (fortunately, the US Congress rejected the cuts).And anti-trust enforcement, needed to counter excessive monopoly power in many parts of the economy, is essentially dormant.That will exacerbate inequality over the long term; Trump’s coal mines and trade tariffs are at best band-aids on a bullet wound... many of the regulations that Trump is targeting ought to be strengthened, not eliminated. It is hard to imagine that gutting the Environmental Protection Agency and withdrawing from the Paris climate agreement are helpful for long-run growth, given that the costs of cleaning up pollution later vastly exceed the costs of mitigating it today... As for financial regulation, the reams of new rules adopted after the 2008 financial crisis have been a dream come true for lawyers. Rather than try to micromanage banking, it would be far better to ensure that shareholders have more “skin in the game,” so that big banks are more inclined to avoid excessive risk. On the other hand, neutering existing legislation without putting anything adequate in its place sets the stage for another financial crisis... although the US economy is indeed growing rapidly, the full extent of Trump’s economic legacy might not be felt for a decade or more. In the meantime, should a downturn come, it will not be Trump’s fault – at least according to Trump, who is already gearing up to blame the US Federal Reserve for raising interest rates and ruining all his good work.
Will China Really Supplant US Economic Hegemony?
As artificial intelligence reshapes the global economy, economists who once argued that China’s massive population would propel it to superpower status should rethink that assumption. In fact, as the global economy reaches higher stages of development, China’s labor advantage today could become a handicap tomorrow.
.. Many economists, including many of the same experts who see China’s huge labor force as a decisive advantage, also worry that robots and artificial intelligence will eventually take away most jobs, leaving most humans to while away their time engaged in leisure activities.
Which is it? Over the next 100 years, who takes over, Chinese workers or the robots? If robots and AI are the dominant drivers of production in the coming century, perhaps having too large a population to care for – especially one that needs to be controlled through limits on Internet and information access – will turn out to be more of a hindrance for China. The rapid aging of China’s population exacerbates the challenge.
.. China’s gains still come largely from adoption of Western technology, and in some cases, appropriation of intellectual property.
.. In the economy of the twenty-first century, other factors, including rule of law, as well as access to energy, arable land, and clean water may also become increasingly important.
.. Yes, the US faces vast challenges as well. For example, it must devise a way to retain dynamic technological growth while preventing excessive concentration of wealth and power.
Inside India’s Unprecedented Assault on Cash
India is hardly alone in seeking to drive underground money into the banking system. But the scale, pace and finality of Mr. Modi’s action make it a stunning and painful test of what had to this point been a largely theoretical debate.
.. “The great task that the country wants to accomplish today is the realization of our dream of a cashless society,” the prime minister said in a recent radio address.
.. The lives of the poor, in particular—many of whom depend on irregular, off-the-books employment paid in cash—have been upended.
.. That was when Mr. Dastur noticed a problem: The new bills were slightly smaller than the old ones.
.. engineers would have to open up each of the nation’s ATMs and manually reconfigure the cash drawers before they could dispense the new notes—a process that NCR estimated could take two months.
.. The Modi administration insists there will eventually be big benefits, including better tax collection, improved surveillance of crime networks, and more accurate monitoring of commercial activity itself.
.. Defenders of cash see risks in those same capabilities—including a loss of privacy and a vast expansion of government power.
.. Former U.S. Treasury Secretary Lawrence Summers, writing in The Washington Post, argued, “It’s time to kill the $100 bill.”
.. Fewer than a third of Indians have a smartphone
.. Harvard economist Kenneth Rogoff, author of “The Curse of Cash.” “That’s a big ally of governments.”