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16031. Restoring Fiscal Equilibrium in the United States

Author:
William R. Cline
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Halfway through this presidential election year, there is great uncertainty about how, when, and even whether the United States will restore fiscal sustainability. As shown by the near-default because of the impasse over the debt ceiling in July 2011, the two parties have been in sharp opposition on this issue. The Republicans have insisted that adjustment be accomplished by spending cuts rather than tax increases. Two hundred and thirty eight Republican congressmen and 41 Republican senators have signed the Grover Norquist pledge to oppose any attempt to raise marginal tax rates or reduce deductions without implementing offsetting tax reductions. In contrast, Democratic lawmakers have tended to emphasize the maintenance of social and entitlement programs and expressed a willingness to restore higher tax rates if necessary.
Topic:
Economics, Monetary Policy, Financial Crisis, Governance, and Law
Political Geography:
United States

16032. Estimates of Fundamental Equilibrium Exchange Rates, May 2012

Author:
William R. Cline and John Williamson
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
This Policy Brief updates our estimates of fundamental equilibrium exchange rates (FEERs) to the latest available data. For exchange rates, we apply the average rates of April 2012, while for the International Monetary Fund's balance of payments forecasts, we use the April 2012 issue of the World Economic Outlook (henceforth WEO; see IMF 2012a). This study is the fifth in an annual series, begun in 2008, in which we have used the spring WEO as the basis for drawing out implications for exchange rate changes needed if the world is to approach a reasonably satisfactory medium-run position. In addition, in semiannual updates (most recently in November 2011), we have tracked interim changes in exchange rates but not reestimated the underlying FEERs for the year in question.
Topic:
International Relations, Economics, Foreign Exchange, International Trade and Finance, and Financial Crisis

16033. Right Idea, Wrong Direction: Obama's Corporate Tax Reform Proposals

Author:
Gary Clyde Hufbauer and Martin Vieiro
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The need for US corporate tax reform is blindingly obvious. Conservatives contend that the top corporate tax rate— whether measured in statutory or effective terms—is the second highest in the Organization for Economic Cooperation and Development (OECD). Liberals argue that the US corporate tax system is riddled with complex “loopholes,” enabling many firms—whether incorporated or not—to pay less than their fair share.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Governance
Political Geography:
United States

16034. Japan Post: Anti-Reform Law Clouds Japan's Entry to the Trans-Pacific Partnership

Author:
Gary Clyde Hufbauer and Julia Muir
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Our last policy brief on this long-running saga recounted political machinations, late in 2011, to reverse the Koizumi era reforms of Japan Post, a giant among state-owned enterprises (SOEs). As a brief background: Japan Post is a conglomerate of five companies: the parent, Japan Post Holdings; two subsidiaries concerned with operating post offices and delivering mail, namely Japan Post Network and Japan Post Services; and two giant financial arms, Japan Post Bank and Japan Post Insurance.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and Law
Political Geography:
Japan and Israel

16035. Will the World Trade Organization Enjoy a Bright Future?

Author:
Gary Clyde Hufbauer and Jeffrey J. Schott
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Our answer is a resounding “yes.” This answer does not rest simply on the World Trade Organization's proven competence as a judicial body nor its acknowledged expertise in gathering statistics and analyzing trends. Crowning these strengths, we see the dawn of a new era of trade and investment negotiations within the halls of the WTO.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization

16036. Framework for the International Services Agreement

Author:
Gary Clyde Hufbauer and J. Bradford Jensen
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Services trade continues to be the most dynamic part of world trade, and service sectors have long been the largest destination of foreign direct investment (FDI) flows. Higher GDP growth goes hand-in-hand with service sector growth. Yet, despite these positive attributes, little progress has been achieved in multilateral talks to liberalize services trade and investment. There is something very wrong about this picture—the disjuncture between stalled service negotiations in Geneva, the excessive focus on other components of the Doha Round to the neglect of services, and the rapid expansion of services trade and investment across borders. The time has come for an International Services Agreement (ISA) in which self-selected World Trade Organization (WTO) members voluntarily agree to new rules and market access commitments. The ISA would be distinct from a multilateral undertaking, like the Doha Round, that must gain the consent of all WTO members. Instead, it would be akin to the Agreement on Government Procurement, in which the market access benefits are confined to the agreement's members, but the agreement itself is open to all WTO members that are willing to accept its disciplines and commitments.
Topic:
Economics, Emerging Markets, International Trade and Finance, Markets, and World Trade Organization

16037. US Tire Tariffs: Saving Few Jobs at High Cost

Author:
Gary Clyde Hufbauer and Sean Lowry
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In his 2012 State of the Union address, President Obama claimed that "over a thousand Americans are working today because we stopped a surge in Chinese tires." The tire tariff case, decided by the president in September 2009, exemplifies his efforts to get China to "play by the rules" and serves as a plank in his larger platform of insourcing jobs to America.
Topic:
Economics, Industrial Policy, International Trade and Finance, and Governance
Political Geography:
United States, China, and America

16038. Does Monetary Cooperation or Confrontation Lead to Successful Fiscal Consolidation?

Author:
Adam S. Posen, Tomas Hellebrandt, and Marilyne Tolle
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Active accommodation of fiscal consolidations by monetary policy is controversial, as can be seen in current euro area discussions. While many observers acknowledge that there is usually a place for monetary accommodation in response to fiscal consolidation, a sequencing argument is often heard today that fiscal commitment must precede any loosening. Some analysts go further to suggest that toughness by central banks taking a hard line on adjustment is critical to inducing sustained fiscal stabilization. This policy brief looks at the recent historical record of central bank behavior vis-à-vis fiscal authorities, at least until the current crisis period, and whether accommodative approaches ahead of consolidations have proven dangerous or helpful. The authors also try to assess the market credibility of fiscal consolidations as a function of the central banks' monetary stance prior to fiscal consolidation. They find clear evidence of positive associations between the degree of monetary ease in advance of fiscal consolidation programs and both those programs' success and their market credibility.
Topic:
Economics, Markets, Monetary Policy, Financial Crisis, and Governance

16039. Projecting China's Current Account Surplus

Author:
William R. Cline
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For several years China has run persistent current account surpluses that have been widely seen as the most serious single source of global imbalances on the surplus side, and mirrored by persistent systemically large US current account deficits on the other side. In recent years, however, both imbalances have shown moderation (figure 1). China's surpluses have posed questions of international policy rules, because they have reflected in part an unwillingness to allow the exchange rate to appreciate sufficiently to act as an effective equilibrating mechanism. Exchange rate intervention resulted in a massive buildup of international reserves, which rose from $615 billion at the end of 2004 to $3.2 trillion at the end of 2011 (IMF 2012a).
Topic:
Economics, Emerging Markets, Foreign Exchange, and International Trade and Finance
Political Geography:
United States, China, and Israel

16040. Overlooked Opportunity: Tradable Business Services, Developing Asia, and Growth

Author:
J. Bradford Jensen
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper argues that developing Asia is overlooking an opportunity for increased growth and development through trade in business services. Developing Asia would benefit from liberalizing services trade as it has benefited from liberalizing goods trade. This argument rests on these key findings: business services are important for growth, developing Asia is relatively under-endowed with business services, many business services are tradable, and developing Asia has relatively high barriers to services trade.
Topic:
Economics, Emerging Markets, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Israel and Asia