Party Debt – Glw Drk http://glwdrk.com/ Fri, 18 Nov 2022 10:44:40 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://glwdrk.com/wp-content/uploads/2021/07/icon-1-150x150.png Party Debt – Glw Drk http://glwdrk.com/ 32 32 Voters disappointed as parties dodge debt issue https://glwdrk.com/voters-disappointed-as-parties-dodge-debt-issue/ Fri, 18 Nov 2022 10:02:30 +0000 https://glwdrk.com/voters-disappointed-as-parties-dodge-debt-issue/ Tax alarm bells are ringing in the state of Victoria, but the question is how worried should we be? Victoria has the highest debt (in proportional terms) of any state. According to the Treasury, net debt is expected to reach 20.4% of gross state product by the end of this fiscal year. Before the pandemic, […]]]>

Tax alarm bells are ringing in the state of Victoria, but the question is how worried should we be? Victoria has the highest debt (in proportional terms) of any state. According to the Treasury, net debt is expected to reach 20.4% of gross state product by the end of this fiscal year. Before the pandemic, it was around 5%.

In dollars, the pre-election budget update revealed that state spending would exceed revenue by $10.2 billion this fiscal year. In a sign of the government’s difficulty in balancing its books, it projected a deficit of $7.9 billion in May, then changed it to $9.7 billion in the mid-year budget, released less than two weeks before the latest estimate of $10.2 billion. It’s a readjustment of 500 million dollars in two weeks.

Hello big spenders: Victorian Premier Daniel Andrews and Opposition Leader Matthew Guy.Credit:Scott McNaughton, Chris Hopkins

This week, credit rating agency Standard & Poor’s revealed that after taking into account the government’s infrastructure program, Victoria’s bottom line is the worst the agency has encountered in an Australian jurisdiction, and it deteriorates.

This all sounds pretty dire, but in the world of economics, it may depend on your perspective. No one is saying the state government can’t pay its bills, but the pandemic has forced it, mostly for good reason, to dramatically increase its borrowing to financially support people and the business community during the extended shutdowns. .

So how bad is it really? Economist Chris Richardson puts it this way: “It’s not broken, but it needs some degree of repair.” He also had some advice as the state headed to the polls: “Whatever you do, don’t have a campaign that pretends it’s not doing it.” [need fixing].”

That is precisely what our political leaders, from both parties, are doing.

This contradicts one of the concerns of readers of age, which, through our Victoria’s Agenda program, called for adult discussion about getting the deficit under control and starting debt reduction. “Are we in an endless cycle of politicians jostling the road on debt? asks Mr Bon, a 25 to 34 year old from St Kilda. Another reader says, “Taxes have to go up to pay for the increase in government services.

With Labor well ahead in the polls, you would think it is in the best position to control its spending or propose sensible tax reform. And yet the Andrews government has made hundreds of campaign promises at a total cost of more than $10 billion at a time when net debt is expected to reach $165.4 billion by mid-2026, or 24, 8% of the state economy. The Coalition has made new announcements worth at least twice as much as Labor’s, though they’re partially offset by the $8 billion it promised to save from scrapping the first stop on the commuter rail loop. The Greens have also pledged to spend with no sign of restraint.

What is also not openly discussed are the ongoing costs that will arise from the promises made. This is especially true in healthcare, where both sides are vying for hospital upgrades and new facilities. Health economist Stephen Duckett estimates that every dollar spent to build a hospital requires an additional 50¢ a year to run it. RMIT Emeritus Professor of Public Policy David Hayward believes this means Labor will have to find an extra $3 billion a year and the Coalition an extra $4 billion to run the new hospitals they promise.

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Nouriel Roubini on stagflation, over-indebtedness, financial innovation, etc. by Nouriel Roubini https://glwdrk.com/nouriel-roubini-on-stagflation-over-indebtedness-financial-innovation-etc-by-nouriel-roubini/ Tue, 15 Nov 2022 09:47:00 +0000 https://glwdrk.com/nouriel-roubini-on-stagflation-over-indebtedness-financial-innovation-etc-by-nouriel-roubini/ Project union: In your last PS comment, you reaffirmed you expect monetary authorities’ efforts to tame inflation “to cause both an economic and financial crash” and that “regardless of their harsh rhetoric,” central banks “will feel immense pressure to reverse their tightening once this crash materializes. What would be the impact of such a reversal? […]]]>

Project union: In your last PS comment, you reaffirmed you expect monetary authorities’ efforts to tame inflation “to cause both an economic and financial crash” and that “regardless of their harsh rhetoric,” central banks “will feel immense pressure to reverse their tightening once this crash materializes. What would be the impact of such a reversal? Do monetary policymakers in the United States and Europe have good – or less bad – options?

Nouriel Roubini: Central banks are in both a stagflation trap and a debt trap. In the midst of negative aggregate supply shocks that reduce growth and increase inflation, they are damned if they do and damned if they don’t. If they raise interest rates enough to bring inflation down to 2%, they will cause a severe hard landing in the economy. And if they don’t – trying instead to protect growth and jobs – they will find themselves further and further behind the curve, leading to an unanchoring of inflation expectations and a wage-price spiral. .

Very high debt ratios (both private and public) further complicate the dilemma. A rise in interest rates sufficient to crush inflation causes not only an economic crash, but also a financial crash, with heavily indebted private and public debtors facing severe distress. The resulting financial turmoil intensifies the recession, creating a vicious cycle of deepening recession and escalating financial hardship and over-indebtedness.

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Voters approve of Medicaid expansion and a minimum wage hike in these states https://glwdrk.com/voters-approve-of-medicaid-expansion-and-a-minimum-wage-hike-in-these-states/ Sat, 12 Nov 2022 04:34:00 +0000 https://glwdrk.com/voters-approve-of-medicaid-expansion-and-a-minimum-wage-hike-in-these-states/ CNN — Voters in several states approved progressive measures that could not pass through a Democratic-led Congress or Republican-dominated state houses. More low-income South Dakota residents will have access to Medicaid, and Arizona residents with medical debt will have more protections. Minimum Wage Workers in Nebraska will get a raise. Here is a sample of […]]]>



CNN

Voters in several states approved progressive measures that could not pass through a Democratic-led Congress or Republican-dominated state houses.

More low-income South Dakota residents will have access to Medicaid, and Arizona residents with medical debt will have more protections. Minimum Wage Workers in Nebraska will get a raise.

Here is a sample of the polling metrics:

South Dakota voters voted to expand Medicaid to about 42,500 low-income residents starting in mid-2023. The measure fell from 56% to 44%, according to data from the South Dakota secretary of state.

“The people of South Dakota know their families and neighbors deserve health care without going into debt or avoiding the tests, procedures and medications they need,” said Kelly Hall, executive director of The Fairness Project. , who supported the measure.

It is the seventh successful effort to expand Medicaid in Republican-led states, which began with the approval of Maine voters in 2017. Voting initiatives have also Missouri, Oklahoma, Idaho, Nebraska and Utah during the last years.

More than 60 organizations — including the South Dakota Farmers Union, the Greater Sioux Falls Chamber of Commerce and several health care and religious groups — have endorsed Amendment D. It will open coverage to adults earning less than about 19,000 $ per year.

Currently, childless adults are not eligible for Medicaid in South Dakota, and parents must be on very low incomes to be eligible — about $1,000 a month for a family of four.

By expanding Medicaid, South Dakota is expected to receive an additional $328 million in federal funds in the first year and generate 4,000 new jobs, according to Zach Marcus, campaign manager for South Dakotans Decide Healthcare, who advocated for the campaign measure. The state Legislative Research Council found last year that the expansion would save South Dakota $162.5 million over five years.

Many Republican officials opposed the measure, citing its potential future costs. States are responsible for picking up 10% of the health care tab from enrollees at the expansion.

South Dakota Gov. Kristi Noem, a Republican, did not support the initiative, although she said she would implement it if voters approved it. An expansion bill failed in a state Senate vote earlier this year.

Until the vote, South Dakota was one of 12 states that had chosen not to expand Medicaid. The only remaining states where citizen vote initiatives might be possible are Florida and Wyoming, Hall said.

Nebraska voters have chosen to raise the state’s minimum wage to $15 an hour by 2026 from $9 an hour now. The vote was 58% to 42% in favor, according to data from Nebraska’s secretary of state.

It is expected to benefit about 150,000 workers, according to the National Employment Law Project and the Economic Policy Institute, both of which are left-wing groups. About 75% of workers are over 20 years old.

The measure will provide those workers with an additional $2,100 in pay, said Kate Wolfe, campaign manager for Raise the Wage Nebraska. More than 25 organizations and legislators are part of the coalition that backed Initiative 433, backed by The Fairness Project.

“Initiative 433 was passed tonight because Nebraskanians understand that raising the minimum wage is about respecting and rewarding hard work,” Wolfe said.

In 2014, voters approved an election measure to raise the minimum wage to $9 an hour by 2016.

Opponents, however, said the initiative would hurt state businesses and reduce job opportunities for young people.

“The initiative’s proposed increase is a 66.7% increase over four years,” Bud Synhorst, CEO of the Lincoln Independent Business Association, wrote in a local trade publication last month. “It’s a radical increase that will be felt throughout the economy.”

In Nevada, some 54% of voters had voted in favor of a state constitutional amendment to raise the minimum wage to $12 an hour by 2024 as of Wednesday afternoon, according to data from the Secretary of State. State of Nevada. The measure would also remove an existing provision setting different rates for the minimum wage depending on whether or not the employer offers certain health benefits.

Some 46% of voters were opposed to the measure on Wednesday evening.

CNN predicted Friday that the amendment would pass.

The state’s minimum wage is already set to increase to $12 an hour for workers who don’t receive certain health care benefits, and $11 an hour for those who do, in 2024.

Proponents of the initiative, Question 2 on the Ballot, said workers should have a constitutional guarantee of a $12 hourly minimum wage, preventing lawmakers from reducing it in the future. Opponents argued the change was unnecessary because the state legislature already has the power to raise the minimum wage.

Arizona voters overwhelmingly chose to change some rules governing medical debt owed by residents.

Proposition 209 passed by a vote of 72% to 28%, according to data from the Arizona Secretary of State. It will cap the interest rate on medical debt at 3% and limit medical debt wage garnishment to a maximum of 30% of earnings.

It will also increase the value of primary residences and cars that would be protected from medical debt collectors to $400,000 and $15,000, respectively, from $250,000 and $6,000, said Rodd McLeod, spokesperson for Healthcare. Rising Arizona, which supported the measure also supported. by the equity project.

The measure will not forgive any medical debt, McLeod said.

Opponents argued that the initiative would hurt consumers. It will be harder for Arizonans to get credit and for businesses in the state to collect debts, as well as raise interest rates on consumer debt, according to Protect Our Arizona, which had hoped to do fail the measurement.

Meanwhile, California’s Proposition 30, which would add a 1.75% surtax on people earning more than $2 million a year, was on course to fail by 59% to 41% on Wednesday night , according to data from the California Secretary of State. CNN is not yet projecting a winner.

Most of the funds would have been used to promote zero emission vehicles and forest fire prevention and control.

The measure was widely backed by Lyft, which, like other ride-sharing companies, is subject to another state rule requiring it to primarily use zero-emission vehicles by 2030. Opponents, including the The state’s Republican Party said the ballot measure was an attempt. by Lyft to get taxpayers to pay the company’s bill.

Notably, Democratic Gov. Gavin Newsom also opposed the measure, appearing in an ad to defeat it.

“Prop 30 is billed as a climate initiative, but in reality it was designed by a single company to funnel state income taxes to benefit its company,” he said in the announcement.

Supporters, which include environmental groups, public interest organizations, labor unions and a slew of Democratic officials, said the measure was needed to address climate change in the state. This would generate around $100 billion over the next 20+ years, they said.

This story has been updated with additional developments.

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Potentially divided US government launches tough economic debates for 2023 https://glwdrk.com/potentially-divided-us-government-launches-tough-economic-debates-for-2023/ Wed, 09 Nov 2022 21:41:00 +0000 https://glwdrk.com/potentially-divided-us-government-launches-tough-economic-debates-for-2023/ WASHINGTON, Nov 9 (Reuters) – Potential Republican control of at least one chamber of the U.S. Congress sets the stage for economically risky battles in 2023 over federal spending limits and the government’s response to a recession. Tuesday’s election results remain uncertain, with President Joe Biden’s Democratic Party posting better-than-expected results and potentially able to […]]]>

WASHINGTON, Nov 9 (Reuters) – Potential Republican control of at least one chamber of the U.S. Congress sets the stage for economically risky battles in 2023 over federal spending limits and the government’s response to a recession.

Tuesday’s election results remain uncertain, with President Joe Biden’s Democratic Party posting better-than-expected results and potentially able to retain control of the Senate.

The Republican Party had a better chance of winning a majority in the House of Representatives, and if that happened, it would complicate and likely temper Biden’s economic plans for his second two years in office — a time when the economy will likely suffer. yet another inflationary shock and upward adjustment in interest rates imposed by the Federal Reserve to control it.

“It will be a de facto stalemate regardless of the outcome,” said Brian Gardner, Washington-based strategist for Stifel. “The rooms will be so tightly divided.”

Deadlock can sometimes be positive for markets and the private sector, limiting the ability of either side to make disruptive changes to taxes, laws or regulations.

But it can also foul the wheels of basic governance and pose its own set of risks.

Congress, for example, will have to lift the US debt limit at some point, probably next year, but maybe not until the fall. Depending on the election outcome and the size of any Republican majority in the House, this has the potential to disrupt the economy at a time when Fed rates may still be at their peak.

Under then-President Barack Obama, the Republican Party used the debt ceiling talks to force through federal spending cuts at a time when the economy was still struggling after the deep recession of 2007-2009. a “fiscal drag” that Fed officials lamented. at the time as undermining already weak economic growth.

“A similar scenario could play out next year,” Goldman Sachs analysts wrote in an election postmortem that put the odds in favor of Republican control of the House.

U.S. stock markets closed lower on Wednesday, with major indices shedding 2% or more, as uncertainty over the election results combined with problems in the crypto industry and more layoffs across the country. tech industry.

An auction of US Treasury bonds pushed yields higher.

IS IT THE ECONOMY?

Voters cited economic problems as a priority ahead of Tuesday’s vote, with wallet pain from rising inflation and the Fed’s rate hike offsetting low unemployment, steady job creation , and household wealth and bank accounts that remain flush with budget spending during the pandemic.

In the end, voters punished the incumbent Democratic Party less than pre-election opinion polls suggested, even after Republicans used the final weeks of the campaign to point to rising food prices and gasoline.

The political and economic battle over inflation remains ongoing, however, as we approach a pivotal period in which either the pace of price increases will slow or the Fed will find it necessary to raise rates even higher than expected. currently in another blow to the economy. .

“The realignment of supply and demand may demand even more from us, creating risk for the broader economy,” Richmond Fed President Thomas Barkin said Wednesday.

In a recent Fed survey of bank loan officers, more than 57% of respondents put the likelihood of a recession in the next 12 months at 60% or more, although it should also be mild in nature. or moderate.

Unless inflation dips unexpectedly – new data will be released on Thursday – it could leave the US facing both still rising prices, high interest rates and falling output .

It would also leave fiscal policy as the main driver of any response to the recession, with decisions made more difficult by a divided regime and the beginnings of what could be a tendentious presidential election cycle.

The United States’ response to the pandemic recession in 2020, initially under Republican President Donald Trump and a Democratic Congress, then later under Biden, was seen as a textbook in some ways – with the rapid deployment of a broad net security that asked few questions other than how to avoid a second Great Depression.

But it may also have helped trigger the current cycle of inflation and pushed US public debt to record highs.

This may mean a more reluctant fiscal response to any downturn ahead.

“We continue to believe that a divided government in 2023 will underscore the shift from fiscal tailwinds to fiscal tailwinds, and likely lead to a lack of fiscal support during our forecast recession,” Nomura analysts wrote.

Reporting by Howard Schneider; Editing by Andrea Ricci and Jonathan Oatis

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]]> People over numbers: book charts China’s neopolitical turn https://glwdrk.com/people-over-numbers-book-charts-chinas-neopolitical-turn/ Tue, 01 Nov 2022 14:25:23 +0000 https://glwdrk.com/people-over-numbers-book-charts-chinas-neopolitical-turn/ Like China’s leaders for decades before him, outgoing Prime Minister Wen Jibao’s last government work report in 2013 presented a litany of statistics meant to communicate progress: increases in GDP, incomes and disposable incomes, as well as as new housing, rail lines and airports. But a few months later, the tone was dramatically different when […]]]>

Like China’s leaders for decades before him, outgoing Prime Minister Wen Jibao’s last government work report in 2013 presented a litany of statistics meant to communicate progress: increases in GDP, incomes and disposable incomes, as well as as new housing, rail lines and airports.

But a few months later, the tone was dramatically different when Wen’s successor, Xi Jinping – recently elected for a third term as general secretary of the Communist Party of China (CCP) – presided over provincial inspections that were broadcast nationally. . On the verge of tears, local officials apologized for caring too much about GDP growth and not enough about people.

In a new book,Seeking Truth and Hiding Facts: Information, Ideology and Authoritarianism in China“, Jeremy Lee Wallaceassociate professor of government at the College of Arts and Sciences, explains how a few numbers came to define Chinese politics “until they no longer counted what mattered and what they counted no longer mattered. height”, and the “stunning overthrow” led by Xi within the CCP.

Wallace will share his findings in a virtual round table hosted by the Center for Strategic and International Studies at 9:30 a.m. on November 2. He spoke to the Chronicle about his research reframing how China got to where it is today and where it is heading.

Question: Why in the four decades known as “reform and opening up” has China adopted what you call a limited and quantified vision system?

Answer: The economic and social disaster of the Cultural Revolution that lasted a decade before Mao’s death made politicians and pragmatic ideas attractive to an elite and a populace tired of the hustle and bustle of constant ideological upheaval in the midst of a persistent poverty. Tight central control and planning failed to produce growth, so the regime remade itself, decentralizing, experimenting and commodifying. Monitoring a few critical metrics greased the wheels of performance. Decentralization with limited control freed individual initiative under state capitalism. Initially, economic reforms helped many without harming others. A limited but real vision of localities has encouraged local growth while allowing local leaders to benefit personally.

Q. How was this system and vision ultimately undermined?

A. Limiting its vision of localities to a few figures – GDP, tax revenues,

investment – ​​produced excellent performance on these measures and negative externalities elsewhere. This limited quantified vision has not seen the significant problems that have come to plague Chinese society: notably corruption, pollution and debt. With increasing regularity, cases of officials falsifying statistics – that is, fabricating data – have come to light, undermining internal and external confidence in the reality of China’s economic growth. Even the limited set of closely watched numbers was moving in the wrong direction; more worryingly, growth was slowing and debt-fueled stimulus was becoming a less sustainable response. Over time, these negative externalities have come to threaten the economic and political pillars of the country.

Q. What was Xi’s response?

A. In response to the inadequacy of the center’s limited and quantified vision, Xi has centralized power, more closely observing and controlling the actions of lower-level politicians and bureaucrats who execute his rule, has changed the way he justified his stay in power, and launched a massive crusade against corruption. In the book, I call this the “neopolitical turn.”

Q. You argue that dictators must convince people of their right to rule, and quantification is a tool in their arsenal. How is Xi using it and what does it say about the direction China is heading?

A. The book argues that quantification may have a more authoritative character than is generally acknowledged. By simplifying and organizing a complex reality, it lends an aura of objective truth, transparency and scientific authority to decisions. Quantification appears to promote accountability, without democracy, by generating commonly understood numerical benchmarks and facilitating comparisons, but it simultaneously reinforces the elites that create the metrics being measured. Xi’s relationship to the numbers remains difficult to read. At the recent Party Congress where Xi won his third term, national GDP data was due to be released, but was shockingly delayed until the end of the Congress. It’s hard to believe that a country still struggling with real poverty would ignore basic economic development and transparency, but maybe that’s where it’s headed.

Q. How does your analysis of China apply to other authoritarian regimes?

A. While the book retains its empirical focus on China, I hope scholars of censorship, propaganda, and authoritarianism will find some of the book’s theoretical reflections useful in their studies. The book ends with a discussion of neoliberalism, in particular the need to reflect on the factors outside of the United States and Europe that are behind its global rise and fall.

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Opinion: Democrats just can’t seal the deal with young Americans https://glwdrk.com/opinion-democrats-just-cant-seal-the-deal-with-young-americans/ Sat, 29 Oct 2022 20:56:00 +0000 https://glwdrk.com/opinion-democrats-just-cant-seal-the-deal-with-young-americans/ Editor’s note: CNN political commentator Kristen Soltis Anderson is a Republican strategist and pollster and author of “The Selfie Vote: Where Millennials Are Taking America (And How Republicans Can Keep Up).)” The views expressed in this comment are his own. Lily more reviews articles on CNN. CNN — Democrats felt young voters could stay home […]]]>

Editor’s note: CNN political commentator Kristen Soltis Anderson is a Republican strategist and pollster and author of “The Selfie Vote: Where Millennials Are Taking America (And How Republicans Can Keep Up).)” The views expressed in this comment are his own. Lily more reviews articles on CNN.



CNN

Democrats felt young voters could stay home in November and turned to “Dark Brandon” for help in times of trouble.

For those who don’t know – and mine vote suggests that almost everyone reads this – “dark brandon” is a meme of President Joe Biden, rendered as an all-powerful hero (or villain, depending on your perspective). It started as a right-wing slogan before Democrats appropriated it to praise the president.

The meme reached the pinnacle of its powers, whatever they might be, when the Democrat group Building Back Together published a 30-second hallucinogenic commercial earlier this month featuring President Biden’s meme, lasers coming out of his eyes and all. The message? Biden is an exciting and successful hero on issues like student loan debt. Or rather, “if you’re not excited about Biden and the Democratic Party, please don’t be.”

I’ve been sounding the alarm for years that Republicans have trouble with young voters and risk losing them for good. This remains the case, as numerous polls show that younger voters still have quite negative opinions of the GOP.

But even though Millennials and Gen Z Americans tendency to lean to the left on a host of economic and cultural issues such as LGBTQ rights and the size of government, it’s clear that in this midterm election, Democrats have failed to energize the youth vote and may not be able to rely on young people as a key part of their coalition.

Voters under 30 aren’t exactly enamored with the way things are going in America these days. Two-thirds of them say the economy is doing badly, according to CBS News/YouGov Poll. And as a result, less than a quarter “strongly approve” of the work Biden is doing. Only 31% say they are “very enthusiastic” about voting midterm, compared to two-thirds of voters aged 65 and over. And only one in six say they pay “great” attention to midterm reviews.

It’s not very unusual. Younger voters typically drop out in greater numbers than older voters as you transition from a big presidential election to a less key midterm. According to CNN exit polls, voters under 30 accounted for only 13% of all voters halfway through 2018, versus 17% in the 2020 general election.

However, my own firm’s analysis suggests that voters under 30 could drop to just 10% of the electorate in 2022 – a year in which a historic overall turnout for a mid-term of more than 125 million votes is expected.

While young voters aren’t likely to turn out in large numbers to fuel a “red wave,” it’s not hard to imagine them costing Democrats their majority by staying home.

Democrats haven’t always needed younger voters to win. In fact, young voters were a relatively evenly distributed group of voters for much of the 1990s and 2000s. But midterm in 2006, before Sen. Barack Obama (D-IL) had even announced his candidacy for the presidency, young voters started bleeding of the GOP in large numbers. Exit polls showed voters under 30 split for Democrats by a 22-point margin in House races in that election, which propelled Nancy Pelosi to the presidency for the first time.

Young voters continued to oppose the GOP even during the “red wave” years. The 2010 election, by all accounts a great year for Republicans, saw voters under age 30 more break for the Democrats by a margin of 16 points. By the time the “blue wave” of 2018 arrived, we were seeing a massive turnout of young voters in the elections they had previously participated in. Plus, those voters broke for the Democrats by an absolutely whopping 35-point margin.

But then Donald Trump lost the presidency and Biden – not necessarily a favorite among young voters – became the leader of the nation and the Democratic Party. Even before he was the Democratic presidential nominee, his polls of young voters still left something to be desired; only a third of voters those under 30 had a favorable opinion of him ahead of the 2020 election.

Issues important to many young voters have taken a back seat and our political class continues to age. As a result, over the past few years there has been a fascinating depolarization along generational lines. It used to be that if I knew your age, I could pretty easily make an educated guess about how you would vote. That’s less likely to be the case today, largely because younger voters have grown more disillusioned with Democrats.

What is particularly embarrassing for Democrats is that all of this is happening in a context where young Americans are increasingly speaking out about their politics. Companies are struggling with Gen Z and Gen Y employees who seem livelier than ever work for employers that match their political and cultural worldview. I regularly hear from business leaders who know that young consumers vote with their wallets and opt for products and services that align with their values.

If young Americans are increasingly focused on the issues and want change, but aren’t voting midterm, it represents a huge missed opportunity for those who want to see greater youth participation in politics. . And in this election, it could cost the Democrats their majority.

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An Investor’s Guide to the Looming Debt Ceiling Fight https://glwdrk.com/an-investors-guide-to-the-looming-debt-ceiling-fight/ Thu, 27 Oct 2022 14:47:12 +0000 https://glwdrk.com/an-investors-guide-to-the-looming-debt-ceiling-fight/ Comment this story Comment The debt ceiling is one of those recurring issues in American politics that sometimes becomes a major concern. The ceiling has been raised, suspended or adjusted 28 times since 1993, usually with little drama. But there were major fights in 1995, 2011 and 2013 that led to prolonged government shutdowns and […]]]>

Comment

The debt ceiling is one of those recurring issues in American politics that sometimes becomes a major concern. The ceiling has been raised, suspended or adjusted 28 times since 1993, usually with little drama. But there were major fights in 1995, 2011 and 2013 that led to prolonged government shutdowns and fears that the United States might not meet its debt obligations. If Republicans take control of Congress in November’s midterm elections, some people are predicting another debt ceiling battle in early 2023. Financial markets were quick to ignore the effects of previous battles, but this time could be different.

The fundamental problem is that Congress likes spending and tax cuts, but dislikes debt. This leads to contradictory legislation: expenses and tax bills incompatible with the debt limits it sets. This is not a Democrat versus Republican question. Democrats in fiscally liberal countries can be reelected regardless of debt, and Republicans in fiscally conservative countries will never lose elections by opposing debt. It is the centrists of both parties who need the votes of the fiscal liberals and the conservatives. These are people who want more money from the government and people who are concerned about preserving the value of the money they already have. Moderate and conservative Democrats don’t want to be seen as reckless spenders forcing debt increases without bipartisan support, and moderate and liberal Republicans don’t want to be blamed for government shutdowns and market instability.

The usual assumption is that the center will hold. The cap (currently around $31.4 trillion, leaving $300 billion of wiggle room for borrowing) will eventually be raised or some other workaround found, but fiscal conservatives will get some concessions to cut spending or tighten fiscal rules. However, previous fights against the debt ceiling have taken place during times of economic prosperity, with rising stock prices and low inflation. Republicans emboldened by election success after criticizing Democratic spending may feel like they have a winning hand in forcing a rollback of the Biden administration’s costly policies — earning credit for taming inflation and protected the credit of the United States while showing that the Democrats are ineffective.

I am not a political analyst, so I have nothing more to say on this subject. My topic is the likely market reaction to a deadly fight. Will the possibility of a default send the US dollar and the bond market into meltdowns as almost happened (and may still happen) in the UK? Or will increased fiscal discipline in the US stabilize markets?

One clue is that treasury bill rates from mid-January 2023 to mid-April are up to 0.5% higher than you would expect given the earlier and later maturities. In other words, investors seem to be avoiding these bills. This is the likely time frame for a fight against the debt ceiling, although there are other possible reasons for the yield curve bump. Taken at face value, this suggests that investors are bracing for a significant possibility of major disruption, but not permanent damage. We will know more about this when the results of the November elections are known.

Any fight against the debt ceiling, or even talk of a fight, will drive up short-term Treasury rates and will also drive up other short-term dollar-denominated rates while lowering the value of the dollar. This will increase credit fears in the economy. It could fuel inflation by encouraging people to spend rather than hold dollars and make foreign goods more expensive. This could slow the economy by instilling fear and lowering stock prices.

The worst outcomes are a loss for fiscal conservatives, blunting their future power, or a dysfunctional deal that only complicates matters further and guarantees bigger future fights and continued instability. This could lead to a permanent increase in government borrowing costs, less confidence in the dollar and US credit, and increased debt with weaker controls. It could send the US down a path the UK could have narrowly avoided.

The best outcome, at least for the bond markets, would be agreement on a rational budget process with budget controls allowing Congress to choose and manage the level of debt, and allowing only spending and tax legislation consistent with the level. debt selected. The market is less concerned with the level of indebtedness than whether it is under control and whether it could be reduced if necessary. If the United States has the will to service the debt, no one doubts that it has the capacity. Of course, a perfect solution is unlikely.

The stakes will be much higher in 2023 than in previous debt ceiling fights. Debt and deficits are much larger. True, the 2022 budget deficit was half that of 2021, but it was equal to the largest non-Covid deficit in history, which was the year of the financial crisis of 2009. Moreover, deficits and debt Projected futures, not to mention unfunded budget deficits (mainly Medicare), are much higher than conventional ideas of fiscal prudence would allow. The economy is at least probably in a recession, stocks are in a bear market and inflation is high. If the situation is the same or worse at the start of 2023, we could be close to economic crisis even without the fights in Congress.

Crisis tends to bring out the best and the worst in people. It could provide the fuel for long-needed reforms, or the excuse for a damaging tightrope approach. I’m optimistic in that I think the economy should improve on its own, midterm results will be mixed enough to discourage grandstanding on both sides, and Congress will choose reason over mutually assured destruction. I’m optimistic because I’d rather be happy than afraid, not because I have good reason to hope.

More from Bloomberg Opinion:

• The debt crisis is on the Republican agenda for 2023: Matthew Yglesias

• Another absurd fight against the debt ceiling? No Thanks: Jonathan Bernstein

• Biden hurt, not helped, the economy: Allison Schrager

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Aaron Brown is a former Managing Director and Head of Capital Markets Research at AQR Capital Management. He is the author of “The Poker Face of Wall Street”. He may have an interest in the areas he writes about.

More stories like this are available at bloomberg.com/opinion

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Uncontrolled government spending leads to currency crisis https://glwdrk.com/uncontrolled-government-spending-leads-to-currency-crisis/ Mon, 24 Oct 2022 21:23:15 +0000 https://glwdrk.com/uncontrolled-government-spending-leads-to-currency-crisis/ OPINION: Those who study both the physical and behavioral sciences should have learned that there are consequences to every action – some good and some not so good – often referred to as Stage II. Good chess players are able to “see” the consequences of various moves several steps in advance. The same goes for […]]]>

Those who study both the physical and behavioral sciences should have learned that there are consequences to every action – some good and some not so good – often referred to as Stage II.

Good chess players are able to “see” the consequences of various moves several steps in advance. The same goes for strong environmental scientists, military and diplomatic strategic thinkers, as well as investors and economists. Unfortunately, sane thinkers have too often been ignored by members of the media and politicians who seek sensationalism rather than rational thinking. For years, many of us warned that rampant government spending would eventually lead to a cash crash. This day has arrived.

When an individual, family or business goes into debt faster than their income, judgment day arrives and the only way out is bankruptcy. With interest rates now rising rapidly due to inflation, many people and institutions will increasingly find that they are unable to repay the debts they have incurred – so large increases in the number Bankruptcies Will Happen – Starting Now!

When sovereign governments take on more debt than they can repay, they have two choices: raise taxes or depreciate the currency (known as inflation). There is a limit to how much the government can raise taxes because of the natural tendency of taxpayers to find legal and illegal ways to avoid taxes – which increases as the tax burden increases.

Due to the increased tax burden, economic growth slows down and approaches or even falls below zero – so any increase in tax rates or new taxes does not result in any new income or even negative income. Many of the major countries are now at this stage, including much of Europe and the United States.

As noted, to reduce the debt burden, governments “inflate” it, which is happening. The situation will not improve until government spending is reduced to the point where the debt burden no longer increases relative to income. The same people who first told you that there would be no rise in inflation and then that inflation would only be transitory are now saying that it would come back to around 2% – this is not not true – in the absence of a major reduction in public or private spending (i.e. a deep recession).

Individuals and institutions can partially protect themselves by acquiring real estate assets that will retain their value over the long term. Those without the ability to acquire such assets will only become poorer. Members of the media and others who profit from the ignorance of their fellow citizens will demand that the government increase payments to low-income people (as was done during the COVID-19 lockdown). Such payments will give a little temporary relief but, if not properly funded, will make the situation worse over time by further depreciating the currency. The gap between the haves and the have-nots will increase, leading to a reduction in social cohesion. Not a bright future.

Much of the increase in government spending is the result of the environmental lobby demanding “green energy” because of the “existential” (whatever that means) threat of climate change. Everyone wants a cleaner environment and is willing to pay for it up to a point where Phase II kicks in. As science writer Robert Bryce recently noted: “Despite over $2 trillion in spending on renewable energy over the past three decades, there is little evidence that an energy transition is underway.

Last year, according to data from the BP Statistical Review of World Energy, in the United States and around the world, the growth of hydrocarbons – oil, natural gas and coal – “far exceeded the growth of wind and solar by huge margins”. .” The fact is, opposition to wind and solar is growing as people say “not in my backyard”, in part because it’s unsightly and noisy. Wind and solar also require many rare materials that are potentially harmful and expensive to manufacture.

For most people, “saving the planet” doesn’t mean kids going to bed hungry and cold. A number of European countries may well run out of energy to heat people’s homes this winter, and gas and food prices are much higher than in the United States, largely because governments have shut down coal, oil, natural gas and nuclear power plants. As ‘good’ Europeans freeze and suffer, they are increasingly aware that China and India are building more and more coal-fired power stations, whose C02 emissions dwarf Europe’s attempts to reduce them. Much of this calamity could have been avoided if more attention had been paid to “Phase II”.

And finally, there is the Russian-Ukrainian war. And as in most wars, too little attention has been paid to the consequences of a “victory” or a “defeat”, both for Ukraine and the West, and for Russia. What does victory or defeat look like for both parties? Is Russian President Vladimir Putin just stopping at Ukraine or, like Adolf Hitler and Napoleon Bonaparte, is this whetting his appetite for more? If Mr. Putin loses, who will take over in Russia – and will they be “better” or “worse” than with Mr. Putin?

The inability of political leaders to adequately consider Phase II with growing government spending, environmental policy and the Russian-Ukrainian war has put billions of people at risk.

• Richard W. Rahn is President of the Institute for Global Economic Growth and of MCon LLC.

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