James Pethokoukis

Politics and policy from inside Washington

More on the dangerous dollar …

Jul 24, 2009 20:15 UTC

It is the last part of this bit from Brad DeLong that really caught my attention (bold is mine):

The fact is that the approporiate fiscal policy for the U.S, right now is to pass: (a) a bigger stimulus over the next two years, (b) a standby tax increase to return the federal budget to primary surplus by 2012, and (c) devout and lengthy prayers that confidence in the dollar doesn’t collapse and send interest rates on U.S. Treasuries above the economy’s growth rate–in which case the situation changes from its current value of “dire” to “catastrophic.”

COMMENT

The reality is that we are approaching a SDR world. Which is how it should be.

However, the talk of a devalued dollar is premature. Relative to other world currencies, the dollar is actually strong considering the current environment. While there is pressure, the $ has been rather resilient in the face of a credit crisis compounded by a downturn, volatility and uncertainty. SE Asia and Latin America were not so lucky.

I don’t think Obama will devalue the dollar. China’s reserves are safe. Remember, that the US has top credit-worthiness because, excepting global disaster, it will not default.

This is still a serious correction, that has annihilated global wealth. We should take a lesson from this event. The future will require more precise policy analysis and flexibility in execution, when dealing with economic cyclical variations. The embrace of the boom times, should be accompanied by the tempering of the bust.

Posted by Greg | Report as abusive

Healthcare reform has to pass because … because … well, it just has to is all!

Jul 24, 2009 19:40 UTC

Ezra Klein does his gosh-darned best to help restore momentum to healthcare reform, which he is sure people will love to bits if only it passes:

Democrats know full well that there are two plausible outcomes to the health-care reform process. Health-care reform will fail, dealing a huge blow to the Democratic Party and giving Republicans tremendous momentum as we enter the 2010 campaign season. Or health-care reform will pass, and Democrats will criss-cross the country touting the largest legislative accomplishment in decades. Republicans may still attack them on the plan. But attacking a historic legislative success is a whole lot harder than attacking a historic legislative failure. Republicans know that, which is why they want to kill the bill. Democrats know it too, which is why they won’t let them.

COMMENT

lol, keep on reaching there ezra…. Too bad they see it as just a political matter.

Posted by jason | Report as abusive

GOP healthcare alternative? It’s pretty flawed, too

Jul 24, 2009 17:54 UTC

Ugh. So House GOPers have put out their alternative to ObamaCare. It’s really more of a statement of principles with a few numbers. Yes, it is  a good idea to level the playing field between those who get their insurance through their employers and those who buy it on their own. But this is the part that put me back on me heels:

Strengthens employer-provided health coverage by helping the 10 million uninsured Americans who are eligible, but not enrolled in, an employer-sponsored plan get health care coverage. The plan does this by encouraging employers to move to opt-out, rather than opt-in rules.

Employer-based covering should be scrapped, not strenghthened. (In fact, doing so really is key to reform.)  The great Arnold Kling gives five good reasons why:

  • The cost of health insurance is disguised from consumers, because firms do not report what they pay in premiums. Workers are under the illusion that their health coverage is inexpensive, and if they subsequently find themselves having to obtain their own health insurance, they are offended by the cost and instead choose to go uninsured.
  • Workers who are concerned about the availability of health insurance may suffer from “job lock.” They might wish to leave their job for self-employment, pursuit of formal education, an opportunity with a smaller firm, or early retirement, but the potential loss of health insurance is a deterrent.
  • Workers may not enjoy the range of insurance choices that they would have if health insurance were not negotiated for them by employers. For example, if they could choose their own insurance, some workers might elect coverage with higher co-pays and deductibles but lower premiums, in order to have more cash income.
  • Because employer-provided health insurance is subsidized through the tax system, the benefits accrue relatively more to high-income workers.
  • Workers who are fired or laid off can find themselves without health insurance at a point where they can least afford to be uninsured.
  • COMMENT

    A tax incentive to have some sort of medicial saving plan
    could make the diffrence…Save more early for old age. 401k for medicial? I see it as a way to phase out social security and reduce our dependance on goverment and vica versa. Insurance could come down like car insurance. Parents would cover their kids at birth so no prexisting conditions, even better before conception. Still didn’t see anything about tort reform..NO plan can work without that!

    Posted by Tom | Report as abusive

    Is Obama playing politics with the dollar?

    Jul 24, 2009 16:59 UTC

    A weak dollar is not always a bad thing. Stocks are up 43 percent from their March lows while the greenback is off 11 percent against major currencies. Scott Grannis explains the correlation:

    As panic set in late last summer, people all over the world flocked to the dollar as a safe haven. People stopped spending money, stockpiling it in the form of currency and in the form of higher money balances. … It all reached a head in early March of this year, as fear of massive deficits and massive tax increases paralyzed financial markets. Since that time, everything has reversed. The economy avoided the catastrophe many had feared, and Obama’s legislative agenda has stalled and his approval ratings have plunged. People have stopped accumulating dollar currency and money deposits, and so spending is starting to ramp up. The economy is starting to come back to life.

    But economist David Rosenberg of Gluskin Sheff has begun to worry (this is the second time he has written about it this month) that a weaker dollar is starting to reflect a plan by the White House to send it lower to give the economy a short-term boost, as well as the political fortunes the Obamacrats:

    [US Dollar Index futures are] starting to break down, and the moving averages are moving down across the board. Meanwhile, the commodity complex and the commodity-based currencies are on fire. The Kiwi is at a nine-month high; the Rand at an 11-month high and the Loonie at a seven-week high. Meanwhile we saw sugar, wheat, corn, cotton and gold all rally significantly yesterday. As we said before, the last policy shoe to drop, which may be dropping already, is the dollar.

    COMMENT

    China has over $2000 billion in foreign exchange reserves, guess who’s not going to be amused about this policy.

    Poll: Obamanomics has too much spending, too much government

    Jul 24, 2009 13:19 UTC

    Notice particularly the the stats for independents …

    072409gallup

    Public doesn’t like direction of ObamaCare

    Jul 24, 2009 11:26 UTC

    Why is Obama suddenly talking a lot more about healthcare costs? (And maybe he should do something more akin to a PowerPoint presentation when talking about this stuff. Remember those old Ross Perot presidential campaign commercials where he used charts?) Maybe because of this (from the WSJ):

    072409healthchart

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