The White House budget proposal released on Monday assumes the U.S. economy is heading for a six-year run of above-average economic growth with no sign of a worrisome spike in inflation or interest rates.
The forecasts underlying President Barack Obama’s budget plan show real gross domestic product rising 2.7 percent this year, which is largely in line with private forecasts.
Beginning in 2011, the White House’s projections diverge. It expects six consecutive years of strong growth ranging from 3.2 percent to 4.3 percent — well above what most economists consider the longer-term trend of around 2.6 percent.
The last time the economy saw a similar streak of strong growth was in the late 1990s, during the dot-com boom.
The missing link is still jobs. Despite the rosy economic forecast, the White House sees the jobless rate only slowly declining from the current 10 percent level. In fact, the forecast shows the unemployment rate won’t dip below 6 percent until 2015.
Strong growth. Weak labor market. Can we really have both for six years?
White House sees smooth economic sailing
New committee to save the world
In the late 1990s, when the Asian Financial Crisis was in full swing, Time Magazine dubbed then Treasury Secretary Robert Rubin, his deputy Lawrence Summers and then Federal Reserve Board Chairman Alan Greenspan as “The Committee to Save the World.”
On Saturday, a new committee convened in Washington, only this time the crisis is global, and now there are 20 members. Leaders from the 20 richest countries came together and backed a 10-page plan for the global economic crisis, agreeing on the need for measures to spur growth, better financial market rules and more say for emerging countries.
Sexy stuff, right?
Here’s a sample paragraph:
“Regulators should develop enhanced guidance to strengthen banks’ risk management practices, in line with international best practices, and should encourage financial firms to reexamine their internal controls and implement strengthened policies for sound risk management. * Regulators should develop and implement procedures to ensure that financial firms implement policies to better manage liquidity risk, including by creating strong liquidity cushions. * Supervisors should ensure that financial firms develop processes that provide for timely and comprehensive measurement of risk concentrations and large counterparty risk positions across products and geographies. * Firms should reassess their risk management models to guard against stress and report to supervisors on their efforts. * The Basel Committee should study the need for and help develop firms’ new stress testing models, as appropriate. * Financial institutions should have clear internal incentives to promote stability, and action needs to be taken, through voluntary effort or regulatory action, to avoid compensation schemes which reward excessive short-term returns or risk taking. * Banks should exercise effective risk management and due diligence over structured products and securitization.”
Tremonti: Not so happy
The Group of Seven officially agreed on a joint “plan of action” at this weekend’s blockbuster meeting amid a global financial crisis. Since everyone signed the paper, you’d think they’re all happy with what is in it, right?
After meeting with U.S. President George W. Bush at the White House, Italy’s Finance Minister Giulio Tremonti tells reporters on Pennsylvania Avenue what he really thinks.
