December 14, 2017

I.M.F. Lowers Estimates for Global Economic Growth for 2013

In a periodic update to its economic projections, the fund said on Tuesday that it expected global growth of about 3.3 percent this year and 4 percent in 2014. That is a reduction of 0.2 percentage point since its January estimate for 2013; it did not change its estimate for next year’s growth.

Still, the report underscored that financial conditions had improved markedly since last year, in no small part because of aggressive monetary easing undertaken by the Federal Reserve, the Bank of Japan and the European Central Bank.

Recession continues to afflict Europe, and the world still struggles with high unemployment, but the greatest risks — in particular from the threat of a country’s leaving the euro zone and from fiscal policy uncertainty in the United States — have faded.

“Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy,” said the report, called the World Economic Outlook. “Policy makers cannot afford to relax their efforts.”

The fund cut its projections of current-year growth for the euro zone economies of France, Italy and Spain, as well as for Britain, which has also carried out austerity policies and entered a period of economic contraction. I.M.F. officials have urged stronger European economies with lower borrowing costs, like Germany, to do more to foster growth across the entire region and to move more aggressively to finish a cross-border banking union to shore up investor confidence. The fund and many international economic officials, including Treasury Secretary Jacob J. Lew, are expected to press Europe on its plans for growth again this week.

“Policy should use all prudent measures to support sluggish demand,” the report said. “However, the risks related to high sovereign debt limit the fiscal policy room to maneuver. There is no silver bullet to address all the concerns about demand and debt.”

The fund warned that “markets may have moved ahead of the real economy” and noted that improved financial conditions had not, in many cases, translated to better access to credit for consumers and businesses, with lending standards remaining tight. In the euro area, indeed, credit continues to contract and lending conditions continue to tighten, the I.M.F. said, reflecting in part “the poor macroeconomic outlook for the region as a whole.”

The fund lowered its estimate of United States growth this year to 1.9 percent, down 0.2 percentage point from its January forecast. While Washington had avoided falling over the “fiscal cliff,” the I.M.F. said that the United States had proved too aggressive in carrying out budget cuts, given its still-sluggish rates of growth and high unemployment levels. It said it anticipated that the across-the-board $85 billion in budget cuts known as sequestration would push down growth levels this year and beyond.

“The growth figure for the United States for 2013 may not seem very high, and indeed it is insufficient to make a large dent in the still-high unemployment rate,” Olivier Blanchard, the fund’s chief economist, said in the report. “But it will be achieved in the face of a very strong, indeed overly strong, fiscal consolidation of about 1.8 percent of G.D.P. Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The fund raised its estimate of growth for Japan, which has recently undertaken an aggressive round of fiscal and monetary stimulus to aid its slow-growing economy. Still, the I.M.F. expects an economic growth rate of only about 1.5 percent for this year and next for Japan.

Tokyo’s assertive monetary easing — which has pushed down the value of the yen, thus aiding the country’s exports — has reignited concerns about competitive devaluation, often referred to as currency wars. In the report, the fund acknowledged concerns over Japan’s policy, but called the recent bout of currency complaints “overblown.”

Article source: http://www.nytimes.com/2013/04/17/business/economy/imf-lowers-estimates-for-global-growth-for-2013.html?partner=rss&emc=rss

I.M.F. Lowers Estimates for Global Growth for 2013

In a periodic update to its economic projections, the fund said Tuesday that it expected global growth of about 3.3 percent this year and 4 percent in 2014. That is a reduction of 0.2 percentage point since its January estimate for 2013; it did not change its estimate for next year’s growth.

Still, the report underscored that financial conditions have improved markedly since last year, in no small part because of aggressive monetary easing undertaken by the Federal Reserve, the Bank of Japan and the European Central Bank.

Recession continues to afflict Europe, and the world still struggles with high unemployment, but risks to the downside — in particular from the threat of a country’s leaving the euro zone and from fiscal policy uncertainty in the United States — have faded.

“Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy,” said the report, called the World Economic Outlook. “Policy makers cannot afford to relax their efforts.”

The report again focuses in no small part on the economic troubles emanating from Europe. The fund cut its projections of current-year growth for the euro zone economies of France, Italy and Spain, as well as for Britain, which has also carried out austerity policies and entered a period of economic contraction.

I.M.F. officials have urged stronger European economies with lower borrowing costs, like Germany, to do more to foster growth across the entire region and to move more aggressively to finish a cross-border banking union to shore up investor confidence. The fund and many international economic officials, including Treasury Secretary Jacob J. Lew, are expected to press Europe on its plans for growth again this week.

“Policy should use all prudent measures to support sluggish demand,” the report said. “However, the risks related to high sovereign debt limit the fiscal policy room to maneuver. There is no silver bullet to address all the concerns about demand and debt.”

Still, officials have proposed a broad range of policies to help bolster demand in Europe, including delaying budget cutting in stronger economies, reforming the labor markets and increasing inflation targets.

“The forecast for negative growth in the euro area reflects not only weakness in the periphery but also some weakness in the core,” Olivier Blanchard, the fund’s chief economist, wrote in the report, noting that Germany is expected to have virtually no growth in 2013 and France is expected to have a negative growth rate. He included one ominous warning: “This may call into question the ability of the core to help the periphery, if and when needed.”

On a more positive note, the I.M.F. said that equity prices had risen in a broad market rally, and volatility had fallen to precrisis levels. The spread between government bond yields for periphery and central euro zone economies has diminished as well.

Still, the fund warned that “markets may have moved ahead of the real economy” and noted that improved financial conditions had not, in many cases, translated to better access to credit for consumers and businesses, with lending standards remaining tight. In the euro area, indeed, credit continues to contract and lending conditions continue to tighten, the I.M.F. said, reflecting in part “the poor macroeconomic outlook for the region as a whole.”

The fund lowered its estimate of United States growth this year to 1.9 percent, down 0.2 percentage point from its January forecast. But it said the United States was “in the lead” in seeing an acceleration of growth, in part because Washington policy makers were able to avoid the so-called fiscal cliff of tax increases and spending cuts at the turn of the year.

The I.M.F. also said that the United States had proved too aggressive in carrying out budget cuts, given its still-sluggish rates of growth and high unemployment levels. It said it anticipated that the across-the-board $85 billion in budget cuts known as sequestration would push down growth levels this year and going forward.

“The growth figure for the United States for 2013 may not seem very high, and indeed it is insufficient to make a large dent in the still-high unemployment rate,” Mr. Blanchard said in the report. “But it will be achieved in the face of a very strong, indeed overly strong, fiscal consolidation of about 1.8 percent of G.D.P. Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The fund raised its estimate of growth for Japan, which has recently undertaken an aggressive round of fiscal and monetary stimulus to aid its slow-growing economy. Still, the I.M.F. anticipates an economic growth rate of only about 1.5 percent for this year and next for Japan.

Tokyo’s assertive monetary easing — which has pushed down the value of the yen, thus aiding the country’s exports — has reignited concerns about competitive devaluation, often referred to as currency wars. In the report, the fund acknowledged concerns over Japan’s policy, but called the recent bout of currency complaints “overblown.”

“There seem to be no large deviations of the major currencies from medium-term fundamentals,” it said. “The U.S. dollar and the euro appear moderately overvalued and the renminbi moderately undervalued. The evidence on valuation of the yen is mixed.”

On the whole, emerging economies are “doing well,” the fund said, though growth rates in some big developing countries — in particular China — seem to have declined somewhat from their precrisis levels. Of late, many developing countries have benefited from high commodity prices, low interest rates and money flowing in from abroad in search of returns, the fund said. In the past, such conditions have created asset bubbles, but policy makers seem vigilant about the risks, the I.M.F. added.

Article source: http://www.nytimes.com/2013/04/17/business/economy/imf-lowers-estimates-for-global-growth-for-2013.html?partner=rss&emc=rss

Economic Memo: In Divided Market, the Bigger the Companies, the Better They Fare

It’s tough to make sense of the economy these days.

The latest jobs numbers show hiring is down. Taxes are up, austerity reigns in Washington and consumers are skittish. Yet the stock market is defying gravity, marching ever higher in spite of it all.

Behind this seeming riddle lies a confluence of economic forces that is likely to continue to produce good times for the biggest American companies — and the stock market — even if growth, as expected, slows in the coming months.

By pumping hundreds of billions of dollars a month into the global economy, central banks like the Federal Reserve and the Bank of Japan have encouraged investors to put their money into stocks and other riskier investments, increasing their prices. Bullish traders now count on a supportive Fed chairman, Ben S. Bernanke, much as their predecessors did in the 1990s when Alan Greenspan held that job.

At the same time, American giants are benefiting from productivity gains and renewed growth in China and other overseas markets, allowing them to increase profits even if business at home remains lackluster.

“Big companies have found a way not just to survive but to prosper despite the broader economy and all the uncertainty,” said Howard Silverblatt, a senior index analyst at Standard Poor’s. “There’s a disconnect between them and the rest of the world.” Investors are also looking farther ahead, discounting what economists are calling a spring swoon, and focusing on prospects for healthier growth late this year and into 2014.

After finally achieving what experts estimate was a healthy 3 percent annual growth rate in the first quarter of 2013, the American economy is expected to slow to half that pace in the next two quarters as higher payroll taxes and automatic government spending cuts begin to bite.

Signs of that start-and-stop phenomenon have been mounting in recent weeks. After adding more than 200,000 jobs a month since November, the American economy created fewer than half that number in March, surprising some observers who thought the labor market had finally turned a corner.

And on Friday, new data on retail sales showed spending fell 0.4 percent last month while consumer sentiment sank to its lowest since last summer, according to a new survey by Thomson Reuters and the University of Michigan.

Despite that bearish data, the Dow Jones industrial average, made up of 30 of the biggest American companies, rose more than 2 percent last week to a record high, and stands within shouting distance of breaking the psychologically important 15,000 level.

Indeed, while the outlook among small-business owners remains stuck near recession levels, Wall Street is again expecting the largest companies to report strong results when they announce first-quarter earnings in the coming weeks.

That is especially true for the very biggest corporations. While analysts estimate profits for the 100 largest companies in the Standard Poor’s 500-stock index to rise 6.6 percent this quarter, earnings for the bottom 100 are expected to fall by 1.6 percent.

Of all the profits earned by the companies that make up the S. P. 500, 22 percent will come from the 10 largest companies, up from 18 percent in 2010, according to Mr. Silverblatt.

The same phenomenon is playing out among privately owned firms as well. Over the last three years, sales at companies with revenue of more than $50 million have grown by an average of 15.3 percent annually, compared with 8.5 percent annual growth at businesses with less than $50 million in revenue, according to Sageworks, a financial information company.

Among the smallest privately owned firms, the mood is especially bleak.

“It’s a bifurcated economy,” said William C. Dunkelberg, chief economist at the National Federation of Independent Business, which represents small-business owners. “Corporate profits are at a record, but all the data we have say small business is dead in the water.” Last week, the group reported that its Small Business Optimism index declined in March after rising for the previous three months.

Big companies also enjoy much easier access to credit than smaller companies, which still face wariness from banks nervous about lending to borrowers without sterling credit histories.

The fiscal tightening in Washington — primarily the automatic budget cuts imposed by Congress that are now taking effect at government agencies and the increase in Social Security taxes this year — is also poised to fall more heavily on smaller, domestically focused firms than on multinational giants.

Article source: http://www.nytimes.com/2013/04/15/business/economy/in-divided-market-the-bigger-the-companies-the-better-they-fare.html?partner=rss&emc=rss

News Analysis: Thatcher Policies Still Resisted by Europe

Mrs. Thatcher, many Britons said, transformed their country, opening the way for sweeping privatization and deregulation, legitimizing wealth and unleashing acquisitive, entrepreneurial passions among her compatriots. But Thatcherism, as it came to be known, never found fertile soil on the Continent, not even after the financial crisis and euro zone woes that have plunged much of Europe into an economic gloom at least as dark as that of 1970s Britain.

Yet her doubts about a “European superstate” and the common currency ring true today, nearly a quarter of a century after she resigned. She correctly predicted in her memoirs that Germany’s historical fears about inflation would lead to slow-growth policies that would deepen the problems of the euro zone’s weaker, less efficient economies, which could no longer rely on devaluation to solve their problems.

Mrs. Thatcher’s prescription for Britain in the 1980s — faith in market forces, willingness to impose short-term austerity in the service of long-term prosperity, and skepticism or even hostility to the fiscal and social costs of the welfare state — prefigured some of the policies Germany and European regulators are still recommending, wrongly in the view of many economists, for the struggling Southern European countries.

But few of those nations, even in the hard-hit southern tier, have shown the political strength or will to face down the entrenched forces — unions, state-owned enterprises, encrusted political elites — that Mrs. Thatcher did, and the crisis drags on without resolution.

It is an indelible part of the Thatcher legacy that her success in remaking Britain never drew the Continent closer to its cantankerous, offshore cousins. Nonetheless, she remains the revered icon of British conservatism, a yardstick for true believers in the free market and the ability of capitalism to spread prosperity in a way that socialist redistribution never could.

Within moments of the announcement of Mrs. Thatcher’s death at age 87, Queen Elizabeth II and Mr. Cameron offered tributes to what he called “a great leader, a great prime minister, a great Briton.” Mr. Cameron said Parliament would be recalled on Wednesday for a special session in her honor.

The prime minister’s office said that, in line with her family’s wishes, Mrs. Thatcher would not be accorded a full state funeral but would nonetheless be buried with military honors. That ceremony is to take place on a yet-to-be-announced day next week, at St. Paul’s Cathedral. Officials gave no other details, beyond saying that the arrangements would be similar to those made after the death in a Paris car crash in 1997 of Diana, Princess of Wales, whose coffin was carried through crowds in London on a horse-drawn caisson.

The last prime minister to be accorded similar honors was Winston Churchill in 1965, a comparison that spoke for Britain’s sense of Mrs. Thatcher as a historical figure, and, as many of her admirers said on Monday, as perhaps the country’s greatest peacetime leader.

Mrs. Thatcher was Britain’s first female prime minister, serving for 11 years, beginning in 1979. Many Britons remembered her as a dominant yet divisive figure, whose impact on British life and society was enduring, if deeply contentious at the time, and whose pervasive influence on political thinking about the role of the state in free societies spread far beyond Britain’s shores.

Along with President Ronald Reagan, with whom she helped define modern conservatism, Mrs. Thatcher propagated a faith in the redemptive power of capitalism that became dominant around the world, and hastened the fall of Communism. But she also helped to unleash market forces, and unravel social compacts, in ways that many societies have yet to resolve.

Article source: http://www.nytimes.com/2013/04/09/world/europe/tributes-pour-in-for-margaret-thatcher.html?partner=rss&emc=rss

Cyprus Deal to Bring U.S. Stock Rally, Experts Say

The last-ditch effort to save the banking system in Cyprus should bring a rally when U.S. stock markets open on Monday, according to several investment managers.

Cyprus secured a 10 billion euro ($13 billion) package of rescue loans in tense, last-ditch negotiations early Monday, In return for the bailout, Cyprus’ second-biggest bank, Laiki, will be restructured, and holders of deposits exceeding 100,000 euros will have to take losses.

It was unclear just how big of a hit big depositors will have to take, but the tax on deposits was expected to net several billion euros.

U.S. investors won’t care too much about who takes losses in Cyprus, as long as there’s a bailout that stops the run on banks in the Mediterranean island nation and keeps the eurozone stable, said Karyn Cavanaugh, market strategist at ING Investment Management in New York.

“If this works out, regardless of the terms, this is going to be good for the market,” she said Sunday night.

Without a deal by Monday night, the tiny Mediterranean island nation of about 1 million would have faced the prospect of bankruptcy, which could have forced it to become the first country to abandon the euro currency. That precedent would have roiled markets and spurred turmoil across the entire eurozone.

The tax on large deposits likely will be 10 to 20 percent, in order to raise about $7.5 billion, said Jack Ablin, chief investment officer for BMO Private Bank in Chicago. The move should be well received by U.S. investors because it’s the third bailout deal in the eurozone, including Greece and Spain, and in each case the countries have agreed to austerity plans.

“I suspect investors will take that news pretty well,” he said.

The Dow Jones industrial average dropped more than 90 points Thursday in part on fears that the crisis in Cyprus will intensify. But it rebounded and erased the loss on Friday.

Late Sunday, Dow Jones industrial futures were up 42 points to 14,501. The broader SP futures added 6 points to 1,558.00 and Nasdaq futures rose fractionally as well. Japan’s benchmark Nikkei 225 gained 1.35 percent to 12,505.51 in early trading.

ING’s Cavanaugh said she’s still concerned that the U.S. economy, with recent weak corporate earnings, may be hurt by economic troubles in Europe. She’s advising investors to be defensive, staying in the market but moving some of their portfolios into bonds.

Article source: http://www.nytimes.com/aponline/2013/03/24/business/ap-us-cyprus-markets.html?partner=rss&emc=rss

Economix Blog: Federal Austerity’s Bite on Job Growth

The latest jobs report could have been even better. Employers added 236,000 jobs in February, evidence that the economy is gaining strength, but analysts generally agree that the number would have been higher if the federal government had not increased payroll tax rates in January.

And the sequestration of federal spending, which began last week, has joined the tax increases in restricting the pace of job growth.

As a result, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

“This is basically a picture of an economy that is showing modest growth, but has not yet felt the impact of the end of the payroll tax cut and the sequester,” Dean Baker, co-director at the liberal-leaning Center for Economic and Policy Research, wrote of the February data released by the Labor Department.

Government and private forecasters expect austerity, in the form of the spending cuts and tax increases, to take a big bite: about 142,000 fewer jobs a month for the rest of the year than would otherwise be added. That’s more than the 134,000 jobs that employers added each month last year, on average.

“Clearly, the labor market was in decent shape before the sequester began and before the impact of the Jan. 1 payroll tax hike started to work through,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisers. “But that does not mean these two factors — a tightening worth about 1.5 percent of G.D.P. — will not reduce payroll growth in the months ahead.”

The Congressional Budget Office estimated last year that the payroll tax increase would cost about 800,000 jobs this year, or about 67,000 a month.

Sequestration, the office estimates, will in turn cost about 750,000 jobs over the remaining 10 months of the year – or about 75,000 jobs a month.

Private economic forecasters have offered similar estimates. Macroeconomic Advisers predicted that sequestration would cost about 700,000 jobs, with most of the missed opportunities falling in the second and third quarters.

On the one hand, these estimates suggest that without federal austerity, the economy might have added more than 300,000 jobs in February. That would have been a good month even by the robust standards of the 1990s.

On the other hand, the estimates also suggest the economy will need to grow even more quickly to keep chipping away at unemployment. Another month like February, taking sequestration into account, would only increase employment by about 160,000 jobs, about enough to keep pace with population growth.

“It will take many months of job growth at this level simply to make up for the job losses during the recession,” wrote Joan Entmacher, an expert in family economic security at the National Women’s Law Center. “And Congress just made the task harder by refusing to block sequestration.”

Article source: http://economix.blogs.nytimes.com/2013/03/08/federal-austeritys-bite-on-job-growth/?partner=rss&emc=rss

Euro Watch: Euro Zone Unemployment Rose to New Record in January

That, and new data showing a decline in inflation in the euro zone, could prompt the European Central Bank to take steps to stimulate the economy when its Governing Council meets this week, analysts said.

Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.

For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted.

A separate Eurostat report showed price pressures easing in February. In the euro zone, the annual inflation rate came in at 1.8 percent, down from 2 percent in January and below the European Central Bank’s 2 percent target.

The jobless data “suggest that wage growth is set to weaken from already low rates” and further depress consumer spending, which has already been damped by government austerity measures, Jennifer McKeown, an economist at Capital Economics in London, wrote in a research note.

Ms. McKeown noted that the low inflation numbers and high joblessness “should leave the E.C.B.’s policy options open,” and said it was possible the central bank “might discuss an interest rate cut or other unconventional policies” when its Governing Council meets on Thursday.

There was some bright news Friday. A survey of European purchasing managers by Markit, a data and research firm, showed German manufacturing output growing in February for a second straight month, as new business levels improved.

The composite German purchasing managers’ index improved to 50.3 in February — just above 50, the level that separates growth from contraction — from 49.8 in January. And the Federal Statistical Office in Wiesbaden reported Friday that German retail sales rose 3.1 percent in January from December, when sales fell 2.1 percent.

Another bit of data this week also supports the view that the German economy will bounce back after a fourth-quarter slump. The European Commission’s economic sentiment indicator for the euro zone rose to 91.1 in February from 89.5 in January, with German confidence leading the gain.

“German industry is clearly rebounding and taking advantage from better external traction,” Gilles Moëc, an economist at Deutsche Bank in London, wrote.

Employment is sometimes seen as a lagging indicator of economic growth, because companies try to avoid adding to their costs until they are convinced that a rebound is at hand.

But despite the glimmers of hope in German industry, there are few reasons to regard a recovery as imminent. Markit’s overall euro zone purchasing managers’ index was unchanged in February at 47.9, signaling continued contraction.

Olli Rehn, the European commissioner for economic and monetary affairs, forecast on Feb. 22 that the euro zone would shrink 0.3 percent this year, about the same as last year. The bloc’s debt problems, and the tax increases and government spending cuts that have been prescribed as the remedy, have sapped demand and spending power, reducing business demand for labor.

In absolute terms, Eurostat estimated Friday that 19 million people in the euro zone and more than 26 million people in the overall Union were unemployed.

Spain’s unemployment rate in January was 26.2 percent, and Portugal’s was 17.6 percent. Austria, at just 4.9 percent, had the lowest rate, followed by Germany and Luxembourg, both of which had 5.3 percent unemployed.

Greece’s unemployment rate in November, the latest month for which Eurostat has figures for the country, was 27 percent.

France, with the second-largest euro zone economy, after Germany’s, had a 10.6 percent jobless rate in January. In Britain, not a euro member, the jobless rate stood at 7.7 percent.

That compares with a January unemployment rate of 7.9 percent in the United States. In Japan, 4.2 percent of the work force was counted as unemployed in December.

This article has been revised to reflect the following correction:

Correction: March 1, 2013

An earlier version of this article carried a headline that misstated the month of the data. The report was for January, not February. An earlier version of the article also misstated the name of a federal agency in Wiesbaden, Germany. It is the Federal Statistical Office, not the Federal Statistics Office.

Article source: http://www.nytimes.com/2013/03/02/business/global/euro-zone-unemployment-rose-to-new-record-in-january-as-inflation-eased.html?partner=rss&emc=rss

Hard Budget Realities as Agencies Prepare to Detail Reductions

“Sequestration,” that arcane budget term consuming Washington in recent weeks, is about to move from political abstraction to objective reality for tens of millions of Americans. Barring an extremely unlikely last-minute deal, about $85 billion is set to be cut from military, domestic and certain health care programs beginning Friday.

Much of the government will be immune, only magnifying the cuts for the rest. If they are not reversed, federal spending at the discretion of Congress will eventually fall to a new five-decade low. Cuts of even larger size are scheduled to take effect every year over the next 10, signaling an era of government austerity.

By the end of this week, federal agencies will notify governors, private contractors, grant recipients and other stakeholders of the dollars they would be about to lose. As of March 1, the Treasury Department will immediately trim subsidies for clean energy projects, school construction, state and local infrastructure projects and some small-business health insurance subsidies.

Nearly two million people who have been out of work for more than six months could see unemployment payments drop by 11 percent in checks that arrive in late March or the first days of April, according to the White House budget office, an average of $132 a month. Doctors who treat Medicare patients will see cuts to their reimbursements.

If the stalemate in Washington continues, furloughs and layoffs will probably begin in April, starting largely in the 800,000-member civilian work force of the Defense Department and then rippling across the country, from meat inspectors in Iowa to teachers in rural New Mexico.

“If they hit me with a $3 million cut in March, I’m not sure what I’m going to do,” said Raymond R. Arsenault, the superintendent of the Gallup-McKinley County Schools, a district that serves primarily Navajo students on the Arizona-New Mexico border.

Mr. Arsenault’s school system would be hit much harder than most because 35 percent of his $100 million annual budget comes from federal education “impact aid” to offset the large tracts of land that are owned by Washington and therefore not subject to taxation. Of that, $3 million may be about to disappear.

The sequester involves trimming $85 billion from a $3.6 trillion annual federal budget, or about 2.4 percent. But the cuts will not affect Social Security or Medicaid, and the Medicare cuts total only about $11 billion in the 2013 fiscal year, which ends Sept. 30, according to calculations by the Bipartisan Policy Center.

Thus, entitlement spending, which poses the biggest long-term challenge to the federal budget, accounts for only a sliver of the cuts. That leaves more than $70 billion in cuts to be applied over the next seven months to the roughly two-fifths of the budget that is devoted to discretionary spending, including the military, education and dozens of other categories.

In a matter of weeks the cuts would cascade through the government, delaying snow removal on the Tioga Pass in Yosemite National Park, for example, and keeping an aircraft carrier battle group docked in Norfolk, Va., rather than steaming through the Persian Gulf.

“The cut is so big and over such a short period of time that there’s no way to avoid all the operational and program harms,” said Daniel I. Werfel, controller of the White House budget office.

These cuts would probably not be confined to 2013. Even if President Obama manages to persuade Congress to raise new revenue, he has said he would replace only half of the spending cuts with tax increases, in essence accepting a half-trillion dollars in cuts over 10 years. That would be on top of more than $1 trillion in cuts already enacted by the Budget Control Act, which created the sequester in 2011 as part of a deal to raise the country’s statutory borrowing limit.

A comprehensive deficit-reduction deal, which is currently moribund but is still both Congress and the White House’s stated goal, might mitigate the impact by including fast-growing programs like Medicare and Medicaid in the cuts. But belt-tightening, for now, appears to be the new normal.

Article source: http://www.nytimes.com/2013/02/24/us/politics/hard-budget-realities-as-agencies-prepare-to-detail-reductions.html?partner=rss&emc=rss

In Battling Tax Dodgers, Britain Gives Shame a Try

On its Web site, Her Majesty’s Revenue Customs on Thursday published the names and addresses of accused tax cheats, along with the amount the department says they owe. The individuals and small businesses owe a combined £1.8 million, or $2.7 million, in fines and unpaid taxes. The department said the list would be updated every three months.

The campaign is intended to encourage Britons to pay their taxes in full and put pressure on tax dodgers to come forward, the government said, but some lawmakers and pressure groups argued that it failed to address the real problem in Britain: tax avoidance strategies used by large corporations.

“The publication of these names sends a clear signal that cheating on tax is wrong and reassures people who pay their taxes — the vast majority — that there are consequences for those who refuse to tell Her Majesty’s Revenue Customs about their full liability,” David Gauke, exchequer secretary to the Treasury, said in a statement.

Executives of Starbucks, Amazon and Google were questioned by lawmakers in November over concerns that the companies were not paying enough tax in Britain, given the sales they generate here. The companies responded that they had been unfairly singled out, but a month later Starbucks bowed to public pressure and said it would pay more corporate tax in Britain.

Going after tax cheats and making it harder for individuals and companies to find loopholes in the tax system is one of Prime Minister David Cameron’s top goals. At a time of austerity — and when average households are increasingly squeezed by rising electricity and food prices — the government is under pressure to be seen as doing more to limit tax evasion and avoidance. In January, Mr. Cameron said those avoiding taxes “need to wake up and smell the coffee.”

Britain missed out on £5 billion in revenue in the tax year that ended in 2011 because of tax-avoidance methods and about £4 billion from tax evasion, according to the tax authorities. The Public Accounts Committee, a group of lawmakers representing the largest political parties, called on the authorities Tuesday to consider naming and shaming those who promote tax avoidance strategies to make them less attractive to individuals and companies.

The nine names published on the Web site also include a wine merchant, a grocery store and a bus operator. UK Uncut, a campaign that combats tax avoidance, said the step showed the authorities “spent time and money going after small companies that avoid tax, but so far we’ve seen no serious action from the government to claw back the billions avoided by global giants.”

Chris Morgan, head of tax policy at KPMG in London, said the naming and shaming campaign was a “perfectly reasonable step” and would help to deter people from not declaring their full income. The tax bills of large corporations are a different matter because companies generally declare their income properly, he said, but their tax obligations can be interpreted in different ways.

Judith Freedman, a professor of taxation law at Oxford University, agreed.

“The people who have been named on the Web site deliberately evaded taxes” and were penalized for it, she said, adding that there was “no penalty you could levy against the big companies.”

“So far, no one has proven that they have done something wrong,” she said. “You might not like what they do, but it is no secret.”

Article source: http://www.nytimes.com/2013/02/23/business/global/britain-names-and-shames-accused-tax-scofflaws.html?partner=rss&emc=rss

Hollande Visits Greece to Show Support for Recovery Efforts

“Our message is one of friendship, support, trust and growth” for Greece, Mr. Hollande said after talks with Prime Minister Antonis Samaras. “No European people have undergone such a test, so we must stand by Greece’s side.”

Mr. Hollande, a socialist who came to power last spring on a pledge to increase growth to counteract deepening austerity in Europe, emphasized the importance of foreign investment to bolster Greece, which is in its sixth year of recession. Greek unemployment has risen to 27 percent, climbing above 60 percent for young people.

Mr. Hollande said he would push French companies to “actively support investments” and to participate in bids for the privatization of Greece’s state water and rail companies as well as other projects.

“I will speak to them this evening,” he said, before further talks with Mr. Samaras and his partners in Greece’s coalition government that were to conclude his roughly six-hour visit.

Mr. Samaras, for his part, heralded “a new chapter” in bilateral ties, describing the French leader’s visit as “a vote of confidence that proved Greece is no longer the weak link of Europe.”

He said talks on possible cooperation focused on sectors including the military, construction and, chiefly, energy, noting that Greece aimed to become an “energy hub in the Aegean.”

A plan to cooperate on energy projects is to be broached during Mr. Samaras’ visit next month to Turkey, which objects to Greece’s prospecting for oil and gas in the Aegean until the two countries resolve a longstanding dispute regarding the delineation of the countries’ territorial waters and the continental shelf.

Mr. Hollande indicated that energy was a potential area of mutual business opportunity. “If France is able to commonly exploit hydrocarbon reserves with Greece, it will do so,” he said.

The French president added that he was “not here to sell arms,” an apparent response to speculation about the possible lease or sale of frigates to Greece. He added that he and Mr. Samaras had signed a deal to bolster tourism, which accounts for a fifth of Greece’s dwindling gross domestic product.

Recession is a Europe-wide problem, not particular to Greece, Mr. Hollande added, noting that France would fall short of its target of 0.8 percent growth for 2013.

Although security was tight on Tuesday, with police helicopters circling over central Athens, the French leader’s visit did not involve the draconian measures that accompanied the arrival last October of Chancellor Angela Merkel: Germany is widely seen by Greeks as having imposed a series of austerity measures including wage and pension cuts. Still, tension in Greece is high ahead of the anticipated return to Athens next week by inspectors from the so-called troika — the European Commission, the International Monetary Fund and the European Central Bank.

Thousands of Greek workers were poised to walk off the job Wednesday in the first general strike of the year, protesting salary cuts and plans for selling state-owned assets.

Mr. Samaras’s government has insisted on the need to attract foreign investments to raise revenue, which fell 7 percent short of the budget target last month. But unions and opposition parties oppose further foreign involvement. Greece has agreed to two bailouts worth a total of €240 billion in exchange for implementing austerity measures that have lopped 25 percent off its G.D.P. since the crisis erupted three years ago.

Article source: http://www.nytimes.com/2013/02/20/business/global/hollande-visits-greece-to-show-support-for-recovery-efforts.html?partner=rss&emc=rss