June 25, 2019

Economix Blog: Kissing Away the Corporate Tax

My column on Wednesday startled some readers. Was I proposing to do away with corporate taxes simply because globalization is making it easier for multinational companies to avoid them? Should we really just roll over and accept defeat?

Well, other advanced nations seem on their way to doing exactly that.

They have found a way of reducing corporate tax rates that improves economic efficiency, lowers the cost of capital for their companies and may even increase the progressivity of their tax system: offsetting those lower corporate rates with higher tax rates on the income that companies provide to their shareholders.

Since 2000, the top corporate tax rate in Britain has fallen to 23 percent, from 30 percent; in France it has receded to 34.4 percent, from 37.8 percent, and in Denmark it has declined to 25 percent, from 32 percent, according to data from the Organization for Economic Cooperation and Development.

Source: Organization for Economic Cooperation and Development

Many of these countries have compensated for lowering the corporate rates by taxing dividends more. Over the same period, the dividend tax rate rose to 30.6 percent in Britain, from 25 percent; in France, it went to 44 percent from 40.8 percent, and in Denmark it rose to 42 percent from 40 percent. Most industrial countries have also eliminated exemptions to prevent double taxation of dividends.

The United States has rowed in the opposite direction. Companies complain, rightly, that the corporate tax rate in the United States is too high compared to those of its peers: 39.1 percent, combining federal and state taxes – virtually the same as it was 13 years ago. But they rarely mention that the tax on profits flowing to shareholders has fallen drastically.

Even after the New Year’s budget deal raised taxes on the highest earners, the 20 percent top rate for dividends and long-term capital gains remains much lower than in the 1990s — when the top capital gains tax was 28 percent, and dividends were taxed as ordinary income.

A paper published a couple of years ago by Rosanne Altshuler of Rutgers, Benjamin H. Harris of the Brookings Institution and Eric Toder of the Tax Policy Center suggested that the American mix is particularly inefficient.

Because American corporate tax mostly falls on domestic profits (foreign profits retained abroad pay no tax), it raises the cost of domestic investment and encourages companies to invest abroad. It also encourages them to seek out low-tax havens around the world to park their profits. And it encourages companies to shed their corporate status to avoid the tax altogether.

The Altshuler-Harris-Toder paper suggests that reducing the corporate tax rate and increasing taxes on dividends and capital gains would be a much more efficient way to raise money.

Their calculation — which is only rough because it assumes no change in the behavior of companies or their shareholders — suggests that raising the top tax on long-term capital gains to 28 percent and taxing dividends as ordinary income (which faced a top rate of 35 percent at the time of the study) would raise enough money to pay for a cut in the federal corporate tax rate from 35 to 26 percent.

But the most interesting bit of the study is their finding that these changes would make the tax structure more progressive – increasing the tax burden on Americans with the highest incomes. That’s because the rich would bear the brunt of the increase in the dividend and capital gains tax.

Even assuming that shareholders bear the entire burden of corporate taxation — an assumption that is being questioned in the economic literature — the change suggested by the economists would lower the average federal tax rate of everybody except the top 1 percent of Americans, who would suffer a tax increase of 1 percent.

Under a different assumption — that corporate taxes are mostly paid by workers because of the impact of the tax on investment, jobs and wages — the progressivity would be steeper. In particular, those in the top percentile of income would see their taxes rise by 1.8 percent.

So getting rid of corporate taxes — or at least reducing them substantially — may not be such a bad idea. The tax burden would just have to be shifted from the companies to their owners.

Article source: http://economix.blogs.nytimes.com/2013/05/31/kissing-away-the-corporate-tax/?partner=rss&emc=rss

Risk of Bank Failures Rising in Europe, E.C.B. Warns

In a sober assessment of the state of the zone’s financial system, the E.C.B. said that a prolonged recession had made it harder for many borrowers to repay their loans, burdening banks that had still not finished repairing the damage caused by the 2008 financial crisis.

Last year “was not a good year for banks at all,” Vítor Constâncio, the vice president of the E.C.B., said Wednesday.

While the E.C.B., as customary, did not mention specific banks, it said the most vulnerable were those in countries with high unemployment or falling house prices. That list would include Italy, Spain, Greece and Portugal among others. But ailing banks are also a problem in stronger countries like Germany, where Commerzbank and publicly owned landesbanks, or state banks, are struggling with bad loans to the shipping industry and other problems.

Germany has drawn criticism for lecturing other countries on excessive government debt, while trying to protect its own banks from greater scrutiny. “They are very virtuous when they look at national accounts but less when they are looking at their own banks,” said Stefano Micossi, an economist who is director general of Assonime, an Italian business group.

The E.C.B. takes the pulse of the European financial system every six months, but the latest report, running 128 pages, has particular importance as the central bank prepares to become the supreme regulator of euro area lenders. The report also raised concerns about whether banks were systematically underestimating risk, and served as a reminder of the monumental task that lies ahead for the E.C.B. when it assumes its new powers next year.

A similarly dim snapshot of the state of the euro zone economy was issued Wednesday by the Organization for Economic Cooperation and Development in Paris. It warned of the dangers posed by weakly capitalized banks, a problem it said underlined the need for E.U. leaders to push through with a so-called banking union that would include centralized supervision of lenders.

The limited ability of European banks to absorb losses and the lack of a full banking union are potential threats to achieving a lasting stability, the O.E.C.D. said. Reduced tensions on financial markets seem to have dampened the desire to push for progress in creating joint banking mechanisms, it added.

“It is important to strengthen the capital of financial institutions so that they can withstand sovereign debt write-downs if rules prove insufficient to prevent sovereign crises,” the O.E.C.D. report said.

The O.E.C.D., based in Paris, predicted that gross domestic product in its 34 member countries, all of which have developed economies, would grow 1.2 percent this year, slightly below the 1.4 percent it forecast six months ago.

Unemployment, especially in Europe, remains a persistent problem contributing to the uneven pace of growth globally, the O.E.C.D. said. It warned European countries that failing to address the issue would undermine the progress made from the fiscal and structural adjustments that many countries have pushed through in recent years.

The E.C.B., as part of changes designed to avert future financial crises, will begin supervising the euro area banks sometime next year, depending on when changes in E.U. law are approved by the European Parliament. The E.C.B. has already begun preparing to assume the new powers.

The report issued Wednesday raised the question of whether the E.C.B. would be more willing than national regulators to require banks to confront problems like problem loans or other damaged assets. Many analysts say the euro area still has numerous so-called zombie banks, which are close to bankruptcy but have kept their losses hidden.

Melissa Eddy contributed reporting from Berlin.

Article source: http://www.nytimes.com/2013/05/30/business/global/risk-of-bank-failures-rising-in-europe-ecb-warns.html?partner=rss&emc=rss

Apple’s Web of Tax Shelters Saved It Billions, Panel Finds

The investigation is expected to set up a potentially explosive confrontation between a bipartisan group of lawmakers and Timothy D. Cook, Apple’s chief executive, at a public hearing on Tuesday.

Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”

Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue.

Investigators have not accused Apple of breaking any laws and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. In recent months, revelations from European authorities about the tax avoidance strategies used by Google, Starbucks and Amazon have all stirred public anger and spurred several European governments, as well as the Organization for Economic Cooperation and Development, a Paris-based research organization for the world’s richest countries, to discuss measures to close the loopholes.

Still, the findings about Apple were remarkable both for the enormous amount of money involved and the audaciousness of the company’s assertion that its subsidiaries are beyond the reach of any taxing authority.

“There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

While Apple’s strategy is unusual in its scope and effectiveness, it underscores how riddled with loopholes the American corporate tax code has become, critics say. At the same time, it shows how difficult it will be for Washington to overhaul the tax system.

Over all, Apple’s tax avoidance efforts shifted at least $74 billion from the reach of the Internal Revenue Service between 2009 and 2012, the investigators said. That cash remains offshore, but Apple, which paid more than $6 billion in taxes in the United States last year on its American operations, could still have to pay federal taxes on it if the company were to return the money to its coffers in the United States.

John McCain of Arizona, who is the panel’s senior Republican, said: “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.”

In prepared testimony expected to be delivered to the Senate committee by Mr. Cook and other Apple executives on Tuesday, the company said it “welcomes an objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy.”

The executives plan to tell the lawmakers that Apple does not use tax gimmicks, according to the prepared testimony.

Nelson D. Schwartz reported from Washington and Charles Duhigg from New York. David Kocieniewski contributed reporting from New York.

Article source: http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?partner=rss&emc=rss

O.E.C.D. Warns Slovenia on Banking Crisis

LJUBLJANA, Slovenia — Slovenia, trying to avoid becoming the euro zone’s next bailout victim, may have ‘’significantly’’ misread the cost of fixing its troubled banks, the Organization for Economic Cooperation and Development said Tuesday.

Following the messy rescue of Cyprus last month, Slovenia, a country of 2 million perched on Italy’s northeast border, is facing intensifying market pressure while seeking funds to heal its state-owned financial sector.

The O.E.C.D., which includes 34 developed countries, said in a report that Slovenia should save state-owned banks that are viable and sell them into private hands, and allow those that are not viable to fail.

According to an assessment made last year, the local banks, mostly state-owned, are burdened with 7 billion euros, or about $9 billion, in bad loans — a fifth of Slovenia’s gross domestic product.

The country risks falling behind in its race to catch up with Western living standards, the Paris-based organization said.

The report predicted a second straight year of economic contraction, by 2.1 percent. It also said that Slovenia’s public debt had more than doubled since 2008 to 47 percent of gross domestic product and that it could rise to 100 percent by 2025 if no changes are made.

Facing uncertain costs to bail out its lenders, continued pressure on its exports from the euro zone crisis, and a rise in lending costs after Cyprus’s bailout, Slovenia has one of the worst economic outlooks in the O.E.C.D., the organization’s report said.

‘’Against this difficult background and with a possible further deterioration in the international environment, Slovenia faces risks of a prolonged downturn and constrained access to financial markets,’’ the report said.

It recommended that the government increase the powers of the competition office, gradually raise the retirement age, wean wealthier citizens off family benefits, cut unemployment and other benefits, and improve efficiency in education and health care.

Slovenia is the only former communist European Union state that declined to sell most of its banking sector into private hands, a strategy that led to political influence, mismanagement and disastrous lending that has now put the lenders at risk.

‘’Slovenia is facing a severe banking crisis, driven by excessive risk-taking, weak corporate governance of state-owned banks and insufficiently effective supervision tools,’’ according to the report.

Last year’s estimate of the level of bad loans in the banking system is outdated and was created by methodology that was weak and nontransparent, so the real damage could be worse, the organization said.

‘’Capital needs are uncertain and could in fact be significantly higher,’’ it said.

The O.E.C.D. said it welcomed a plan by the Slovenian government to create a so-called bad bank to take nonperforming loans away from state banks, but it said that ‘’lack of transparency and potential political interference pose risks.’’

It added that weak corporate governance and credit misallocation could potentially be attributed to corrupt behavior.

The organization also urged the government to start new stress tests of the banking sector based on a more robust methodology, and to publish the results before recapitalizing distressed but viable banks, preferably through share issues.

But it said market valuation showed that equity in state banks had been ‘’virtually wiped out,’’ and that Slovenian banks that were nonviable should be wound down, with holders of subordinated debt and lower-ranked capital instruments absorbing losses.

Slovenia should then privatize the banks, the Organization for Economic Cooperation and Development said. It criticized a plan being discussed by the current left-of-center government for the state to retain a blocking minority, saying such a move could lead to political interference and new problems.

It said failure to pursue the changes pledged when the government in Ljubljana tapped the dollar debt market last year could ‘’significantly raise borrowing costs,’’ as could a higher-than-expected bill for recapitalizing banks. All of this has put pressure on growth, the report said.

‘’Potential growth has fallen significantly since the outset of the crisis,’’ it said. ‘’As a result, Slovenia is unlikely to resume the catching up toward more developed O.E.C.D. countries soon.’’

Article source: http://www.nytimes.com/2013/04/10/business/global/oecd-warns-slovenia-on-banking-crisis.html?partner=rss&emc=rss

German Officials Welcome Offshore Tax Havens Leak

“I am pleased about these reports,” Finance Minister Wolfgang Schäuble said on German radio.

Berlin is hoping the disclosures will provide some leverage in the country’s efforts to drum up support for its long-running fight against international financial systems that make it easy for the wealthy to hide their money.

Germany has lobbied for years within international organizations, including the Group of 20 and the Organization for Economic Cooperation and Development, to clearly define tax havens in an effort to pressure such jurisdictions to fight tax avoidance and comply with money-laundering statutes and other measures aimed at dirty money. But the efforts have been hampered by reluctance among some of its international partners, including some within the European Union, that do not share the German sense of outrage.

“I think that such things as have been made known will increase the pressure internationally, and we will be able to increase the cooperation with those who have been more reticent,” Mr. Schäuble said in an interview with Deutschlandfunk radio.

He was among those who made sure that Cyprus, the tax haven that received a bailout last month, would impose levies on its largest depositors in exchange for the European Union’s support. “We don’t like this business model, and we hope it is not successful,” Mr. Schäuble said. “And when it becomes insolvent, as in Cyprus, they can’t expect it to keep being financed.”

But the information that has trickled out has also tarnished German banks, and clearly the German authorities hoped to use the leak to gain ground in their own struggle to bring tax evaders to justice. Many Germans are listed among the wealthy in the data dump that was obtained by the International Consortium of Investigative Journalists, based in Washington, and shared with select news media outlets around the globe, including two in Germany.

Economic justice has been a hot topic in Germany. The nation’s sense of social justice is strong, and the government has gone to great lengths to obtain information about its wealthiest residents who sneak money into Switzerland or Liechtenstein in order to avoid the country’s hefty income tax, which can be as high as 45 percent.

German banks, too, may feel the pressure from the release of the information, which states that international financial institutions have “aggressively worked” to help wealthy clients use offshore banking facilities in places like the British Virgin Islands. Deutsche Bank, Germany’s largest lender, vigorously defended the legality of its management services and insisted that clients were advised to properly report all of their taxes.

Mr. Schäuble conceded that the information in the report was not necessarily evidence of wrongdoing. He nevertheless called for the German news outlets with access to the information to make it available to the authorities.

The leaked records reported on Thursday include data mainly from the British Virgin Islands, the Cook Islands and Singapore. Not all of those named necessarily have secret bank accounts. Some only conducted business through companies they control that are registered offshore.

Article source: http://www.nytimes.com/2013/04/06/world/europe/german-officials-welcome-offshore-tax-havens-leak.html?partner=rss&emc=rss

Economix Blog: In Most Rich Countries, Women Work More Than Men

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

In most of the developed world, women spend more time working each day than men do, if you include unpaid work.

According to the latest report on gender and employment from the Organization for Economic Cooperation and Development, across the developed world and in other countries tracked by the organization, men spend more minutes per day in paid work than women do.

The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris. The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris.

In the United States, for example, men spend 5 hours and 8 minutes working on the average day, whereas women spend 4 hours and 2 minutes.

But when it comes to unpaid work — activities like child care and cleaning — women spend vastly more time than men in every country the organization included in its analysis.

The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris. The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris.

Women perform a disproportionate share of unpaid work regardless of whether they are employed. In couples where both partners have paid jobs, women spend more than two hours per day in unpaid work, the report says, and that gap “hardly narrows” even when you restrict the sample to couples with both partners working full time. Among couples in which the woman works and the man doesn’t, men do only as much housework as the women, and spend far less time in child care.

The biggest gender gaps in unpaid work, in fact, involve taking care of children: working mothers devote about 50 percent more time to child care than nonworking fathers do.

When you look at time spent in paid and unpaid work together, women edge out men in most countries included in the analysis.

The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris. The years covered are: Australia: 2006; Austria: 2008-09; Belgium: 2005; Canada: 2010; China: 2008; Denmark: 2001; Estonia: 1999-2000; Finland: 2009-10; France: 1998-99; Germany: 2001-02; Hungary: 1999-2000; India: 1999; Italy: 2002-03; Ireland: 2005; Japan: 2006; South Korea: 2009; Mexico: 2009; the Netherlands: 2006; New Zealand: 2009-10; Norway: 2000-01; Poland: 2003-04; Portugal: 1999; Slovenia: 2000-01; South Africa: 2000; Spain: 2002-03; Sweden: 2000-01; Turkey: 2006; Britain: 2000-01; and the United States: 2010. Source: Organization for Economic Cooperation and Development. Secretariat estimates based on national time-use surveys. Further detail, see: Miranda, V. (2011), “Cooking, Caring and Volunteering: Unpaid Work Around the World”, O.E.C.D. Social, Employment and Migration Working Papers, No. 116, O.E.C.D. Publishing, Paris.

The chart above shows how much more time women spend than men on unpaid work (light blue bars); how much less time women spend than men on paid work (medium blue bars); and how much time over all women spend compared to men on paid and unpaid work combined (dark blue diamonds).

As you can see, across the member countries of the Organization for Economic Cooperation and Development, women spend 21 minutes more time, on average, in total work per day than men do.

The gap is exactly the same in the United States. Of the countries surveyed, the gap is biggest in India, where women spend on average 94 minutes more time than men on total work each day.

In a few countries analyzed, though, men do spend slightly more time than women on total work per day: Denmark, Sweden, Norway, the Netherlands and New Zealand. In Britain and Germany, the two sexes spend almost equal time on total work each day, although the composition of that work falls along traditional gender lines, with men spending more of their time on paid work and women more on unpaid work.

For whatever reason, the traditional division of labor appears deeply ingrained, in both rich countries and poor ones. The report observes also that policies intended to help promote work-life balance, such as parental leave options, often counterintuitively have the effect of reinforcing gender roles at home:

[M]others generally make much wider use than fathers of parental leave options, part-time employment opportunities, and other flexible working time arrangements like teleworking. It is primarily mothers, for example, who avail themselves of long parental leave – and they are frequently reluctant to give up leave to their partner’s benefit. The result is a reinforcement of traditional gender roles. In fact, even when policies allow or encourage women to change the nature of their participation in employment or their hours of work, inequalities at home and in contributions to home life have a tendency to remain. A vicious circle is thus established: as long as mothers reduce employment participation when they have (young) children in the household, employers have an incentive to invest less in their female than in their male workers.

Article source: http://economix.blogs.nytimes.com/2012/12/19/in-most-rich-countries-women-work-more-than-men/?partner=rss&emc=rss

Asian Cities’ Air Quality Getting Worse, Experts Warn

Clean Air Asia, a regional network on air-quality management, aggregated data from more than 300 cities in 16 Asian countries and found that levels of fine particulate matter — a key pollutant in terms of its impact on human health — were below targets recommended by the World Health Organization in just 16 cities, most of them in Japan.

Pollution levels in 70 percent of the cities, mostly in fast-growing, less developed countries like China, India, Bangladesh and Mongolia, exceed even the most lenient of several targets recommended by the W.H.O., the organization said.

“The economic rebound in Asia following the global economic crisis of 2008 has accelerated sales of both passenger and freight vehicles as well as power generation,” Sophie Punte, Clean Air Asia’s executive director, said in a statement. This “is putting pressure on urban air quality in the region,” she said.

The number of people living in cities in developing Asian nations is expected to swell by 1.1 billion over the next 20 years, making urban air pollution a particularly relevant issue for the region.

A study by the World Health Organization published in 2008 estimated that outdoor air pollution caused 1.3 million premature deaths worldwide per year, 800,000 of them in Asia.

Similarly, a report by the Organization for Economic Cooperation and Development this year warned that air pollution could become the biggest environmental cause of premature death by 2050 if action is not taken to improve air quality. The number of premature deaths from exposure to particulate matter is projected to reach 3.6 million a year globally by then, with most of the deaths occurring in China and India, the report said.

Article source: http://www.nytimes.com/2012/12/06/world/asia/asian-cities-air-quality-getting-worse-experts-warn.html?partner=rss&emc=rss

Economix Blog: A Dismal Outlook for Growth

They don’t call it the dismal science for nothing.

In a new paper, the Northwestern economist Robert J. Gordon argues that the United States should get ready for an extended period of slowing growth, with economic expansion getting ever more sluggish and the bottom 99 percent getting the short end of the (ever-slower-growing) stick.

“A provocative ‘exercise in subtraction’ suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades,” he writes.

To put that in context, American households’ real consumption expanded by about 3 percent a year before the recession hit and has been growing about 2 percent a year during the recovery, according to statistics from the Organization for Economic Cooperation and Development.

Mr. Gordon’s paper joins a growing economic literature that seeks and fails to find new sources of bang-up growth. (See Tyler Cowen’s wonderful “The Great Stagnation” for more on that.)

In the past, the United States economy grew quickly and its citizens got richer, in no small part because of advances made in three consecutive industrial revolutions: steam engines and railroads first; electricity, indoor plumbing and the combustion engine second; and the computing revolution third.

But the productivity and income gains begot by that third revolution have not been as impressive as the productivity and income gains from the first and second, he writes. Moreover, the United States is facing a number of headwinds. We’ve gotten most of the gains from the “demographic dividend.” Inequality is rising. Higher education is getting more costly, and student performance waning. We have high levels of government and household debt. And we have taxes and regulations stifling innovation and businesses.

That leads Mr. Gordon to question the notion that growth is a “continuous process that will persist forever.” We might not stop growing. But he argues we will stall out.

“Doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated to one century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988,” he writes. “But then doubling is predicted to slow back to a century again between 2007 and 2100.”

Of course, there could be revolutionary new sources of growth: from the singularity, maybe, or a new renewable energy source. An article about “The Next Great Growth Cycle” also has some good pushback on the doom-and-gloom economic narrative.

Article source: http://economix.blogs.nytimes.com/2012/08/28/a-dismal-outlook-for-growth/?partner=rss&emc=rss

Mixed Signals for European Central Bank as Data Point to Slowdown

The Organization for Economic Cooperation and Development forecast Monday that euro zone economies will see a “marked slowdown” next year, and called on the European Union to clarify its anti-crisis measures, The Associated Press reported.

In an update of economic forecasts timed to coincide with this week’s meeting of the Group of 20 major economies, the Paris-based O.E.C.D. said “patches of mild negative growth” were likely in the euro zone in 2012.

It predicted economic growth in the euro zone would stall at 0.3 percent next year, after just 1.6 percent growth this year. That is down from the O.E.C.D.’s forecast in May of 2 percent growth in the euro zone in 2012.

“Detailed information is needed” on how the European Union will implement the package of measures announced last week aimed at resolving the European debt crisis, the O.E.C.D. said.

Inflation in the 17 countries that belong to the euro area was steady in October at 3 percent, according to figures from Eurostat, the European Union statistical agency. That was contrary to analyst predictions of a slight drop because of slowing economic growth. However, unemployment edged higher to 10.2 percent in September from 10.1 percent in August, Eurostat said.

The data, along with a muted official forecast for Spanish growth, offer no easy choices for Mario Draghi when he presides over his first monetary policy meeting as president of the European Central Bank on Thursday.

Some economists expect the E.C.B. to cut its benchmark interest rate on Thursday in response to signs of a marked slowdown by the euro area economy. The Bank of Spain said Monday that the Spanish economy stopped growing in the three months through September, as government austerity measures cut into domestic consumption.

At the same time, inflation remains well above the E.C.B.’s target of about 2 percent. As a result Mr. Draghi, anxious to establish his credentials as an inflation fighter, may be hesitant to preside over a rate cut just days after succeeding Jean-Claude Trichet as E.C.B. president.

“Our forecast is for the first cut to be delivered this week but this uncomfortably high headline inflation reading may make the E.C.B. want to wait until December,” analysts at HSBC wrote in a note to clients Monday.

Economists said joblessness was likely to rise further as the sovereign debt crisis continues to act as a drag on euro-area growth. An additional 188,000 people became unemployed in September, a total of 16.2 million people, the biggest increase in two years.

“The outlook is not particularly bright for the euro area labor market,” Francois Cabau, an analyst at Barclays Capital, wrote in a note.

Unemployment was highest in Spain, at 22.6 percent, and Greece, at 17.6 percent. Italy recorded one of the biggest jumps in joblessness, to 8.3 percent from 8 percent, as well as one of the biggest increases in inflation, to 3.8 percent from 3.6 percent.

The rise in Italian prices was caused partly by an increase in the value-added tax. Still, the data may add to the heat that Prime Minister Silvio Berlusconi is feeling from other leaders, who are showing frustration with his failure to push through policies to make the Italian economy perform better. Italy has replaced Greece as the biggest threat to the euro area, as bond investors begin to doubt that the country will be able to service its debt.

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Economix Blog: World of Commuters

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

Americans have some of the shortest commuting times in the developed world, according to a new report from the Organization for Economic Cooperation and Development.

DESCRIPTIONO.E.C.D. Time Use Survey database. Note: Data refer to 1998-99 for France; 1999 for Portugal and India; 1999-2000 for Estonia, Finland and Hungary; 2000 for South Africa; 2000-1 for Norway, Slovenia, Sweden, United Kingdom; 2001 for Denmark; 2001-2 for Germany; 2002-3 for Italy and Spain; 2003-4 for Poland; 2005 for Belgium, Canada and Ireland; 2006 for Japan and Turkey; 2008 for United States; 2008-9 for Austria; and 2009 for Korea. Data have been normalized to 1,440 minutes per day: in other words, for those countries for which the time use did not add up to 1,440 minutes, the missing or extra minutes (around 30 to 40 minutes usually) were equally distributed/subtracted across all activities. Employed refers to full-time employed except for Hungary, Ireland, Portugal, Turkey and South Africa, for which they refer to all employed (e.g, part-time employed are included). Data refer to people 15 or older, except for Austria, where no limit of age is defined, and for Hungary (people ages 15 to 74 are considered).

According to organization’s time use data, the average commuting time in the United States is about 28 minutes (similar to a separate measure from the United States Census Bureau). That is 10 minutes shorter than the average commuting time for all member countries, of 38 minutes, and longer than the time spent traveling to work in only three rich countries (Israel, Denmark and Sweden).

The O.E.C.D. member country with the longest average commuting time is South Africa, where the typical time spent traveling to work is 56 minutes.

To the extent that public policy is intended to enhance not only economic growth but also total happiness, these figures are important. A study from Alan Krueger, Daniel Kahneman and others found that commuting to work was the daily activity that gave the least enjoyment.

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