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Germany Fights Population Drop

August 13, 2013 by

The reality is that the German population is shrinking and towns like this one are working hard to hide the emptiness. Mr. Voigt has already supervised the demolition of 60 houses and 12 apartment blocs, strategically injecting grassy patches into once-dense complexes.

“We are trying to keep the town looking good,” he said.

There is perhaps nowhere better than the German countryside to see the dawning impact of Europe’s plunge in fertility rates over the decades, a problem that has frightening implications for the economy and the psyche of the Continent. In some areas, there are now abundant overgrown yards, boarded-up windows and concerns about sewage systems too empty to work properly. The work force is rapidly graying, and assembly lines are being redesigned to minimize bending and lifting.

In its most recent census, Germany discovered it had lost 1.5 million inhabitants. By 2060, experts say, the country could shrink by an additional 19 percent, to about 66 million.

Demographers say a similar future awaits other European countries, and the issue grows more pressing every day as Europe’s seemingly endless economic troubles accelerate the decline. But bogged down with failed banks and dwindling budgets, few are in any position to do anything about it.

Germany, however, an island of prosperity, is spending heavily to find ways out of the doom-and-gloom predictions, and it would seem ideally placed to show the Continent the way. So far, though, even while spending $265 billion a year on family subsidies, Germany has proved only how hard it can be. That is in part because the solution lies in remaking values, customs and attitudes in a country that has a troubled history with accepting immigrants and where working women with children are still tagged with the label “raven mothers,” implying neglectfulness.

If Germany is to avoid a major labor shortage, experts say, it will have to find ways to keep older workers in their jobs, after decades of pushing them toward early retirement, and it will have to attract immigrants and make them feel welcome enough to make a life here. It will also need to get more women into the work force while at the same time encouraging them to have more children, a difficult change for a country that has long glorified stay-at-home mothers.

There is little doubt about the urgency of the crisis for Europe. Several recent studies show that historically high unemployment rates — in excess of 50 percent among youths — in countries like Greece, Italy and Spain are further discouraging young people from having children. According to the European Union, the total number of live births in 31 European countries fell by 3.5 percent, to 5.4 million from 5.6 million, between 2008 and 2011. In 1960 about 7.5 million children were born in 27 European countries.

Even before those trends were detected, many countries in Europe were expected to shrink by 2060; some, like Latvia and Bulgaria, even more than Germany. And the proportion of elderly will become burdensome. There are about four workers for every pensioner in the European Union. By 2060, the average will drop to two, according to the European Union’s 2012 report on aging.

Some experts worry that Germany has already waited too long to tackle the issue. But others say that is too pessimistic. In any case, in Germany the issue is front and center now.

Large families began to go out of fashion in what was then West Germany in the 1970s, when the country prospered and the fertility rate began dropping to about 1.4 children per woman and then pretty much stayed there, far below the rate of 2.1 children that keeps a population stable. Other countries followed, but not all. There is a band of fertility in Europe, stretching from France to Britain and the Scandinavian countries, helped along by immigrants and social services that support working women.

Raising fertility levels in Germany has not proved easy. Critics say the country has accomplished very little in throwing money at families in a system of benefits and tax breaks that includes allowances for children and stay-at-home mothers, and a tax break for married couples.

Chris Cottrell contributed reporting from Berlin.

Article source: http://www.nytimes.com/2013/08/14/world/europe/germany-fights-population-drop.html?partner=rss&emc=rss

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Orders for Durable Goods Jump

March 26, 2013 by Leave a Comment

WASHINGTON — Demand for long-lasting manufactured goods surged 5.7 percent in February as orders for transportation equipment rebounded strongly, the Commerce Department said Tuesday.

The rise in durable goods orders, which range from toasters to aircraft, reversed January’s 3.8 percent plunge and suggested factory activity continued to expand at a moderate pace. Economists polled by Reuters had expected orders to rise 3.8 percent after a previously reported 4.9 percent fall in January.

Excluding transportation, orders slipped 0.5 percent after increasing 2.9 percent in January.

But the government also said nondefense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 2.7 percent, the largest decline since July; economists had expected a 1.2 percent drop. Orders for the so-called core capital goods had jumped 6.7 percent in January.

However, core capital goods shipments, used to calculate equipment and software spending in the gross domestic product report, increased 1.9 percent. That followed a 0.7 percent fall in January and suggested that business spending would again contribute to growth this quarter.

Though the report was mixed, it was in line with other data, including industrial production and the Institute for Supply Management’s survey of national factory activity, that have shown a steady growth pace in manufacturing.

Overall orders for durable goods were buoyed by a 21.7 percent jump transportation equipment as demand for civilian aircraft surged 95.3 percent. Motor vehicle orders increased 3.8 percent. Defense aircraft orders rose 7.6 percent.

In a separate report, a closely watched survey showed that single-family home prices rose slightly in January.

The Standard Poor’s Case Shiller composite index of 20 metropolitan areas gained 0.1 percent from December. On a seasonally adjusted basis, the rise was 1 percent, topping expectations for 0.9 percent. Prices have been gaining since February 2012.

Prices in the 20 cities climbed 8.1 percent from January 2012, unadjusted. It was the biggest yearly increase since June 2006.

Another report said consumer confidence tumbled in March as Americans turned more pessimistic about economic prospects in the short term.

The Conference Board, an industry group, said its index of consumer attitudes fell to 59.7 from a downwardly revised 68 in February. The figure fell short of economists’ expectations of 68. February was originally reported as 69.6.

Those expecting business conditions to get better over the next six months decreased to 14.4 percent from 18 percent, and those expecting conditions to get worse rose to 18.3 percent from 16.6 percent.

“The recent sequester has created uncertainty regarding the economic outlook and, as a result, consumers are less confident,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.

The $85 billion in automatic government spending cuts known as the sequester was triggered at the beginning of the month when politicians failed to come to an agreement on a new deal.

Article source: http://www.nytimes.com/2013/03/27/business/economy/orders-for-durable-goods-jump.html?partner=rss&emc=rss

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Trade Deficit Narrows, Countering a Report of a Contraction

February 8, 2013 by Leave a Comment

The country’s trade deficit narrowed to $38.5 billion in December, its lowest reading in nearly three years, Commerce Department data showed. The decrease was driven by a drop in oil imports and a surge in exports. The overall trade gap was far smaller than analysts polled by Reuters had expected.

“Trade data for December paint a reassuring and encouraging picture of the U.S. economy at the end of last year,” said Chris Williamson, chief economist at Markit.

A separate report from the Commerce Department showed that wholesale inventories unexpectedly declined in December, a factor that could hamper the stronger trade figures’ effect on growth.

Still, the two reports together suggested the government could revise up its reading on fourth-quarter G.D.P., which showed the economy contracting at a 0.1 percent annual rate. That decline was driven by an expected drop in exports, smaller gains in inventories and a plunge in military spending.

Barclays said that even with December’s decline in wholesale inventories, the economy most likely expanded 0.3 percent in the fourth quarter, thanks to the higher export numbers in Friday’s trade report.

American exports increased by $8.6 billion in December over the year-ago month, lifted by sales of industrial supplies, including a $1.2 billion rise from November in nonmonetary gold.

Reflecting the country’s current boom in oil and natural gas, petroleum exports rose by nearly $1 billion during the month to a record high.

A fall in petroleum purchases led overall imports to decline by $4.6 billion in December from the year-ago period.

For the entire year, the country’s imports of crude oil fell to their lowest levels since 1997 in terms of volume.

Stocks prices on American exchanges rose as investors took note of the strong trade data, which included the United States figures as well as readings showing stronger exports and imports in China during January. The price of the benchmark 10-year Treasury note also rose.

For all of 2012, the United States trade gap shrank by 3.5 percent, to $540.4 billion. Running trade deficits means the country loses dollars, which drags on the economy; rising exports reduce that effect.

Exports last year rose 4.4 percent.

Even the American trade balance with China had a silver lining. While imports from China increased to a record high last year, so did American exports there. The December trade deficit in goods with China, not seasonally adjusted, narrowed by $4.5 billion from the previous month on a drop in imports.

Also in December, United States wholesale inventories unexpectedly fell as auto dealers and agricultural suppliers drew down their stocks.

The Commerce Department said stocks of unsold goods at wholesalers dropped 0.1 percent during the month and grew less than initially estimated in November.

Economists polled by Reuters had expected wholesale inventories to rise 0.4 percent.

Article source: http://www.nytimes.com/2013/02/09/business/us-trade-deficit-shrinks.html?partner=rss&emc=rss

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Economic View: Budget Showdown Offers an Opportunity for Progress

November 12, 2012 by Leave a Comment

LOOMING CHANGES ARE BAD POLICY Though our long-run budget problems are enormous, a permanent dive over the cliff isn’t the answer.

Cold-turkey deficit reduction would cause a significant recession. A recent analysis by the Congressional Budget Office estimated that going headlong over the cliff would cause our gross domestic product, which has been growing at an annual rate of around 2 percent, to fall at a rate of 2.9 percent in the first half of 2013. I suspect that this estimate is, if anything, too optimistic. Many private-sector analysts predict a longer, deeper recession if we take the plunge. But even the C.B.O. number suggests that the resulting recession would be worse than those in 1990 and 2001.

Going over the cliff would also be a poor way to deal with our long-run deficit problem. Too much of the deficit reduction comes from tax increases — particularly on middle-class families whose incomes have stagnated for the past decade. And the spending cuts are haphazard and do nothing to deal with the fundamental driver of our long-run budget problems: rising government health care spending.

DON’T KICK THE CAN DOWN THE ROAD Just as going permanently over the cliff isn’t the answer, neither is wimping out. Pre-emptively extending all of the Bush tax cuts for another year and postponing the spending cuts would be a mistake. The cliff is a unique opportunity to forge a genuinely bipartisan solution to our budget problems. Republicans have strong views about how they want to reduce the deficit. The threat of automatic tax increases and military spending cuts gives Democrats a fair shot at negotiating for their priorities as well.

As bad as going over the cliff — and staying over it — would be, going over for a few weeks or even a few months wouldn’t be catastrophic. The Treasury has some discretion over how quickly the tax withholding tables are changed, so some of the tax increases might not be felt for a while. And since the result of a stalemate is budget consolidation, going over the cliff temporarily is unlikely to unnerve bond markets.

SOME TAXES NEED TO RISE A brief fall off the cliff would free lawmakers from the straitjacket of having signed Grover Norquist’s pledge never to raise taxes. Once taxes have returned to their Clinton-era levels, a partial reinstatement of the Bush tax cuts would count as a tax cut. And a brief plunge would also show that the president is serious about raising additional revenue.

And he should be. Every serious bipartisan budget plan — Bowles-Simpson, Rivlin-Domenici, the Gang of Six — includes additional revenue. That makes sense. With a long-run budget as out of balance as ours, the only way to solve the problem while spreading the pain widely is to work along every possible margin.

Democrats should be flexible, however, about the form of tax increases. If Republicans want to cut exemptions and loopholes more and raise marginal rates less, that should be on the table. What shouldn’t be contemplated is redistributing tax burdens away from the wealthy and toward the middle class. And the additional revenue needs to be substantial. The Bowles-Simpson proposal that revenue be about $200 billion a year higher should be a guidepost for the size of a sensible tax component.

EMBRACE ENTITLEMENT REFORM Republicans in Congress will likely insist that reforms to Medicare, Medicaid and Social Security be part of any budget deal. Democrats should meet them partway. It will be impossible to get our long-run deficit under control without slowing entitlement spending. Rather than fighting all changes to these programs, Democrats should work to preserve their core functions and protect the most vulnerable.

For example, in a previous column, I described how replacing Medicare’s fee-for-service model with accountable care organizations could help reduce costs while maintaining quality. And with the president’s health care law now likely to go into effect on schedule, it’s possible to consider gradually raising the eligibility age for Medicare. This would lower government health care spending and encourage people to continue working longer — and, thus, to continue paying taxes.

Another entitlement program needing attention is Social Security Disability Insurance. It provides essential support for people unable to work, and will be even more important if we raise the Medicare eligibility age. But the current system is expensive and inefficient. The rolls have surged in recent decades, and the system discourages part-time work and moves to less-demanding jobs. Economists have proposed innovations that could allow more workers to stay in the labor force — thus slowing spending growth and improving the security and well-being of disabled workers.

PRESERVE VALUABLE PUBLIC SPENDING To deal with the deficit, we’re going to have to trim other types of spending as well. My plea is to protect public investment. Infrastructure, job training and basic scientific research are the country’s seed corn — the spending that allows us to be more productive and prosperous in the future.

A related point involves near-term jobs measures. Because immediate severe austerity would be terrible for the economy and for unemployment, the president needs to gain support for including job-creation measures in an overall fiscal reform package.

One such measure that he probably shouldn’t embrace is an extension of the payroll tax cut legislated in late 2010. That cut, like its predecessor in the 2009 Recovery Act, was useful, but less effective than expected for stimulating consumer spending. And if we extend the cuts for a fifth year, I fear that they could become permanent.

Far better to focus on temporary infrastructure spending, which would create jobs today and leave us with something of lasting value. One way to achieve bipartisan support might be to give Republicans in Congress substantial control over the specifics of the spending. Our infrastructure needs are so large that we shouldn’t be fighting over which to address first.

IN the seven weeks before Jan. 1, not even the best-functioning political system could enact the kind of comprehensive fiscal plan I’ve outlined. What policy makers can do is agree in principle on the broad components of a plan and the top-line numbers for deficit reduction in each area. With that vote in hand, it would be reasonable to enact temporary measures to avoid the fiscal cliff while Congress negotiates the details of a comprehensive agreement.

A child care book I read as a new mother encouraged parents not to dread nighttime feedings, but to embrace them as another chance to nurture their babies. We should view the fiscal cliff the same way — not as a disaster to be avoided, but an opportunity to be embraced. It’s a chance for Congress and our re-elected president to nurture the economy and to protect the future of all Americans.

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Article source: http://www.nytimes.com/2012/11/11/business/budget-showdown-offers-an-opportunity-for-progress.html?partner=rss&emc=rss

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