Rolf Englund IntCom internetional
"That is why the world economy is not yet out of the woods"
Rebalancing global growth
The crisis—particularly the credit crunch and the destruction of more than $13 trillion of household wealth—has wrecked the American shopping machine and changed the nature of the world’s imbalances.
Rebalancing via recession is hardly to be recommended.
We will examine the task in a series of articles on the world’s four biggest economies, beginning this week with America’s (see article).
The shift in mindset is most necessary in surplus economies. Too many German leaders seem to take the economy’s export orientation as immutable. Few even grasp the need to nudge it towards domestic spending
nvestment in services, by freeing markets from health care to education. America must counter the rigidities that have arisen after its asset bust.
Congressional Budget Office (CBO) predicts the deficit will be $1.8 trillion this year.
There are other ways to reduce the deficit, including getting rid of the mortgage-interest deduction, raising the age of eligibility for Medicare and Social Security, altering the inflation-indexation formula, or proposing some sort of tax reform that raises additional revenue.