Thursday , December 14 2017
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Jeffrey Frankel’s Blog

Which Reagan Tax Reform is This One Like?

The Republicans, it is said, absolutely must pass a massive tax bill by Christmas, in order to have some major accomplishment to show for 2017, the first year in which they control all branches of government.  Having apparently failed in their seven-year campaign to deprive some 20 million Americans of health insurance, they dare not fail in their Scrooge-like campaign to transfer billions of dollars to the ultra-rich. To try to sell this turkey of a tax bill, Donald Trump recently sought...

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Long-term Job Decline in US Manufacturing

Nov. 10, 2017 — What does international trade have to do with US jobs?  Surely the US trade deficit in manufacturing has reduced employment?  Not as much as you would think, on net.  Especially with regard to overall employment, which in the long run is determined by the size of the labor force.  But even if manufacturing jobs are considered more important than service jobs, trade policy has not been the main reason for their decline.  Perhaps the raw statistics can be made more...

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The Next Fed Vice-Chair

Oct. 30, 2017 — There has been speculation that after Trump picks one of the five candidates to be chair of the Federal Reserve (with Jay Powell now apparently the front-runner), he could pick another one of them to be Vice-chair.  This latter position is the one that, sadly, Stanley Fischer is now vacating. I hope that Trump asks Janet Yellen to be Vice-chair, assuming he breaks precedent and does not re-nominate her for Chair, and I hope she accepts. Most pundits assume that Yellen...

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The Choice of Candidates for Fed Chair

October 29, 2017 — The Trump Administration has said it will announce its choice for the new Chair of the Federal Reserve Board by November 3.  Subject to Senate confirmation, the chosen candidate will succeed Janet Yellen, whose term ends February 3. The White House has said it views five candidates as front runners.  Two are eminent economists with unusually impressive records — both in academic research, mostly at West Coast universities, and as practitioners of macroeconomic policy....

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The VIX is too low!

September 30, 2017 —   During most of this year, the VIX — the Volatility Index on The Chicago Board Options Exchange — has been at the lowest levels of the last ten years.  It recently dipped below 9, even lower than March 2007, just before the sub-prime mortgage crisis. It looks as though, once again, investors do not sufficiently appreciate how risky the world is today. Known colloquially as the “fear index,” the VIX measures financial markets’ sensitivity to uncertainty, in the form...

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Explaining Dodd-Frank

Nine years ago this month, the US sub-prime mortgage crisis morphed into a severe global financial crisis.  Many Americans across the political spectrum angrily demanded financial reform, by which they meant a tightening of financial regulation.  Indeed, important reforms were subsequently enacted, in particular the 2010 Dodd-Frank bill. Today, those reforms are increasingly under assault.  Most recently, the Trump Administration is proposing a roll-back of regulation of banks as well as...

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The Signal/Noise Ratio in US North Korea Policy

Americans have under-estimated the nuclear threat from North Korea and misunderstood what policies would reduce it.  At the same time they have over-estimated the importance of bilateral trade deficits with China and misunderstood what policies would reduce them.  Now these two different issues intersect. My preceding post discussed the Chinese trade aspect of the problem.  Here I review the geo-politics and history of the North Korea nuclear problem. US policy has been to demand that...

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Deal-maker Trump Can’t Deal

(August 27, 2017) — Donald Trump has threatened new trade barriers against China while simultaneously depending on Beijing’s help to rein in North Korea’s alarming nuclear weapons program.   These two aspects of US policy toward China are at odds. It feels inappropriate to write a column that treats the two issues on a par.  To state the obvious, the stakes are vastly higher in a potential US-North Korean military conflict, especially when it comes to the real danger that nuclear weapons...

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Why Republicans Can’t Reform Health Care

July 26, 2017 —    Why do Republican politicians seem unable to come together on a bill to “repeal and replace” the 2010 Affordable Care Act, also known as Obamacare?  After all, they have spent 7 years with that as their single-minded goal, they campaigned on it in the 2016 presidential election, and they now control all branches of government. It is tempting to blame lack of experience and competence on the part of the president.  But that doesn’t explain why the Republican congress...

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The Sugar Swamp

(June 25, 2017) As the US, Mexico and Canada get ready to begin talks on the re-negotiation of NAFTA – possibly as early as August – governments are giving a lot of attention to one particular product:  sugar.   The outcome will predictably be a sweet deal for the US sugar industry, quite the opposite of Trump promises to “drain the swamp” of disproportionate influence in Washington by special interests. It’s an old story, in the US as in other industrialized countries.  The politically...

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