Daily Archives: August 9, 2017

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New Zealands strong commitment to economic freedom has resulted in a policy framework thatencourages impressive economic resilience. Openness to global trade and investment are firmly institutionalized. The financial system has remained stable, and prudent regulations allowed banks to withstand the past global financial turmoil with little disruption.

Other institutional strengths of the Kiwi economy include relatively sound management of public finance, a high degree of monetary stability, and strong protection of property rights. The government continues to maintain a tight rein on spending, keeping public debt under control and sustaining overall fiscal health. A transparent and stable business climate makes New Zealand one of the worlds friendliest environments for entrepreneurs.

New Zealand is a parliamentary democracy and one of the AsiaPacific regions most prosperous countries. After 10 years of Labor Partydominated governments, the center-right National Party, led by Prime Minister John Key, returned to power in November 2008. Key was reelected in 2011 and 2014. In December 2016, Key resigned and endorsed his deputy, Bill English, who was elected to succeed him as prime minister. Far-reaching deregulation and privatization in the 1980s and 1990s largely liberated the economy. Agriculture is important, but so too are a flourishing manufacturing sector, thriving tourism, and a strong geothermal energy resource base. Following a sizable contraction during the global economic recession, the economy has been expanding since 2010.

Private property rights are strongly protected, and contracts are notably secure. The judicial system is independent and functions well. New Zealand ranked fourth out of 168 countries surveyed in Transparency Internationals 2015 Corruption Perceptions Index. The country is renowned for its efforts to penalize bribery and ensure a transparent, competitive, and corruption-free government procurement system.

The top income tax rate is 33 percent, and the top corporate tax rate is 28 percent. Other taxes include a goods and services tax and environmental taxes. The overall tax burden equals 32.4 percent of total domestic income. Government spending has amounted to 42.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.5 percent of GDP. Public debt is equivalent to 30.4 percent of GDP.

The entrepreneurial environment is one of the worlds most efficient and competitive. Start-up companies enjoy great flexibility under licensing and other regulatory frameworks. The labor regulations facilitate a dynamic labor market. New Zealand, which has the lowest subsidies among OECD countries, removed all farm subsidies more than three decades ago and spurred the development of a vibrant and diversified agriculture sector.

Trade is important to New Zealands economy; the value of exports and imports taken together equals 55 percent of GDP. The average applied tariff rate is 1.3 percent. There are few barriers to foreign investment, although some investment may be subject to screening. The financial sector, dominated by banking, is well developed and competitive, offering a full range of financing instruments for entrepreneurial activity.

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New Zealand Economy: Population, GDP, Inflation, Business ...

If you thought the recent fight over health-care reform was fun, get ready for the next big Washington circus: raising the debt ceiling.

In October of 2015, Congress chose to avoid the usual fight over setting a symbolic debt target by agreeing to waive any limit on the debt for 17 months, until March of this year. For the past few months, the Treasury Department has engaged in what it calls extraordinary measures to extend the deadline through the end of September. By that time, the U.S. national debt will officially exceed $20 trillion.

As is almost always the case, the big fight will be over whether or not to pass a clean increase in the debt ceiling i.e., one without any amendments. A bill to raise the debt ceiling will require 60 votes in the Senate, effectively giving Democrats veto power over any Republican proposal. If Republicans added a provision supporting Mom, the flag, and apple pie, Democrats could be counted on to oppose it unanimously. Indeed, many Democrats are expected to back a proposal by Senator Brian Schatz of Hawaii to abolish the debt limit altogether.

Yet, many Republicans see this as one of their few opportunities for budget leverage. Wisconsin senator Ron Johnson is typical in warning, Ive been raising the issue of the debt ceiling for months now, and certainly what Id like to see is some meaningful, structural control enacted in conjunction with increasing [the debt limit].

House Republicans are expected to take an even harder line against any bill that raises the debt ceiling without making an attempt to rein in future spending. Just this week, Representative Tom Cole of Oklahoma, never considered a firebrand, said that he could not see any scenario in which the House agrees to raise the debt ceiling without accompanying spending cuts. Meanwhile, the conservative House Freedom Caucus is backing a number of separate proposals, ranging from as much as $50 billion in spending cuts to a demand that the federal government sell property to pay down the debt. Some also want to attach a partial repeal of Obamacare to the bill.

It should come as no surprise that the Trump administration is putting out conflicting signals about what it wants from this fight. Treasury Secretary Steve Mnuchin reportedly prefers a clean bill, as Treasury secretaries have since time immemorial. Office of Management and Budget director Mick Mulvaney is more ambivalent. He originally wanted spending cuts in exchange for increasing the debt limit, but has recently dropped that demand. He now says that the administration hopes for the cleanest possible bill. But he also remains one of the chief proponents of prioritizing debt payments, which would allow the federal government to avoid default if the debt negotiations drag on.

All of this will take place against a backdrop of apocalyptic commentary from much of the media and the business community. They will ignore the fact that the federal government actually did briefly default on its debt in 1979, in part as the result of a debt-ceiling impasse under a Democratic-controlled Congress. Since then, both Democratic and Republican Congresses have missed deadlines to increase the debt ceiling: Once in 1981, a second time in 1985, a third time in 1996, and a fourth time in 2002. In none of those cases did the world end.

Moreover, until fairly recently, it was considered routine to add all sorts of conditions to debt-ceiling legislation. Perhaps the most famous of these provisions was the Gramm-Rudman-Hollings amendment in 1995.

Of course, failure to raise the debt limit would not be a good thing. Financial markets could be expected to react badly. Increased uncertainty would slow economic growth. And we might even see another downgrade of the U.S.s credit rating. But those consequences pale in comparison to the almost-certain calamity that will result from a failure to get control of runaway federal spending and debt.

In the end, the fight over the debt ceiling will mostly be a question of political theater. An increase in the debt limit will eventually pass. Congress will go on spending money on a bipartisan basis the way it always does. And, in a couple of years, well do this all over again.

But amid all the noise thats sure to follow, its important not to forget that our fiscal irresponsibility cant continue forever. Congress may be in the habit of pretending otherwise, but were headed for a fall.

READ MORE: The Bipartisan Push to Increase Spending and the National Debt Congress Continuing Self-Degradation Can Republicans Stand Together on Spending?

Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis. You can follow him on his blog, TannerOnPolicy.com.

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Debt-Ceiling Fight Looms as Next Big Test for Congress - National Review

Scanning recent tax revenues, one would think that all is well in Puerto Rico. On Aug. 2, the Puerto Rican Treasury Departmentannouncedthat tax collection for the first month of fiscal year 2018 was ahead of its forecast. In addition,there was the publication of data showing the government collected more than $150 million above the forecasted revenue figures in fiscal year 2017.

Yet, on Friday, the federally-appointed financial oversight board announced the implementation of a two-day government furlough program beginning this September, along with a 10-percent cut to public pension benefits beginning in fiscal year 2020.

This issue is very worrying because the Puerto Rican government informed Judge Laura Taylor Swain, who is overseeing the island's bankruptcy proceedings, that by the end of June, cash flow would be $290 million. Now, Rossellos administration said the government ended with almost $1.8 billion in cash on June 30.

According to new information arising from the ninthmeeting of the fiscal board last Friday, oversight of the finances of the commonwealth are clearly lacking. The budget was certified weeks ago, and the government did not meet the plan. Furthermore, in March, the liquidity report concluded cash flow was at $230 million.

All of this news comes on top of the lack of financial transparency that has governed the actions of the Puerto Rican government and the financial oversight board. One thing is clear: The actions taken by the board and Gov. Rossellos administration are ripping off bondholders.

For the last few months, the unelected seven-member fiscal board set up under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) has been pursuing a policy to lead Puerto Rico back to the markets. However, this policy is being pursued in the belief that the island can quickly regain access via fiscal consolidation, and given the lack of definition of what is an essential service, this consolidation isamounting to basically reducing debt service payments.

The current situation has seen the board and government follow the policy of taking almost every government entity through Title III bankruptcy instead of following the route of fair, transparent and open negotiations with creditors, many of whom are Puerto Ricans. Consequently, this path results in a cut to bondholder payments totaling almost 80 percent of the expected payments for the next 10 fiscal years.

Instead of following a strong fiscal policy that includes a real fiscal consolidation and the subsequent return to sound finances, Puerto Rico has chosen to violate creditors' rights and fail to pay the money creditors are owed.

The fiscal board established by Congress has chosen to disregard the words and intent of the PROMESA legislation, refusing to amend the fiscal plan for more debt service payments in spite of the better-than-expected revenue figures. It has misrepresented the liquidity figures in court by arguing that the government will be out of cash by Nov. 1.

Now, it turns out, given the refusal to pay bondholders, the government is sitting with millions in cash, which wasn't accounted for in the evidence presented to Judge Swain.

After all of the time the fiscal board has spent litigating against creditors, the most recent meeting of the board reveals its failure to establish the real fiscal condition of the commonwealth. The decisions and disregard of the fiscal board are laying the groundwork for a clear vote of no confidence.

Ojel L. Rodriguez is a research analyst for the Puerto Rican public policy think tank Fundacin Libertad, which promotes libertarian principles of individual freedom, limited government and free markets.

The views expressed by contributors are their own and not the views of The Hill.

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Puerto Rico financial board creating grounds for own removal - The Hill (blog)

I know many Democrats and progressives who continue to be frustrated by the conservative Republicans who have controlled the North Carolina General Assembly since 2010.

The Left has spent years stating and restating its standard narrative about our state: that North Carolina has historically grown faster and been more successful than other Southern states because it was more willing to spend tax dollars on higher education, infrastructure, and other government programs.

Having repeated this catechism faithfully and endlessly, and yet seen no significant change in the policy direction of the state, progressives either resort to conspiracy theories about dark-money interests dictating terms to their political lackeys or they resort to personal attacks on the intelligence of GOP lawmakers.

I chose my terms carefully. The Lefts narrative is a kind of quasi-religious orthodoxy. It is neither good history nor good social science. Since the end of World War II, North Carolinas economy has usually outgrown the nations, to be sure. But thats a regional phenomenon, not a Tar Heel phenomenon. In fact, the average annual growth rate since 1948 of per-person, after-tax income has been exactly the same for North Carolina, South Carolina, and the Southeast as a whole.

Im not arguing that government programs have no value. But to assert that North Carolina had the right amount of government expenditures and taxes before the Republicans took over in 2010, and now it has not enough government, is to make an ideological claim, not an empirical one.

Several years ago, I began keeping a list of all the studies I could find on the subject of state economic growth. My database contains many hundreds of papers, all published either in peer-reviewed academic journals or as chapters of peer-reviewed academic books.

The available research doesnt just examine public-policy variables such as government spending, taxes, and regulations. It also considers other potential explanations for differences in economic growth, including energy prices, private investment, geography, and educational attainment.

Overall, this emerging body of empirical evidence suggests that most governments are too large and do more than they should taxes and regulations are negatively associated with economic growth but that non-policy factors are usually more significant in explaining differences among states and localities.

In the new edition of the Journal of Regional Analysis and Policy, Southern Methodist Universitys Dean Stansel and Meg Patrick Tuszynski reported the results of their own review of the literature. They looked specifically at the 155 studies that have used the Fraser Institutes annual Economic Freedom of North America index in their empirical models. The index includes state-by-state measures of government size, taxes, and labor-market regulations.

In two-thirds of the studies, Stansel and Tuszynski found, economic freedom was associated with better economic performance among states. Of the three sub-indexes, the regulatory burden was the most important.

If you view this conclusion with suspicion, you are of course free to disbelieve it. But just understand that repeating your catechism a few more times isnt going to change anything. Fiscal conservatives have good reasons to believe what we believe. What are yours?

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Evidence Shows that Freedom Works - The Weekly Post

First, the administration is confounded by inexperience, incompetence and infighting. Treasury Secretary Steven Mnuchin has little expertise in congressional stage management, but he understands the gravity of the situation and has lobbied for a clean debt ceiling bill one without conditions or unnecessary amendments.

But that puts him in tension with his White House colleague Mick Mulvaney, the director of the Office of Management and Budget and a founding member of the Freedom Caucus, who has intimated that breaching the debt ceiling would not be that consequential, and who has argued that the must-pass legislation should be used to advance the hard rights agenda. Without a firm signal from the White House that the debt ceiling should not be held hostage to political agendas, it will be hard to get Congress to do the right thing.

And thats the second problem: Congress, and in particular the Freedom Caucus. As the health care fight showed, the caucus is fixated on cutting entitlement spending. It has made it clear that if the House leadership balks on their demands for major cuts in the 2018 budget, theyll refuse to vote on raising the debt ceiling.

Finally, some conservative policy makers besides Mr. Mulvaney have convinced themselves that crashing into the debt ceiling wont be a big deal because the government can prioritize its bill payments, so that interest on Treasury debt will be paid on a current basis, while other bills sit unpaid.

Understanding the false allure of prioritization requires a little background. Hitting the debt ceiling is not the same as a government shutdown or other fiscal brinkmanship. Think of the United States, acting through the Treasury, as holding a bank account at the Federal Reserve. Every day, millions of bills arrive and are promptly paid by debiting Treasurys account at the Fed. At the same time, millions of dollars in tax and other receipts arrive and are credited to that bank account. The money coming in is systematically less than the money being disbursed (thats what it means to run a deficit), and Treasury makes up the difference by borrowing in the capital markets.

A government shutdown occurs when the Treasury has money in its bank account but Congress refuses to appropriate the funds necessary for the government to function. Crashing into the debt ceiling, by contrast, would occur if Treasury had no money in its bank account because Congress prohibited it from funding deficits through incremental borrowing.

If Treasury hits the ceiling, it has only two realistic responses. Treasury can pay the governments bills on a first-in, first-out basis, with the wait for payment growing every month, or it can prioritize bills, as Mr. Mulvaney and others have suggested it would.

But there are profound doubts as to whether the Treasury could even implement prioritization, beyond ring fencing interest payments, because its payment systems are designed to pay all claims as they are due, regardless of their origin. More important, prioritization is default by another name. The consequences are the same, regardless of which i.o.u.s Treasury chooses to dishonor.

All valid claims against the United States are backed by the credit of the United States, full stop; the Constitution does not contemplate that some claims are more senior than others. The deliberate nonpayment of billions of dollars of uncontested claims every month thus constitutes default, even if the Treasury is paying some of its other debts. The resulting class-action lawsuits will enrich generations of lawyers.

Once the unthinkable happens, no future constraints on congressional irresponsibility with regard to the national debt will remain. Prioritization will constitute the intentional subordination, not just of one claim to another, but of all claims to the pettiness of congressional politics. As a result, the once unassailable credit of the United States will become a perennial hostage to politics, and in response the debt markets will demand much higher interest rates.

These are noisy times in Washington. But even in this context, the awfulness of a debt ceiling crisis should galvanize us. Like an impending execution, it should concentrate our minds now, while something can still be done.

Edward D. Kleinbard, a law professor at the University of Southern California and a former chief of staff of the Congressional Joint Committee on Taxation, is the author of We Are Better Than This: How Government Should Spend Our Money.

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A version of this op-ed appears in print on August 7, 2017, on Page A19 of the New York edition with the headline: The Debt-Ceiling Crisis Is Real.

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The Debt-Ceiling Crisis Is Real - The New York Times - New York Times