China counts £130bn cost of economic growth

China counts £130bn cost of economic growth – China‘s economic growth is inflicting more than a trillion yuan’s worth of damage on its environment each year, according to a government report that increases pressure on planners to slow the breakneck speed of development. In one of the longest-term accountings of ecological degradation, the China academy for environmental planning calculated that the cost of pollution spills, deteriorating soil, vanishing wetlands, and other impacts surged to 1.3tr yuan (£130bn) in 2008. This was equivalent to 3.9% of the country’s GDP. Most of these costs do not appear on corporate balance books or government budgets, but they are accumulating year by year to an environmental deficit that threatens the country’s long-term prospects. The central government has increased efforts to clean up the nation’s notoriously filthy air and contaminated water, but the report’s authors – who are affiliated to the Ministry of Environmental Protection – say the cost of pollution spills and other environmental damage rose by more than 74.8% in the five years up to 2008.

Why do some rich economies grow faster than others? – Between 1973 and 2007 the twenty rich nations in the following chart averaged a 2% per year growth rate of per capita GDP. But some of them grew faster than others. Why? One reason is “catch-up”: partly because they could borrow technology from the leaders, countries that began with a lower per capita GDP tended to grow more rapidly. The growth rates shown here adjust for this. What else matters? The list of hypothesized causes is lengthy. It includes investment, consumption, education, natural resources, macroeconomic policy, levels of taxation, welfare state size and structure, industrial policy, government regulations, the distribution of income, interest group organization, corporatist concertation, the partisan complexion of government, interest group-government coherence, cooperation-promoting institutions, and institutional coherence, among others.

Issa, Senior Republican, Asks Businesses Which Rules They Dislike – Companies spend millions of dollars each year complaining to Congress about burdensome laws and regulations, pressing their concerns in public campaigns and in private meetings. They rarely wait for invitations.  Last month a senior House Republican, Representative Darrell Issa of California, nevertheless dispatched letters to 150 companies, trade groups and research organizations asking them to identify federal regulations that are restraining economic recovery and job growth.  Mr. Issa, incoming chairman of the House Oversight and Government Reform Committee, said the concerns of businesses had been ignored by the Obama administration as it pursued what he described as an unprecedented regulatory expansion.  The responses have been predictable but, in asking, Mr. Issa also is underscoring the commitment of the new House majority to help business by curtailing government.

Income Redistribution: The Key to Economic Growth? – Since the 1970s, households at the lower end of the income distribution have experienced income stagnation – “real average hourly earnings (excluding fringe benefits) now stand roughly at 1974 levels” – while those at the top of the distribution have continued to do quite well. The result has been ever-widening income inequality, and inequality has now reached levels rivaling those that existed during the Gilded Age.  Inequality is already high, and if it continues to grow it could reach the point where it becomes morally intolerable, and there is evidence that social ills grow as inequality widens. But there is an economic reason to care, as well. There is an equivalent of a Laffer curve for inequality, but the variable of interest is economic growth rather than tax revenue. We know that a society with perfect equality does not grow at the fastest possible rate. We also know that a society where one person has almost everything while everyone else struggles to survive – the most unequal distribution of income imaginable – will not grow at the fastest possible rate either. Thus, the growth-maximizing level of inequality must lie somewhere between these two extremes. We may be near or even past the level of inequality where growth begins falling.

Federal Spending More Popular than the Tea Party Says – The substantial and broad-based support that exists for federal spending will become common wisdom as individuals, businesses, industries, associations, communities, mayors, county executives, governors and even whole regions of the United States fight openly to prevent the spending reductions that Congressional Republicans say they’re going to consider this year. Ironically, the best example of what’s ahead may well be the military base realignment and closure commissions that so often are held up as paragons of how budget decisions should be made. I’ve said in the past that BRACs are special situations and that their process cannot be easily extrapolated to other budget issues. A BRAC is asked to do one very specific thing: determine which military facilities should be closed after a political decision has already been made that some should be shuttered. That’s very different from the much larger policy questions of whether, when and how the federal deficit should be reduced — the types of questions typically asked of budget commissions like the recently failed Bowles-Simpson panel.

Tax-Exempt Bonds for Beginners – Felix Salmon linked to an article by David Kotok on Build America Bonds (BAB), which reminded me that I’ve been meaning to write about them (now that they no longer exist). BAB were introduced in the 2009 stimulus bill. If a state or local government issues BAB, the federal government pays 35 percent of the interest on the bonds; the bondholder pays tax on all the interest, as usual for corporate bonds — but not for traditional state or local government bonds (“munis”). BAB were initially only authorized for two years, and were not extended in the recent tax cut compromise.The Republican attack line on BAB is that they “subsidize states in more imprudent-type budget and debt scenarios” (Rick Santelli, quoted in Kotok’s article) or they are “a back-door handout for profligate state and local governments, allowing them to borrow more money while shifting some of the resulting interest costs to the federal government” (Daniel Mitchell). Well yes, BAB are a subsidy for state and local borrowing. But to criticize them for that without even mentioning the alternative is either uninformed or irresponsible.

Jobs Vs The Deficit – The roadmaps showing the way out of our 1.4 trillion dollar federal deficit almost always begin at the same starting points. During 2010, it became taken-for-granted that today’s record-setting red ink is a result of unrestrained government spending — especially stimulus spending.The December release of the federal debt panel’s Simpson-Bowles report crystallized a mass re-set of priorities, with politicians and pundits freely equating solutions to ‘the deficit crisis’ with economic recovery. While conservatives and liberals reacted differently to the report’s specifics, the assumption that immediate deficit reduction would be healthy and virtuous was largely accepted.  November ended with three out of four of the lead columns in the Washington Post providing advice on the subject. US News and World Report called on the president to get busy and "name a deficit Czar". Deficit reduction? There’s an app for that. A prominent New York Times feature titled "You Fix the Budget" included an interactive Iphone/Ipad application that urged readers to "Make your own plan and share it online". Jobs and growth have inspired no such apps thus far.

 

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