The Idea Department

The Idea Department is a space for the discussion of politics, economics, global affairs, ethics, international relations, and related topics - brought to you by the staff and interns at Project Syndicate.
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Euro Lessons for East Asia
In his latest commentary for Project Syndicate, Jong-Wha Lee examines the possibility of greater integration among East Asian countries through the strengthening of the Chiang Mai Initiative Multilateralization (CMIM) of the ASEAN+3, which was designed to promote economic cooperation and crisis management. Lee outlines what East Asia has to learn from its European counterparts as it seeks to facilitate regional financial integration that could result in a single currency.
"Asian countries have learned from their region’s own crisis in the 1990’s, as well as from the eurozone’s ongoing crisis, that effective management of cross-border capital flows requires well-constructed national, regional, and global responses. To respond effectively to crises, East Asian countries must continue to improve the regional financial safety net and surveillance mechanism, while strengthening their cooperation with the IMF."
To read more, go here.

Euro Lessons for East Asia

In his latest commentary for Project Syndicate, Jong-Wha Lee examines the possibility of greater integration among East Asian countries through the strengthening of the Chiang Mai Initiative Multilateralization (CMIM) of the ASEAN+3, which was designed to promote economic cooperation and crisis management. Lee outlines what East Asia has to learn from its European counterparts as it seeks to facilitate regional financial integration that could result in a single currency.

"Asian countries have learned from their region’s own crisis in the 1990’s, as well as from the eurozone’s ongoing crisis, that effective management of cross-border capital flows requires well-constructed national, regional, and global responses. To respond effectively to crises, East Asian countries must continue to improve the regional financial safety net and surveillance mechanism, while strengthening their cooperation with the IMF."

To read more, go here.

A key question confronts the four presidents of Europe’s major institutions (the European Commission, the European Council, the European Central Bank, and the Eurogroup) as they prepare their report on how to reform the common currency: Does the eurozone need its own budget?
They are facing the argument that the United States’ monetary union works much better because there is a large federal budget to smooth the impact of asymmetric shocks – that is, shocks to individual states. The eurozone, it is claimed, should have its own budget to provide similarly automatic insurance to its members. This argument, however, misreads the US experience.

The False Promise of a Eurozone Budget, Daniel Gros

For the full article, go to Project Syndicate.

Europe’s Economic War of Attrition
"Like Egypt’s war of attrition, the eurozone’s underlying economic, financial, and social ferment continues. If governments continue to stumble from one patchwork remedy to another – a probability that remains uncomfortably high – the delay in implementing a comprehensive solution will eventually overwhelm the defenses that the ECB has so courageously put in place.
Some say that, just as Egypt’s war of attrition eventually gave way to a full-scale war and then a peace treaty, Europe needs a major crisis to move forward. But this is a dangerous notion, one that entails not just massive risks, but also unacceptably high interim human costs.
European governments are well advised to use the financial cease-fire that the ECB is willing to buy for them. Allowing it to expire without progress toward permanent stability would expose Europe to disruptions that would diminish significantly its prospects for long-term economic stability, growth and job creation.”
To read the full article, go to Project Syndicate.

Europe’s Economic War of Attrition

"Like Egypt’s war of attrition, the eurozone’s underlying economic, financial, and social ferment continues. If governments continue to stumble from one patchwork remedy to another – a probability that remains uncomfortably high – the delay in implementing a comprehensive solution will eventually overwhelm the defenses that the ECB has so courageously put in place.

Some say that, just as Egypt’s war of attrition eventually gave way to a full-scale war and then a peace treaty, Europe needs a major crisis to move forward. But this is a dangerous notion, one that entails not just massive risks, but also unacceptably high interim human costs.

European governments are well advised to use the financial cease-fire that the ECB is willing to buy for them. Allowing it to expire without progress toward permanent stability would expose Europe to disruptions that would diminish significantly its prospects for long-term economic stability, growth and job creation.”

To read the full article, go to Project Syndicate.

"America’s national debt has more than doubled in the past five years, and is set to rise to more than 100% of GDP over the next decade unless changes in spending and taxes are implemented. A well-designed combination of caps to limit tax expenditures and a gradual slowing of growth in outlays for entitlement programs could reverse the rise in the debt and strengthen the US economy. America’s current budget negotiations should focus on achieving a credible long-term decline in the national debt, while protecting economic expansion in the near term."

To read the full article by Martin Feldstein, or for more about current developments and avoiding America’s 2013 “fiscal cliff”, go to Project Syndicate.

 America’s Fiscal Cliff Dwellers
“In early 2012, Federal Reserve Chairman Ben Bernanke used the term “fiscal cliff” to grab the attention of lawmakers and the broader public. Bernanke’s point was that Americans should worry about the combination of federal tax increases and spending cuts that are currently scheduled to begin at the end of this year.
But there is not really any kind of “cliff” in the sense that if you stepped over the edge, you would fall fast, land on something hard, and not get up for a long time. In the modern US economy, the scheduled changes constitute more of a fiscal “slope”…
The sensible course of action for Obama would be to step off the “cliff” by vetoing any extension of the Bush-era tax cuts, which would then expire at the end of 2012. Once tax rates were restored to their previous levels, Obama could present his own tax-cut package to Congress – for example, with a proposal in early January that provided greater benefit to lower-income Americans, as he promised during his re-election campaign.”
To read the full article by Simon Johnson, go here.

 America’s Fiscal Cliff Dwellers

In early 2012, Federal Reserve Chairman Ben Bernanke used the term “fiscal cliff” to grab the attention of lawmakers and the broader public. Bernanke’s point was that Americans should worry about the combination of federal tax increases and spending cuts that are currently scheduled to begin at the end of this year.

But there is not really any kind of “cliff” in the sense that if you stepped over the edge, you would fall fast, land on something hard, and not get up for a long time. In the modern US economy, the scheduled changes constitute more of a fiscal “slope”…

The sensible course of action for Obama would be to step off the “cliff” by vetoing any extension of the Bush-era tax cuts, which would then expire at the end of 2012. Once tax rates were restored to their previous levels, Obama could present his own tax-cut package to Congress – for example, with a proposal in early January that provided greater benefit to lower-income Americans, as he promised during his re-election campaign.”

To read the full article by Simon Johnson, go here.