Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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The International Economic Agenda Facing the New Congress

by Robert Kahn

The initial post-election talk is understandably about whether the shift to a Republican controlled Senate makes it easier or harder to make progress on central economic challenges facing the United States, including energy, immigration, social spending, and infrastructure. There is understandable concern that this next Congress will face the same gridlock that we have now. But even before that, there is the mundane issue of what we borrow and spend. Partly out of fear of being seen as crying wolf one too many times, I have been wary to advertise my concern that we are facing a new series of economic cliffs. First up is a likely standoff on the budget (in December, and likely again in the spring of 2015). Then comes the debt limit, which will be reset on March 15, but given the usual and not-terribly-extraordinary “extraordinary measures” that are at the disposal of Treasury, they can likely pay the nation’s bills until perhaps the fall of 2015 before cash balances fall to zero. Of course, in the past deals have been done, often at the last minute, and we have not, with the exception of the 2013 government shutdown, gone off the cliff (though there have been a few unnecessary fender benders along the way). But with the Senate as polarized as ever, it is easy to see getting to deals on these issues will be difficult and potentially unsettling to markets.

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Sanctions: What’s Next?

by Robert Kahn

Sunday’s referendum in Crimea looks set to lead to escalating tensions and an intensification of sanctions. To date, U.S. and EU sanctions proposed or introduced have been modest and targeted, focused on individuals (presumably mostly Ukrainian) regarded as responsible for “infringements on Ukrainian sovereignty,” and do not include measures on Russian corporations, financial transactions or cross-border trade. That could change next week.

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IMF Reform and the Ukraine Package

by Robert Kahn

The debate over congressional passage of IMF reform has reached a critical juncture. The Senate Foreign Relations Committee  today approved legislation providing loan guarantees for Ukraine and supporting sanctions, and the bill includes language implementing the long-delayed IMF reform. Assuming passage by the full Senate, the debate next moves to conference, where both sides will need to step up and negotiate in good faith. In her companion piece on this blog, Heidi Crebo-Rediker makes a compelling argument that there are significant geo-strategic benefits from this legislation.  There are meaningful economic benefits as well that make it important to reach a deal.

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Obama’s Modest Proposals for Growth

by Robert Kahn

As signaled in recent days, President Obama’s State of the Union address puts the spotlight firmly on domestic policy. Creating economic opportunity was a major theme. In addition to a hike in the minimum wage for government contract employees, the president called for a economy-wide minimum wage increase, an extension of unemployment benefits, immigration reform, and other measures to attack income inequality. The only surprise was a new Treasury instrument, MyRA, to encourage retirement savings.

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The Federal Reserve Tapers: In Search of Calmer Waters

by Robert Kahn

Yesterday’s decision by the Federal Reserve’s policy committee to modestly reduce (“taper”) its purchases of U.S. Treasury and mortgage-backed securities was a turning point in a number of respects.  After a long period of public debate that roiled markets, the Federal Reserve has at last begun what is likely to be a gradual and well-telegraphed exit from its period of extraordinary stimulus.  Together, last week’s fiscal deal and the Federal Reserve’s taper decision appears to have marked the start of a period of relative calm where U.S. macro policy uncertainty will be far less of a driver of markets. That’s good news for the global economy.

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