Paul Krugman - New York Times Blog
April 22, 2011, 4:20 pm
Our Low, Low Taxes
I thought it might be useful to have a cleaner comparison of the major advanced countries. So here are taxes by all levels of government as a % of GDP, removing the clutter by only looking at the G7, and using data from 2007 so that things aren’t confused by the effects of the Great Recession:
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The Republican cant that the solution is always to reduce taxes is just as stupid as a doctor whose only remedy is to cut the patients food intake.
Why don't the Democrats have a better party of opposition? Is there no one in the Republican party smarter than a dirtclod?
BOSTON (MarketWatch) — The International Monetary Fund has just dropped a bombshell, and nobody noticed.
For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
IMF sees China topping U.S. in 2016According to the latest IMF official forecasts, China's economy will surpass that of America in real terms in 2016 — just five years from now. Brett Arends looks at the implications for the U.S. dollar and the Treasury market.
And it’s a lot closer than you may think. According to the latest IMF official forecasts published two weeks ago, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
That would certainly seem to be part of the the inference Jim.
The comparison that really matters
In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Yep, I agree Dales. China could be the next big downturn, I'll watch with interest.
We live in interesting times.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
The dollar price of gold is relevant only to jewelry makers, certain electronics manufacturers and Becktards.
What is the big deal if China's economy surpasses that of the U.S.? Doesn't increasing purchasing power in China mean a bigger market and more demand for U.S. products? Are America's T-bills worth any less? Why is it somehow unacceptable that the country with the world's largest population should have the world's largest economy?
Gob wrote:
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
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The expected numbers do push credulity. In the space of about 15 years, with the U.S. economy growing before and after the recession, China's economy will go from being 1/3 the size of the U.S. economy, to be the same size? Somebody may be playing Madoff with the Chinese numbers. I would expect at some point, China, with business friendly policies, would grow and exceed the size of the U.S. economy, but it is hard to believe it would happen in such a brief period of time.
I cannot see what the IMF would have to gain by pushing misinformation though.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Sue U wrote:
What is the big deal if China's economy surpasses that of the U.S.?
The damage to the; "we are the greatest power in the world at everything, we are number one, the biggest, the brashest, the best" nature of the American psyche?
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
It's not 1/3 the size when using purchasing power parity, rather than official exchange rates. Purchasing power parity is a more meaningful method of comparison because it represents what a local currency can actually buy, vs. what an irrationally fluctuating exchange rate does to the numbers. Using PPP the relative sizes of the economy are somthing like $15 trillion for the U.S. and $11 trillion for China.
Gob wrote:I cannot see what the IMF would have to gain by pushing misinformation though.
Their projections are only as good as the info they get handed by the PRC. Also, it may be one of those things where the extrapolation is based on lines that may not continue on the same straight path, and may already be turning as we speak (e.g., the U.S. percentage went down quickly from 2008 because of the terrible economy, while China continued strong growth; if the U.S. economy picks up steam, those lines will change).
