US growth good for global economy
US growth good for global economy
WASHINGTON, Apr 21: The Trump administration’s priority is boosting US growth through tax cuts and an overhaul of regulations, and a growing American economy will be good for the world, Treasury Secretary Steven Mnuchin said Thursday, reports AFP.
Cutting corporate taxes to encourage US firms to repatriate “trillions of dollars” in foreign earnings currently stashed in offshore accounts will drive investment and growth, he said. “What’s good for the US economy is good for the global economy,” Mnuchin said in a discussion at the Institute for International Finance.
The US official said the administration’s key focus is around fair and balanced trade and investment, but he steered clear of the tensions among finance officials gathered for the semi-annual meeting of the International Monetary Fund due to the worrisome protectionist rhetoric out of Washington.
This has created a strained atmosphere at the usually staid and formulaic meetings, as Trump officials have focused on attacking individual countries for their trade surpluses with the United States, and dismissed the IMF concerns as “rubbish.” Mnuchin said US corporate tax rates are among the highest in the world, and have caused companies to understandably park their earnings offshore.
“It’s about making business taxes competitive and bringing back what we think will be trillions of dollars to invest,” he said.
Asked whether a huge tax cut would enlarge the US budget deficit, Mnuchin acknowledged there would be an impact but said it will balance out once the positive growth anticipated from the increased investment is factored in, a calculation method known as “dynamic scoring.” “It will pay for itself with growth,” he said of the tax plan which he expects to introduce before the end of the year.
Treasury also is working on a report for President Donald Trump in early June on how to reduce the regulatory burden in the financial system.
The goal is to “make sure banks have liquidity so they can lend” but at the same time ensuring they do not become a burden to taxpayers should they run into difficulties.
Treasury has been holding meetings with banking and finance officials about how the regulations are working, and he said “we’re going to make sure all these rules make sense.”
That plan to revamp regulations also has rung alarm bells at the IMF and elsewhere, as officials warn of the dangers of rolling back the regulations put in place in the wake of the 2008 financial crisis to curb risky market excesses.
“Let’s not forget the lessons we learned,” German Finance Minister Wolfgang Schaeuble said earlier Thursday.
Meanwhile, German Finance Minister Wolfgang Schaeuble issued a plea to the United States to remain engaged in the global economy and not to try to score gains at the expense of other countries.
He also repeated a rejection of charges from Trump administration officials that Germany’s trade surplus is a sign of unfair policies imposed in Berlin.
“All of us have benefited greatly” from global integration and trade in recent decades, and Washington has been a leader in the process, the official said in a speech ahead of this week’s semi-annual meetings of the International Monetary Fund and World Bank.
The Trump administration’s antagonistic protectionist rhetoric has created a tense atmosphere at the usually staid meetings of the IMF membership, and drawn a growing chorus from officials defending the global trading system, while acknowledging that some segments of society have not seen its benefits and have borne an unfair share of the costs.
“Surely it’s in America’s own interest to ensure security and economic stability” in its trade partners, Schaeuble said.
And while he said it is legitimate for a government to look out for its own interests, he warned Washington that “peace and prosperity in one country cannot come at the cost of peace and prosperity in another country.”
Trump economic officials have focused on attacking individual countries for their trade surplus with the United States rather than looking at global trade more broadly.
Germany also will chair a gathering of the Group of 20 finance ministers and central bankers Friday, where currencies and trade are a regular part of the agenda.
Schaeuble acknowledged that the relatively weak euro has helped German exports, as Trump administration officials have charged, but he blamed the low interest rates and other extraordinary stimulus measures the European Central Bank has implemented to boost the euro area’s sluggish economy.
Having warned the ECB at the outset that such policies would boost German exports, “I do not now want to be criticized for the consequences,” he said.
Schaeuble said he has met with US Treasury Secretary Steven Mnuchin and explained that Germany’s trade surplus is the result of the high quality of the nation’s exports, not protectionism, saying there are “no sensible measures” that would reduce the surplus.
But he said he is glad to hear the ECB is beginning to discuss following the example of the US Federal Reserve in removing some of the stimulus, which can drive risky behavior in financial markets in addition to influencing the value of the euro.
He also said that global cooperation has put in place rules to try to prevent the behavior that caused the crisis, warning that those lessons should not be forgotten.