Daily Archives: February 13, 2012

There is not much good news when it comes to managing the global system. The euro is in crisis; trade talks are stuck; and then there is climate change – the greatest global challenge met by the greatest global short-sightedness. Or are we missing something?

Just before Christmas, the parties to the UN climate convention agreed in Durban that a global legally binding approach to controlling emissions would be undertaken, to be signed in 2015 and implemented from 2020.

Success in 2015 depends on several factors. First, we need to change the debate from being narrowly about climate to being about food, water and energy – all affected by climate change. Increasing our resource efficiency not only helps the climate, but will help our economy.

Second, Europe needs to show how low carbon contributes to our economic benefit not hardship. Third, we must build new political coalitions that align countries with common interests in a low-carbon future – and work out how to accommodate the US without excusing them.

We must also ensure that previous national pledges to act are fulfilled; structure incentives to drive investment and innovation in low carbon technology; and commit money for adapting to and mitigating climate change. Finally, the scientific community must rehabilitate itself. The communication and the strengthening of trust in climate science is critical.

We cannot let the age of austerity be the age of inaction – the climate will not wait. Low-carbon development raises issues of justice, security and prosperity. It is one of the hardest nuts to crack in the multilateral system. As leadership elections and transitions dominate politics in the next 18 months, this is a challenge the winners cannot be allowed to duck.
 Read more

President Barack Obama’s budget for 2013 will set off a vitriolic battle. Republicans will rail against the Democrats’ “class warfare” and Democrats will rail against the Republicans’ “coddling of the rich”. Yet it is mostly for show. The rich will win in their fund balances while probably losing at November’s presidential polls, and the poor and working class will probably re-elect Obama but suffer a continuing decline in relative and perhaps absolute incomes.

There are very high long-term costs to all this. Main street is in decline, despite the recent optimism over a revival of hiring. One of every two Americans is now in a low-income household. Only about one-third of Americans aged 25-29 have a bachelor’s degree, and the college completion rate falls to a distressing 11 per cent among young Hispanic men. Mr Obama’s policies are slightly more responsive to these realities than the Republican alternatives, but the larger truth is that a shrinking federal government will fail to meet America’s skill, education and infrastructure challenges.

Even as Democrats praise Mr Obama and Republicans castigate him for his headline proposals to tax the rich, the budget is actually more grim news for America’s poor and working class. The poorer half of the population does not interest the Washington status quo. A third political party, occupying the vast unattended terrain of the true centre and left, will probably be needed to break the stranglehold of big money on American politics and society. Read more

President Obama releases the politically-weighty final budget of his first term on Monday. It covers the fiscal year beginning October 1 and also contains long-term budget projections. There are four key points to understanding it. It is as much a campaign document as an actual budget. None of the major proposals it contains will pass Congress in this presidential election year. The poor fiscal outlook for the US will be starkly confirmed. And, the key budget date in 2012 is not now, or mid-year, but December 31. That’s when some major tax cuts expire, the mandatory budget cuts triggered last year commence and legislation raising the federal debt limit will again be needed.

The main cause of these deficits is the financial collapse of 2008 and the Great Recession that followed it. Indeed, the US economy is still very weak, having grown only 1.6 per cent last year. That’s why this new budget will propose one last round of fiscal stimulus ($350bn in tax cuts and spending increases) to accelerate recovery. That would be followed by $3,000bn of deficit reduction actions (half of which would come from tax increases on individuals), beginning next year. This approach of stimulus now and long-term deficit reduction soon thereafter is, in my view, the correct one. Read more