Gaming US Fiscal Reform

Forest fiscal reform provides opportunities to increase revenues generated from forest resources.

Fiscal reform should enhance government legitimacy by paying greater attention to equity.

Such an environment cannot be created unless two important tasks are successfully undertaken, namely, fiscal and financial reform at the country level, and monetary coordination and fiscal harmonization at the regional level.

Fiscal reform We desperately need you to eliminate the looming fiscal cliff in the context of medium term reforms of both the tax system and entitlements. This would also allow for greater fiscal stimulus at a time when other components of aggregate demand are slowing.

It will assess the fiscal and employment impact of ageing and suggest possible directions for social security reform in the concerned countries.

PARIS Together with fiscal consolidation, structural reform is the new European mantra. International organizations and European Union bodies regard such reform as a prerequisite of economic recovery, growth, and alleviation of the unemployment plague.

The need for the Palestinian Authority to adhere to the reform agenda and to re establish fiscal discipline was a central theme of the meeting.

In the United States, where markets, the judiciary, and regulation are highly developed, the imperative is not institutional reform, but policy reform addressing the weak fiscal position, income and wealth inequities, unemployment, health care, and deteriorating physical infrastructure.

Meanwhile, India, constrained by a high fiscal deficit and persistent inflationary pressure, has less scope for expansionary policies and faces significant challenges in pursuing credible structural reform.

Fiscal Challenges and Fiscal Follies

Greater domestic resource mobilization, action against fiscal indiscipline, sound policies to encourage private sector participation, dynamic administration, fiscal and monetary reform and increased domestic capacity achieved through building up sound oversight institutions and better expenditure management may work as effective tools to achieve the Millennium Development Goals.

Governments may need incentives to act, but they also need to be able to show their citizens that reform pays. If, after a few quarters of fiscal adjustment and painful reform, output is lower, unemployment higher, and the outlook darker, governments may soon lose public support and reform may stall, as we have seen in Greece.

Second, health care had effective proponents in Congress, among consumers, and even among some of its providers. Medium term fiscal reform, for its part, will be pushed by bond market vigilantes.

It follows that the best thing the ECB could do to encourage fiscal consolidation and structural reform is to banish the specter of deflation. Only full bore quantitative easing can do that.

And here was the clincher By committing themselves to fiscal tightening, finance ministers gave themselves scope for some fiscal loosening. Proclaiming fiscal virtue enabled them to practice fiscal vice.

First, we must concur on how to approach Greece s fiscal consolidation. Second, we need a comprehensive, commonly agreed reform agenda that will underpin that consolidation path and inspire the confidence of Greek society.

Systemic reform of Italy s government may be a prerequisite to achieving consensus on a path to fiscal health and growth. But this is not the ideal moment for a timeout to do that.

So far, Greece has shown itself to be unwilling to implement a painful internal wage adjustment and reform measures forced by outsiders. Perhaps the latest deal, which was reached with Greece on the brink, will prove to be a turning point, with Greece finally committing actively to economic and fiscal reform.

Fixing America s fiscal problem will be as difficult as it is important. But slowing the growth of Social Security benefits and capping total tax expenditures would be a good framework for the coming reform.

Fiscal Follies

Over the long term, however, US policymakers must make steady progress in restoring confidence in the nation s fiscal health by cutting politically sacred programs like social security, Medicare, and defense. Officials will have to put aside short term motives and party orthodoxy to bolster America s aging infrastructure, reform its education and immigration systems, and pursue long term fiscal consolidation.

Policymakers should pair fiscal measures to ameliorate the jobs and investment deficits now with a multi year plan to reduce the long run fiscal deficit gradually. This long run plan should increase spending on education, infrastructure, and research, while curbing future growth in health care spending through the cost containment mechanisms contained in Obama s health reform legislation.

Systemic risk raises doubts about the solvency of over indebted countries, which means that these countries efforts to consolidate their fiscal position and promote reform do not lead to improvement in financial conditions, which is essential for overcoming the crisis and promoting recovery. As a result, fiscal consolidation becomes increasingly difficult to achieve, inviting renewed speculative attacks.

In the 1990 s, Zhu s core mission was to address the consequences of former Premier Zhao Ziyang s flawed fiscal decentralization efforts. By pursuing fiscal reform one sector at a time, Zhao left room for local governments to form alliances with SOEs, which provided subsidies to local bodies and enabled them to withhold income from the central government.

For President Barack Obama, California s crisis imperils his own reform agenda. Because other American states also face tough fiscal conditions, the political price of bailing out California may be bailing out dozens of other states too.

What is required is a two pronged approach that targets both problems simultaneously. The prevailing approach targeting debt through fiscal austerity and competitiveness through structural reform has produced unemployment levels that threaten social and political stability.

Fiscal reform will determine many things the components of domestic income and demand that will drive structural change on the supply side, the allocation of income and expenditure across levels of government, and the embedded incentives that this allocation implies. Outside of China, this part of the reform agenda is the least well understood.

Europe s Fiscal Wormhole

America s Fiscal Isolationism

Fiscal Apocalypse Now

Germany s Fiscal Follies

Last, but not least, the eurozone authorities misread the confidence factor. In theory, simultaneous fiscal consolidation and supply side reform facilitates economic recovery, because it increases confidence among consumers and investors, thereby inducing higher spending and production.

In other circumstances, these would be positive outcomes. Indeed, Europe does stand to reap significant benefits from fiscal consolidation and structural reform but in the long run, not in the short run, when the problem is deflation.

China s strong fiscal position today gives it a window of opportunity. But that window will close fast, because beneficiaries of specific reform policies have morphed into vested interests, which are fighting hard to protect what they have.

International Monetary Fund (IMF) (December 2004), Macroeconomic and Fiscal Developments, Outlook, and Reform in the West Bank and Gaza , presented at the Ad Hoc Liaison Committee (AHLC) Meeting, Oslo, http www.imf.org external np dm 2004 120804.htm.

With the change in mandate, MINUGUA expanded and broadened its expertise accordingly, adding specialists in indigenous affairs, macroeconomic and fiscal policy, labour issues, land rights and agrarian policy, military and public security reform, and gender issues, among others.

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