With the recent election, congress will shift from democratic control to republican control. Overseas trading partners worry that this change in power will create new challenges for the global economy.
Based on campaign agendas, republicans are expected to curb government spending and extend the Bush tax cuts to address the unemployment and growth problems facing the US. Unfortunately, these plans do not go together. Continuing the Bush tax cuts will add to the deficit and further weaken the dollar.
“Republican claims to fiscal probity are a little difficult to buy into,” said Simon Tilford, the chief economist at the Center for European Reform in London. “What they’re advocating would probably increase the deficit rather than effect the dramatic reduction which they claim they want to bring about.”
While the weakening dollar will make our exports more competitive, it will only do so temporarily. While the US continues to fall, other countries such as China, India and Brazil will continue to outpace us as drivers of global growth.
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