Word: economisters
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...promise. Indeed, the season of testing is already upon him. The coming challenges in domestic, foreign and economic policy will determine whether his "citizen's socialism" will work. "Up until now he's been throwing carrots to the masses," says Guillermo de la Dehesa, a prominent Spanish banker and economist. "It's only now that he faces tough issues, and we're all waiting to see how he does." One of Zapatero's first tasks will be to establish his credentials in foreign policy, especially the Iraq war and the strains within the European Union. Last week he capped...
...BOTTOM LINE Economists give Kerry credit for addressing the heart of the problem: workers are expensive. But economists have doubts about whether this limited policy will make a real difference. They are much less excited about Bush's tax cuts, which could fire up some consumer spending, but not enough to add jobs, and would worsen the deficit. "We can't afford them anymore," says Diane Swonk, chief economist at Bank One. Shrinking the deficit or making big changes to the health-care system, the experts say, would do more to shore up business confidence and boost hiring...
...BOTTOM LINE Economists doubt that either plan would stimulate the economy or generate jobs. The wealthy are spending what they want to, explains Beth Ann Bovino, economist at Standard & Poor's, while everyone else is struggling with higher prices and stagnant wages. Both candidates draw fire for ignoring what their tax plans will do to the deficit. "This is a gigantic time bomb," says David Bradford of Princeton University. As with any business, when the Federal Government runs in the red, borrowing gets more expensive. The result? Interest rates could rise, and in the long run, the government would find...
...HEAVY INDEBTEDNESS of American consumers is nothing new. U.S. families have gradually been spending more of their household budget, about 13%, on debt payments. As long as housing prices hold up, economists say the debt burden will stay manageable. But as interest rates rise, mortgages and credit-card debt get more expensive, especially for those making less than $50,000 a year. "If you look at the low end of the income spectrum, they seem to be having more difficulty making payments," says Sohn. Over time, the deficit could worsen that effect, by making interest rates higher than they would...
...workers abroad. "It's a flashy finding," says Paul Oyer, associate professor of economics at the Stanford Graduate School of Business. "But these are two separate issues, and there's no reason to think they're related." In fact, a 1998 study by University of Illinois at Urbana-Champaign economist Kevin Hallock, published in the American Economic Review, found no causal relationship between layoffs and CEO pay increases, even though the two often happen together. --By Barbara Kiviat