Word: gdp
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...balancing act between the need to prevent a double-dip recession and the desire to keep Japan's budget deficit from spinning out of control. The recession is knocking tax revenues so far below expectations that the deficit will rise to $548 billion this year, an enormous 10% of GDP. Yet, despite Hatoyama's instructions to keep next year's spending no higher than this year's initial budget of $970 billion, the country's ministries have submitted 2010 spending requests totaling $1.04 trillion. (See pictures of how Japan has changed in 20 years...
...overboard some of the $77 billion in programs that the DPJ offered to increase household disposable income. The purpose of this spending is to help shift Japan from an export-led economic model to one led by consumption. During the country's 2002-07 recovery, fully one-third of GDP growth was attributable to a rising trade surplus. As the severity of Japan's current recession showed, this is not a sustainable path. (Read Will an Opposition Victory Rescue Japan's Economy...
...effort to make this vital structural change, the DPJ has recognized a simple fact long denied by predecessors: consumer spending is weak because household income is so low relative to GDP. Real wages per worker have fallen every year but one since 2001. In response, the DPJ, in its policy manifesto used to win the election, came up with a series of programs that will not only put more money into the pockets of consumers but also ease the financial burdens of child-rearing. Programs would include a child allowance of $3,000 per year per child, free medical care...
...there were a simple correlation between financial-sector growth and economic growth, Philippon reasons, finance's share of the economy would stay constant. But when he examined data back to 1860, he found that finance's share of GDP varied widely. It ballooned in the late 19th century, shrank, ballooned again in the 1920s, shrank and stayed low for decades, then began to grow again in the 1970s, reaching unprecedented levels earlier this decade. The measure Philippon uses is the economic value added of the financial sector as a percentage of GDP, which was at about 4% in the 1960s...
...probably be better off with a smaller, less-well-remunerated financial industry than the one we've had. Exactly how much smaller? "I've done what I could, but it's not like I've found the right formula, that finance should be 6.65% of GDP," jokes Philippon. As for Blankfein and Griffiths, they clearly need to come up with a better formula for defending their paychecks...