Examining U.S., European And Japan's Latest Economic Growth
STEVE INSKEEP, HOST:
NPR's business news begins with new numbers on global growth.
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INSKEEP: We now have a decent picture of recent economic growth in the United States, Japan and the countries that use the euro. The numbers in each of those three areas tell different stories. The United States grew at a 2.8 percent annual pace in the last three months. It's not bad, it's been worse. Japan was at 1.9 percent, and eurozone countries hardly grew at all, four-tenths of 1 percent.
To figure out what lessons we can learn from all of this, we turn - as we often do - to David Wessel, economics editor of The Wall Street Journal. David, good morning.
DAVID WESSEL: Good morning, Steve.
INSKEEP: OK. So the U.S., Japan, the European Union, each has a little different approach to the economy and got somewhat different results here. Can we learn anything from the differences?
WESSEL: Right. In a way they're learning they're running a real-time economic experiment. Now it's important to remember there are differences among them; the U.S. has a growing population, the others don't. The U.S. has been out of recession for four years now, the eurozone countries only for six months. But the contrast is instructive, particularly in the way that they're using fiscal policy - that's government tax and spending - and monetary policy - that's what the central bank, the Fed does, interest rates, printing money and stuff like that.
INSKEEP: OK, 2.8 percent for the United States. Now in past economic expansions, that would not be anything really to brag about, but that's actually a lot better then we've done. Does this mean the United States is doing the right things?
WESSEL: I don't think so. I mean, yes, it's better than the other big economies are doing, but it's not very fast. And the problem is the Fed is rowing one way, doing everything it can to help the economy grow faster, and the president and Congress are rowing in the other direction, by raising taxes earlier this year and now by letting these across-the-board spending cuts that we in Washington called the sequester by.
WESSEL: So like Janet Yellin, who is going to be the next Fed chairman, if she's confirmed by the Senate, said last week, fiscal policy has been working at cross purposes to monetary policy. She and a lot of other economists say the U.S. economy could be growing faster if Congress weren't so preoccupied with cutting spending right now.
INSKEEP: If they were not, what about...
WESSEL: If they were not.
INSKEEP: ...other countries? Are the governments in other countries working at a more coordinated fashion?
WESSEL: Yes. Take the case of Japan. Now it's got plenty of troubles, as we know. But since they elected a new prime minister last year and he replaced the head of the central bank, they've been pretty much rowing in the same direction. So that's pulled Japan out of the mud and it seems to have brought an end to a particularly stubborn case of deflation, which is falling prices.
INSKEEP: And then there's the question of Europe.
WESSEL: Right. Now in the 17 countries that share the euro, the currency, the euro, neither fiscal or monetary policy is pulling very hard in the oars at all. A couple of weaker countries, like Spain, Portugal, Greece and Italy are being forced to cut spending and raise taxes, despite very high unemployment. Germany and the other stronger countries aren't willing to offset that. And the European Central Bank- that's their equivalent of the Federal Reserve -has been much less aggressive than either the Fed or the Bank of Japan, in part because it has doubts whether it's tools do much good, and in part because there's a lot of resistance from the Germans. So Europe is growing extremely slowly and unemployment is over 12 percent there.
INSKEEP: I guess the Germans - unlike the Fed in the United States - they don't have a duty to have low employment - or low unemployment, right? I mean their job is just to avoid inflation.
WESSEL: Well, but they have low employment in their own country and they're not willing to tolerate more inflation in Germany or more debt in Germany in order to get rest of the European countries to grow faster.
INSKEEP: Just a few seconds here, David. But you suggested earlier that the United States - officials are not cooperating very much. The Fed and Congress, should they be cooperating more?
WESSEL: Well, the world embraced the idea that central banks should be independent because it was thought that if politicians set interest rates we'd end up with a lot of inflation. But that doesn't mean the two sides shouldn't talk to each other. And the Fed is saying as politely as it can now to Congress, you could help us if you weren't doing the wrong thing right now.
INSKEEP: OK. David, thanks, as always.
WESSEL: You're welcome.
INSKEEP: David Wessel is economics editor of The Wall Street Journal.
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