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Mnuchin Says Goal Is to Pass US Tax Reform by August

Treasury Secretary Steven Mnuchin said Thursday the administration is committed to getting major tax reform legislation through Congress by August. He predicted that President Donald Trump’s economic proposals will be able to boost growth significantly to annual rates above 3 percent.

Mnuchin said that tax reform is the administration’s top economic priority and the goal is to have a measure approved by the time Congress takes its August recess.

“We are committed to pass tax reform,” Mnuchin said in an interview on CNBC. “It’s going to be focused on middle income tax cuts, simplification and making [the U.S.] business tax competitive with the rest of the world, which has been a big problem.”

He said implementation of Trump’s economic program including tax cuts and deregulation would make growth in a range of 3 percent to 3.5 percent “very achievable.”

During the campaign, candidate Trump had set a goal of achieving growth, as measured by the gross domestic product, of 4 percent or better. The country has struggled through the weakest recovery in the post-World War II period in terms of growth, with GDP averaging annual gains of just above 2 percent in the seven years since the recession ended in mid-2009.

“We have underperformed where we need to be,” Mnuchin said. “We believe we can be competitive and get back to sustainable growth of 3 percent or more.”

The GDP grew by just 1.6 percent last year, and many forecasters are predicting growth this year at an only slightly better pace of 2 percent to 2.5 percent. Mnuchin said it would take time for Trump’s economic program to translate to faster growth. But he said positive effects would be realized by next year.

Mnuchin’s prediction of an August passage of a tax plan could prove optimistic given that House and Senate Republicans seem sharply divided over key elements of the program. GOP lawmakers in the Senate have expressed opposition to a House proposal to replace the current 35 percent tax on corporate profits with a border adjustment tax.

Under the House proposal, American companies that produce and sell their products in the United States would pay a new 20 percent tax on the profits from those sales. But if the company exports its products, the profits from those exports would not be taxed by the United states. However, foreign companies that import goods into the United States would have to pay the 20 percent tax.

Mnuchin did not commit to supporting the border adjustment tax but said the administration was “looking closely” at the issues raised by this type of tax. He said he has discussed those issues with two supporters of the approach, House Speaker Paul Ryan and House Ways and Means Committee Chairman Kevin Brady, R-Texas.

“We think there are some very interesting aspects of it. We think there are some concerns about it,” Mnuchin said.

He said one thing the administration wants is a combined plan that would draw support from lawmakers in both the House and Senate.

“We’re working behind the scenes very carefully. We’re running a lot of numbers and we’re taking into account a lot of issues,” he said. He said the administration hoped to have a proposal ready to unveil in “the near future, and we’re committed to get this passed by August.”

In a separate interview with the Fox Business Network, Mnuchin said the administration was focused on an “aggressive timeline” to enact tax reform, calling it critical to stimulating economic growth.

“There’s trillions of dollars offshore that will come back, and this will create jobs [and] this will create investment and we need to make sure our U.S. businesses are competitive,” Mnuchin said.

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Investing in Disaster Resilience Now ‘Mission Critical’ for Business

In the aftermath of Hurricane Katrina in 2005, Gillis, Ellis & Baker, a New Orleans-based insurance company, relocated from the battered, flooded city to nearby Baton Rouge so it could carry on serving its 4,000 clients, who all had at least one claim following the storm.

Had it not been able to keep operating after the disaster, “we would have been out of business today”, said the firm’s president, Anderson Baker.

“We would not have been able to live up to our promise to get our customers’ claims initiated,” he told the Thomson Reuters Foundation.

The company had decided to ramp up its disaster plan just weeks before the deadly hurricane hit, and was able to make use of a generator-powered trailer with office equipment and satellite phones provided by U.S. firm Agility Recovery.

“We don’t see it as a choice,” said Baker. “It’s part of being in business. For us, it’s mission critical.”

Whether a devastating hurricane like Katrina – the costliest storm in U.S. history, which left 1,800 dead — or more commonplace events such as a rat infestation, natural hazards can disrupt business operations and harm profitability.

In 2016, over 10,000 people died as a result of natural and man-made disasters globally, while financial losses amounted to at least $158 billion, according to insurance giant Swiss Re.

Increasingly, companies are realizing how important disaster recovery can be for their survival, and are finding ways to keep their staff and assets safer from threats. Gillis, Ellis & Baker is now investing in remote and cloud-based systems as part of a strategy to protect its operations in case of future disasters.

“We’ve got to be there or those clients—  have no reason to stay with us any further if we’re not there to answer the phones and do what they need us to do,” said Baker.

Stock-piling critical materials, backing up computer data, identifying alternative suppliers and re-locating activities are among the measures businesses can take to prepare and build resilience to disasters, experts say.

Recovery services

And as climate change brings more extreme weather around the globe, there is growing demand from the private sector for backup services in case a disaster strikes.

“It’s asset protection, employee protection — so there’s a responsibility for companies to have to do this,” said Hyune Hand, chief executive officer of Agility Recovery. “The biggest gap we have is when customers say ‘we’ll deal with that if it comes’.”

Agility Recovery, which provides mobile units, computers and generators to disaster-affected clients, is gearing up to increase the number of ready-to-use offices it can offer its customers in emergencies.

When Superstorm Sandy ploughed into the U.S. northeast in 2012, leaving over 120 people dead and knocking out power and telecommunications, Agility Recovery brought in equipment to help its clients, ranging from large financial institutions to local convenience stores.

But businesses need not wait for a crisis to hit before putting in place measures to reduce losses.

When it comes to building resilience to climate change, companies should consider the potential impact on their physical assets, as well as rising costs, from energy prices to raw materials, said Geoff Lane, a partner in the sustainability team at professional services firm PwC.

“Another key aspect is ‘brand resilience’ as consumers, employees and investors are increasingly looking at companies’ overall positioning and response to climate change when making financial or life choices,” he said.

‘Triple Dividend’

But many businesses — and governments — are still too used to under-spending on prevention, taking a short-term approach that ultimately costs them more, experts say.

“We are actually far outspending on recovery and response, the post-event funding … than on prevention and ex-ante anticipative management, and this is really a problem,” said Swenja Surminski, a senior fellow at the London-based Grantham Research Institute on Climate Change and the Environment.

“We’re locking ourselves into a less resilient future if we don’t address risk right now,” she told a recent webinar for the International Center for Climate Governance.

A new book co-authored by Surminski, “Realizing the Triple Dividend of Resilience,” argues that boosting resilience can save lives and avoid losses; unlock economic potential; and generate additional value known as “co-benefits.”

These “co-benefits” could be investing in life boats for floods that can also be used by communities for fishing and trade, or leasing shelters that double up as meeting spaces.

Ripple effects

Adam Rose, research professor at the University of Southern California Sol Price School of Public Policy, agrees that emphasizing the benefits could be one way to incentivize businesses to invest in resilience.

Doing so could help them avoid a drop in profits due to loss of customers and market share, and lessen disruptions to the local economy or society they operate in, he said.

“People are realizing that disaster losses to an individual business have spill-over effects,” he said.

For example, the GDP losses from Hurricane Katrina far exceeded the cost of property damage, while business interruption caused by the September 11, 2001 attacks in New York was valued at around four times higher than the physical damage to the World Trade Center, Rose noted.

So far, larger companies have generally been quicker to take action, while many medium and small-sized firms still need to get up to speed and adopt best practices, he added.

“Businesses are getting more involved in sharing information [and] learning more about all features of the broad definition of resilience,” he said.

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Moody’s Sticks to Initial Assessment of Trump, US Economy

Before Donald Trump won the November election, many analysts were sharply critical of his economic proposals. Some predicted big declines in financial markets, hiring slowdowns and a heightened risk of recession.

But just a little more than a month since Trump became the 45th U.S. president, U.S. stocks have enjoyed the longest winning streak in decades, hiring continues to beat expectations and consumer confidence is soaring.

Were naysayers wrong?

VOA spoke with an early critic of Trump’s economic plans, Moody’s Analytics chief economist Mark Zandi, to ask him if the experts got it wrong.

Zandi’s answer was a crisp “No.”

 “If Mr. Trump got precisely what he wanted, the policy proposals that he had put forward, what would happen to economy? And the answer is, the economy would go into a deep recession.”

Zandi told VOA he stands by his initial assessment before Trump became president, saying that from a policy perspective, he has yet to deliver on his campaign promises.

“What he wanted was 11 million undocumented workers to leave the country. What he wanted was a 45 percent tariff on China, 35 percent on Mexico. What he wanted was tax cuts and government spending increases that would increase the budget deficit by $10 trillion over 10 years. So if that is what he got, that would lead to a recession. That hasn’t changed.”

Others see good signs

But others say the record run-up in stock prices reflects renewed investor optimism under Trump, much of it driven by expectations of corporate tax cuts and fewer regulations. PNC senior analyst Gus Faucher says it’s about higher profits in the short term.

“So they (investors) are expecting stronger U.S. economic growth under President Trump, both real growth — that is after inflation — but also perhaps higher inflation, and that’s going to boost profits as well,” he said. “And then also it looks like we’ll get corporate income tax cuts, so that means more profits to distribute to the shareholders so that’s good news for stock prices.”

Faucher says investors will be disappointed if Trump fails to introduce concrete proposals to boost growth, such as corporate income tax cuts or a major infrastructure jobs program, but he says, in general, the economic outlook is much better than it was just a few months ago.

Enthusiasm wanes

But enthusiasm surrounding Trump’s economic agenda may be waning.

Goldman Sachs says investor confidence may have reached its peak. And Kevin Kelly at Recon Capital Partners says markets may be close to reaching a tipping point.

“Now, it’s focusing on, OK, are we going to get deregulation or are we going to get taxes? Are things going to be weighing for a while? Is it going to be a second half of the year story? I think that’s what’s kind of seeping into the market right now.”

Some economists say Trump’s protectionist, anti-trade positions pose another risk to the larger global economy. 

Trump has turned his back on the 12-nation Trans-Pacific Partnership, and he wants to renegotiate the 1994 North American Free Trade Agreement (NAFTA) with Canada and Mexico. Critics of NAFTA say the North American trade deal destroyed millions of high-paying manufacturing jobs in the United States.

But Zandi of Moody’s says, “The United States is at the center of the global economy. It’s taken hundreds of millions of people out of poverty and brought them into the middle class. Think about Brazil, think about Eastern Europe, think about China and Asia. Consumers have also benefited enormously from cheaper goods. If we pull back on globalization, the world suffers and we will also suffer.”

Congress likely to back policies

Despite reports of disarray in the early days of the Trump administration, Zandi believes a Republican majority in both houses of Congress is likely to approve most of Trump’s policy proposals. 

But some economists wonder, given the Republican party’s brand of fiscal conservatism, if lawmakers approve Trumps proposed tax cuts, how is the administration going to pay for a major infrastructure jobs program, or new border agents, and of course, that giant border wall between the U.S. and Mexico?

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Moody’s Economist Sticks to His Prediction: Trump Bad for Economy

Before Donald Trump won the election, many analysts were sharply critical of his economic proposals. However, in Trump’s first month in office, U.S. stocks have hit a series of record highs and consumer confidence improved. Did analysts get it wrong? Economist Mark Zandi, an early critic of Trump’s economic plans, said it’s still too soon to tell. Mil Arcega reports.

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US Fed: Rate Hike May Come ‘Fairly Soon’

An interest rate hike may come “fairly soon” according to notes from the most recent meeting of top officials of the U.S. central bank.

The assessment by Federal Reserve leaders assumes that data on the job market and inflation continues strengthening at its current pace or faster.

Some Fed officials expressed concern that unemployment might fall so low that it would spark inflation as employers are forced to offer higher wages to attract workers in a tight labor market.

Officials raise interest rates to cool the economy to keep prices from soaring. They worry that an inflationary spike could hurt economic growth.

The Fed is supposed to work toward stable prices and full employment. The most recent unemployment rate is 4.8 percent, which many economists say is pretty much full employment for the large and complex U.S. economy.

The Fed information was published Wednesday after the customary delay of several weeks. The next scheduled meeting of the Fed leadership is in mid-March.

Earlier on Wednesday, a separate report said U.S. home resales surged to a nearly 10-year high in January.

The National Association of Realtors says existing home sales jumped 3.3 percent to an annual rate of 5.69 million homes.

The report says sales are being hampered by the smaller-than-usual number of homes available for sale. The real estate industry group also says sales were up 3.8 percent from the same period a year ago.

Sales growth was stronger than many experts predicted, perhaps because they thought rising prices and interest rates might cool the market a bit.

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US Treasury Chief Tells IMF He Expects ‘Frank and Candid’ Forex Analysis

U.S. Treasury Secretary Steven Mnuchin told International Monetary Fund Managing Director Christine Lagarde on Tuesday that he expects the IMF to

provide “frank and candid” analysis of exchange rate policies, a Treasury spokesperson said.

In a phone call with Lagarde, the spokesperson said, Mnuchin also “noted the importance that the administration places on boosting economic growth and jobs in the United States, and looked forward to robust IMF economic policy advice on its member countries and tackling global imbalances.”

The conversation on U.S. priorities occurred as officials from the Group of 20 major economies express concern about how the United States will approach multilateral institutions and delicately crafted G-20 language on foreign exchange cooperation, trade and other economic policies.

As President Donald Trump pursues an “America First” agenda aimed at reversing chronic trade deficits with China, Mexico, Germany and other major trading partners, some are concerned his administration could back away from pledges to maintain an open global trading system.

“I believe the Trump administration will try to leverage the IMF and the G-20 to help achieve its external objectives and escalate pressure on China and Germany,” said Domenico Lombardi, a former IMF board official who is now with the Center for International Governance Innovation, a Canadian think tank.

Targeting currency manipulation

Throughout his election campaign, Trump accused China of manipulating its yuan currency to gain an export advantage over the United States. And Trump trade adviser Peter Navarro in late January said Germany was using a “grossly undervalued” euro to do the same. Both countries have large bilateral trade surpluses with the United States.

But IMF officials no longer view the yuan as undervalued, especially since China’s central bank has spent hundreds of billions of dollars to prop up the yuan over the past year to counter capital outflows.

The euro’s value against the dollar is widely viewed as a function of still-weak fundamentals in key eurozone economies and the European Central Bank’s use of negative interest rates at a time when the U.S. Federal Reserve is raising rates.

A ‘constructive discussion’

Mnuchin, who was sworn in as Treasury secretary just a week ago, has yet to lay out his priorities. Before his Senate confirmation, he pledged to work through the IMF, the G-7 and G-20 to address currency manipulation as an unfair trade practice.

But he added in written remarks to senators: “The IMF and other multilateral institutions do not appear to have prevented nations from manipulating the value of their own currencies.”

In the call with Lagarde, the Treasury spokesperson said Mnuchin “underscored his expectation that the IMF provide frank and candid analysis of the exchange rate policies of IMF member countries.”

IMF spokesman Gerry Rice said that Lagarde “had a constructive discussion with Secretary Mnuchin on a wide range of issues of interest to our membership. We look forward to continuing our close and productive engagement with the U.S. authorities.”

US is largest IMF shareholder

The United States is by far the IMF’s largest shareholder, with about 17 percent of its board voting power, enough for an effective veto over many major decisions.

It is unclear how Mnuchin might wield U.S. influence over the IMF on issues such as whether it should commit resources to Europe’s bailout of Greece.

In his written remarks to senators, Mnuchin said the Trump administration will “ensure that U.S. resources placed in international institutions such as the IMF and multilateral development banks are used to promote policies consistent with the objectives of the United States to the greatest extent

possible.”

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Small Business Owners in Arizona Look to Trump for Relief

The owners of a local printing company in Arizona are looking to President Donald Trump to cut taxes and improve the business climate. Mike O’Sullivan spoke with the owners, who backed Trump, and their son, who did not, about what they expect from the president.

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Mexico Says New Tariffs in NAFTA Talks Would be Disastrous

Any attempt to introduce quotas or tariffs to the North American Free Trade Agreement would be disastrous for the three-nation treaty, Mexican Economy Minister Ildefonso Guajardo on Tuesday told a Toronto conference on the future of North America.

U.S. President Donald Trump — who says free trade treaties have cost countless thousands of American jobs — wants NAFTA to be renegotiated with a focus on cutting his country’s large trade deficit with Mexico.

One idea floating in Washington is that of a border tariff, which could hit Mexican exports.

“Nothing in the new NAFTA should be a step backward. We will definitely not include any type of trade management measures, like quotas, or open the Pandora’s box of tariffs,” Guajardo said.

“That will be disastrous in any process moving forward,” he said.

New tariffs would result in special interests in all three nations asking for protection, Guajardo predicted.

Trump has revealed little about his intentions for NAFTA, which came into force in 1994, except that he wants to tweak the U.S. trading relationship with Canada while pushing for larger changes with Mexico.

Canadian officials have suggested the United States would first negotiate with Canada and then focus on Mexico, an approach that trade experts say is almost unworkable and one that Mexico dislikes.

Guajardo said the bulk of the NAFTA talks would have to be carried out on a trilateral basis to give investors confidence that the same set of investment rules applied to all three nations. For the talks to succeed, governments in all three nations would have to prove they had benefited, he added.

“If I don’t go back home with a trade agreement that can be clearly understood as a beneficial outcome for Mexico, there is no way the Mexican Senate will approve it,” he said.

The Mexican government expects the talks to start this summer, said Guajardo, who stressed several times how well Canada and Mexico had worked together in the past on trade.

Guajardo and Mexican Foreign Minister Luis Videgaray were to hold talks with Canadian Foreign Minister Chrystia Freeland later on Tuesday.

Freeland said earlier this month that Canada opposed the idea of the United States imposing new border tariffs and would respond to any such move.

 

 

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Sticker Shock for Olive Oil Buyers After Bad Italian Harvest

From specialty shops in Rome to supermarkets around the world, lovers of Italian olive oil are in for some sticker shock this year, with prices due to jump by as much as 20 percent.

 

The combination of bad weather and pests hit the harvest in Southern Europe, most of all in Italy, where production is halved from last fall. That’s pushing up Italian wholesale prices by 64 percent as of mid-February compared with a year earlier, which translates to shelf price increases of 15 to 20 percent in Italy.

 

In other countries, the ultimate price increases will depend on several factors — such as how much retailers take on the costs themselves and the change in currency values. The U.S., for example, is likely to see a more modest rise in price as a stronger dollar keeps a lid on the cost of imports.

 

Italy’s harvest was especially hard hit by the combination of early rains that knocked buds off the trees and the threat of an olive fly that forced an early harvest, further cutting yields. Wholesale prices of olive oil from Spain, the world’s largest producers, are up a more modest 10 percent, with yields similar to last year’s.

 

Vincenzo Iacovissi, the owner of the Sapor d’Olio olive oil shop in Rome, says sales have dropped, though he’s tried to ease the shock for customers by explaining why prices have gone up.

 

“When there are increases of 15 to 20 percent there is some impact on sales. However, explaining the reasons for this increase has in part helped to make up for this,” Iacovissi said.

 

Italians collectively consume about 35 percent of the world’s olive oil, leading Spain at 30 percent, and that affinity makes them pretty resilient as consumers.

 

Flaminia Leoni, a 50-year-old mother of four, buys 80 to 100 liters of olive oil a year for her family and says that at most she will consider substituting lower quality olive oil for extra virgin for cooking — but not on the table, where olive oil is a staple giving accent to pasta, meats, salads and vegetables.

 

“I buy it more or less always at the same price, in truth, maybe a euro more. But I haven’t found this enormous growth in price,” she said.

 

Cedric Casanova, the owner of an Italian grocery in Paris, said he was hoping to get 30,000 liters of olive oil delivered, but received just 8,000 liters. He will have to rely on leftover stock from last year to help make up for the remaining difference — and absorb some of the price increase himself.

 

“I’m working with a standard price, by trying to assume the cost myself,” he said.

 

With global stocks down just 14 percent, no one is predicting general olive oil shortages, even with a 75 percent increase in consumption of olive oil over the last 25 years as demand pushed into non-traditional markets. The market for olive oil in the period has grown by two-fold in the United States, seven-fold in Britain and 14 fold in Japan, according to Italy’s Coldiretti farm lobby, even if continental Europe remains by far the largest market.

 

Italian olive oil is more vulnerable than that of other major producers to climate shifts and pests due to its varied topography, from hills in the north to larger groves in the south. This also lends great variety to Italian olive oil, where unique flavors are derived from a combination of the terrain, topography and the more than 400 olive varieties, according to Nicola Di Noia, an olive oil expert for the Coldiretti farm lobby.

 

“We have hundreds of different varieties of olives that are more difficult to defend compared with Spain or northern Africa, where there are big groves that are easier to manage,” Di Noia said.

 

He said the challenge is educating consumers about why they pay for quality.

 

“We need to learn to choose oils with awareness. Extra-virgin is the juice of a fruit. The primary material from which it derives is very important. Therefore, oil should be tasted and smelled,” he said.