Latest news with #discretionarySpending
Yahoo
6 days ago
- Business
- Yahoo
ECB should change inflation target, researchers to tell policymakers
FRANKFURT (Reuters) -The ECB should abandon targeting headline inflation and focus instead on price growth in discretionary spending to protect the bloc's poorest, a paper to be presented to policymakers at the bank's preeminent research conference argued on Friday. The ECB targets inflation at 2% and a soon-to-be-concluded review will not even discuss the definition of the target as policymakers have long argued that using a different measures, like underlying inflation, or figures incorporating housings costs, could sow confusion. But the paper written for the ECB Forum on Central Banking in Sintra, Portugal next week argues that the current framework disproportionately hurts low income workers and leads to an inferior outcome for society. The logic is that after an interest rate hike, discretionary spending contracts significantly more than needed, triggering a fall in labour demand in sectors producing discretionary goods and services. "These sectors employ a larger share of low-income, hand-to-mouth workers, whose consumption is highly sensitive to income fluctuations," the paper agued. Thus, the initial drop in discretionary spending cascades into a broader decline of overall demand, amplified by this impact on lower-income households. "By targeting discretionary inflation, the central bank provides households with an incentive to smooth their discretionary spending; in turn, this ameliorates the negative employment effects on hand-to-mouth workers in discretionary industries," the paper argued. Although this would lead to a more accommodative policy stance, stabilising discretionary spending inflation allows the economy to more effectively close the so-called output gap, or the difference between potential and actual output, the paper argued.
Washington Post
30-05-2025
- Business
- Washington Post
White House releases partial budget, but without critical details
The White House Office of Management and Budget released hundreds of budget documents early Friday evening that left out key projections that administrations of both parties have publicly disclosed for decades up to now. With little fanfare, the budget office released 1,224 pages that spell out its spending plans in detail, expanding on the abbreviated 'skinny budget' it unveiled this month. So far, though, the administration has only addressed the portion of federal outlays known as discretionary spending, which doesn't cover programs such as Social Security, Medicare and Medicaid that comprise the bulk of the federal budget. Typically, the White House releases a comprehensive budget proposal each year that provides 10-year estimates of federal spending, revenue and deficits, as well as projections of economic growth, interest rates and other important indexes. These numbers are hotly contested and typically initiate a debate over the White House's priorities. But the Trump administration appears to be trying to avoid that debate, at least for now, by ignoring the traditional process for releasing a budget. OMB spokeswoman Rachel Cauley said the administration is waiting until Congress finishes working on the president's tax legislation before it releases economic or deficit projections. Any estimates or deficit figures released now would 'not be accurate' because negotiations over the bill are not concluded, she said. She added that the administration had released a budget, pointing to the less detailed proposal unveiled earlier this year. The nonpartisan Congressional Budget Office has estimated that the tax bill approved by the House would add more than $2 trillion to the federal debt over the next decade. Several experts said they could not recall a time when the White House had gone so long without disclosing widely cited estimates about its economic forecast. Under a 1974 law, the president is required to submit a budget to Congress no later than the first Monday in February, although typically it arrives later during the first year of a presidential term. 'I've never seen a budget delayed this much. The president's budget sets a vision for the entire federal government that is useful to Congress and the American people,' said Jessica Riedl, senior fellow at the Manhattan Institute, a center-right think tank. 'Without it, we don't know what policies the president will promote or what bills he will sign and veto.' G. William Hoagland, senior vice president at the Bipartisan Policy Center, a nonpartisan think tank, said the new document released by the budget office would help the appropriations committees assess the fraction of the federal budget known as discretionary spending as lawmakers try to write spending legislation for the next fiscal year, which begins Oct. 1. 'Maybe this is just the start — but if this is what they're doing, they're breaking precedent,' Hoagland said. 'If this is what they claim is the budget, this is not normal.' Part of the challenge in crafting a full budget proposal may be the president's frequent policy reversals. Trump's tariff policies — which are important for making forecasts about the economy and federal revenue — change on a weekly or even daily basis, and his views on Medicaid and other federal programs also change routinely. That may also make it difficult for the White House to release a full budget document. 'This is extraordinarily unusual. I don't remember it happening in my 46 years of watching this or the first four years of the Trump administration,' said Charles Kieffer, who spent several decades across administrations in the OMB and worked for Democrats on the Senate Appropriations Committee.
