• Would you agree or disagree with David Malpass's suggestions? Why or why not? Thank you!

Government spending {Photo credit: 4010i} 2013] Interest rates have been held near zero for so long they have begun to seem normal. But that's a delusion. It's no more possible to run a market economy on free credit than it would be to run one on free gasoline or free labor. It works for the government and the well-connected but not for the rest, especially.r small businesses and new workers. The result is a heavily distorted global economy, a devastating "new normal" for growth rates and a niultivear collapse in real median income, which worsens income inequality. -- Let interest rates rise. The most important growth policy in 2014 would be for the Federal Reserve to la}? the groundwork for raising interest i1ttpszinmwjmbes.oomisitesiourrenteventsi201M01i'22ivebig-steps-howard-fasler-globel-growthsh=29?ae?591804 2M drzwm'i F'rue Big Sieps Toward Faster Global Growth rates, as it did for reducing bond purchases in 2013. It's high time the Fed moved past zero rateseven a 0.5% interest rate would allow credit markets to work better. -- New debt limit. Washington also needs to rewrite the debt limit so it restrains spending growth and puts a stop to the most ineffective spending. The current debt limit is a harmful masqueradewritten by government for the purpose of expanding spending and debt. A starting point when debt exceeds the ceiling would be to prohibit new entitlements and limit the escalation of existing ones. Congress should reduce the future pay and health insurance subsidies of senior congressional and executive branch ofcials when debt goes over the limit. -- Yen ceiling. Japan should put a ceiling on the yen the way Switzerland did on its franc. As long as there's the risk of another big upswing in the yen, growth and investment in the world's third-largest economy will underperform. Over the last year Japan has softened the yen, but its tools lack credibility. Wall Street traders will complain as loudly about a yen ceiling as they did about the Fed's reduction in bond purchases, as they prefer currency instability. But businesses and jobs do best when countries adopt strong and stable currencies. Japan has mechanisms already in place to implement a Swiss-style ceiling that could jump its growth rate to 4% overnight. -- Downsize governments. European countries need to refocus their austerity programs on downsizing government instead of targeting their private sectors. European programs have concentrated on higher taxes, sweetheart deals for state-owned companies and government control of the labor markets and health care. This has left the euro zone's average unemployment rate at 12.1%, with some countries' rates as high as 25%. Economists call these programs "internal devaluations," which translates to lower wages and pensions for the private sector. They are designed by government bureaucracies to keep government big. May elections for the-- Liberalize trade. This is critical to global growth, but progress has stalled. A core reason for this is that governments evaluate one another based on their average tariffs, ignoring many of the most harmful trade barriers. Over time government institutions have turned trade liberalization into endless negotiations among government lawyers, generating thousands of pages ofomplex regulations. This ends up hurting workers and growth. It's like evaluating teachers based on the average among them, downplaying the damage caused by the weakest few. The world would benet from identifying and xing the most restrictive trade quotas and tariffs. Currently big teams of government negotiators and lobbyists work toward mega- agreements that seek only marginal improvements in average tariffs, which would do little to liberalize trade or increase global growth. Most governments plan to stay the course in 2014, hoping growth in other countries picks up enough to keep them in power. That's possible, but each decision to maintain the status one means slower job growth than that needed to meet the coming increase in the elderly population. Any of these five steps could be accomplished in 2o14, which would materially improve the global growth outlook. 9 David Malpass Reprints 3c Permissions ADVERTISEMENT