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World worries about Republicans' economic strategy

Last updated on: November 4, 2010 12:09 IST

World worries about Republicans' economic strategy

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With the Republican party gaining control of the House of Representatives, Republicans are expected to push for the extension of Bush-era tax cuts that could add to the deficit and weaken the dollar, says a report.

The new challenges are worrying trading partners of the United States, The New York Times reported.

"The rest of the world, including Asia, is looking at the United States and seeing no real effective policy measures in bringing the economy back on track," said Bart van Ark, the chief economist at the Conference Board, which measures American economic indicators.

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World worries about Republicans' economic strategy

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"That is making the US lose its legitimacy in the global economic community as a leader in terms of providing solutions," he told NYT.

The daily further pointed out that keeping taxes at their current relatively low rates could help lift consumer spending in the US, while a cheaper dollar would make American exports more competitive.

"But analysts said those fixes would be only temporary and would be unlikely to reverse the waning of the United States economic clout, as emerging markets led by China, India and Brazil outpace industrial nations as drivers of global growth," it said.

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Image: US President Barack Obama.
Photographs: Reuters
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World worries about Republicans' economic strategy

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Both parties, however, are to keep up pressure on China to strengthen its currency since

American manufacturers have groused that China is keeping its currency artificially weak making it harder for US to compete.
"If the Chinese were to give a little, that would buy a lot of time on trade policy," said said Kenneth S Rogoff, former chief economist at the International Monetary Fund.

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"Asians especially are extremely nervous about seeing the US slap a tariff on Chinese imports or some such aggressive approach, not only because Republicans are taking the House, but because the economy is very weak," he told The Times.

Until the dust settles, however, 'unpredictability is the word of the day,' Rogoff added. "We have a powerful and volatile new force . . . the rest of world will be worried about that."


Image: Indian Prime Minister Manmohan Singh.
Photographs: Reuters
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