I welcome this as a step in the right direction and hope that more will follow.   On the fiscal side, it is important that we see progress in Washington in addressing the long-term fiscal challenges facing the country in a manner that is credible and supports economic recovery. Not only is this important to reassure households and business that the U.S. budget is on a sustainable path, but also this would be important from a larger confidence perspective – demonstrating to our citizens and the world that the political process can still work to make tough choices in the national interest. In this regard, the ability of the so-called Congressional “Super Committee” to reach agreement on a way forward is an important opportunity that I hope is not squandered. Regional economic conditions Now, how has the region fared during the downturn and its aftermath? Based on the New York Fed’s indexes,1 the downturn in the economy in New York City ended in November of 2009. Since then, the city’s economy has been on the mend and, as of September, the recovery continues at a healthy clip. The local economy has fared better than the nation during this deep recession and slow recovery. Employment fell by a smaller percentage in the city than it did nationally. During the recovery, New York City has already regained half of the net jobs lost during the recession.
In 2001, the Norwegian parliament approved new fiscal policy guidelines stipulating that the annual transfer from the Fund to the fiscal budget – that is annual spending of oil money – should correspond to the expected real return on the Fund. The expected real return is estimated at 4 per cent. The point of reference for the spending rule is a normal cyclical situation. In the event of particularly high capacity utilisation, spending should be lower than 4 per cent, whereas in a cyclical downturn, somewhat higher spending may be appropriate. The intention is for this wealth to be transferred to future generations, and that each generation should only spend the returns. The rule gives weight to long-term considerations when addressing current economic policy challenges. The rule also helps stabilise exchange rate expectations. The fiscal rule has the advantage of having intuitive appeal, and it is easy to check whether it is being followed over the business cycle. In line with the rule, the transfer from the Fund was higher than the expected real return of 4 per cent in the cyclical downturn in 2003 and the following two years. Since 2006, however, the transfer has been lower. It should also be noted that the target for the rule is the cyclically adjusted transfer, shown by the solid line in Chart 6. Automatic stabilisers are allowed to work, thereby reducing actual transfers during upturns and increasing them during downturns, as illustrated by the broken line in Chart 6.