US treasury secretary expects good year for US economy

The US economy will have a good year in 2014, spurred by strong core growth, rising confidence and an end to the fiscal drag, Jacob J. Lew, US Secretary of the Treasury said, Addressing, late on Thursday, participants in the 44th World Economic Forum Annual Meeting, Lew said the US economy grew about two per cent in 2013 even though contractionary fiscal policy cut 1.5 per cent from growth. Now that the fiscal drag has ended, he would not make a specific prediction, but said: "We are in the twos and we think it is reasonable to talk about three per cent." However, Lew warned the US Congress against creating a "false crisis" by failing to raise the debt limit promptly. Treasury will reach the end of its borrowing authority at the end of February even after using extraordinary measures, Lew said. If Congress has still failed to act by then, it would cause a "self-inflicted wound" to the US and the global economy. He reaffirmed that it is the responsibility of Congress to raise the debt limit, and that the President will not negotiate under the threat of default. "Not negotiating means not negotiating. I think Congress understands the President's position." Lew said extended unemployment benefits should be renewed even though the economy is strengthening, since long-term unemployment remained high. He said the President was working with industry leaders to end the stigma attached to long-term joblessness and to improve retraining programmes for workers. Lew said the US financial system was stronger now than it was in 2008. He cited better capital levels, the creation of resolution processes for financial institutions, stress tests and the Volcker Rule to limit risk-taking. But Lew said more work remains to be done, particularly on the shadow banking system and cross-border resolution processes for global institutions. Penny Pritzker, US Secretary of Commerce, told Forum participants that corporate tax reform in the US is important, but immigration reform is a higher priority, and trade agreements are the highest priority for US business leaders. Michael Froman, US Trade Representative, said that the boom in energy production has made the US increasingly attractive for manufacturers from all over the world. The Annual Meeting 2014 is taking place from 22 to 25 January under the theme, The Reshaping of the World: Consequences for Society, Politics and Business. Participating this year are over 2,500 leaders from nearly 100 countries, including 300 public figures, 1,500 business leaders and representatives from civil society, academia, the media and arts.