US Vice President to Discuss Economic Issues in China

Dan Robinson | The White House

Photo: AP

US Vice President Joe Biden (file photo)

Steps the United States is taking to get its fiscal house in order will be a key topic during a threecountry Asia tour by Vice President Joe Biden. Mr. Biden sets off Tuesday on the trip to China, Mongolia and Japan. U.S. officials say Mr. Biden will use his talks with Chinese leaders, including Vice President Xi Jinping who is anticipated to succeed President Hu Jintao next year, to emphasize that the United States is moving firmly to tackle its fiscal problems. During the difficult and divisive negotiations between President Barack Obama and Congress for a debt and deficit compromise, China's state-run Xinhua news agency said political battles in Washington were jeopardizing the global economy. Briefing reporters, Treasury Department Under Secretary for International Affairs Lael Brainard said Biden will talk about "the very strong deficit reduction package" President Obama signed into law. Saying the United States "has the capacity, the will, and the commitment" to tackle its fiscal and economic challenges, Brainard noted the stake that China has in a successful U.S. fiscal strategy, namely more than $1 trillion invested in treasury securities. "There continues to be extremely

strong investor demand for U.S. treasury securities, recognizing that this market continues to be the deepest, most liquid in the world. And I think recognition widely in China and around the world is that the U.S. economy remains the most flexible and the most innovative," he said. Brainard said Biden's visit will also be an opportunity discuss key bilateral economic issues. These include the need to continue moving away from protectionism, further steps to allow China's currency to appreciate against the dollar and the need to reorient China's economy to be based more on domestic demand than on exports. The invitation to Biden to visit China was issued by President Hu during his Washington visit in January. In addition to visiting Beijing, where he will meet U.S. and Chinese business leaders, Biden is expected to deliver a speech on Sino-American relations at Sichuan University in Chengdu. National Security Adviser to the vice president, Tony Blinken, says Biden is well-positioned to deliver this message. "As two great powers and global actors in this century, China and the U.S. face many similar challenges and share many common responsibilities. And the vice president and president have the conviction that the more we can act on those challenges and responsibilities together, then the more the world will benefit," he said. Blinken says one of the main purposes of the visit is to get to know China's future leadership and build a relationship with Vice President Xi. Daniel Russel is Senior Director for Asian Affairs on the National Security Council. "This will be the first time that a very senior U.S. official has spent a substantial amount of time with Vice President Xi Jinping," he said. On human rights issues, NSC official Daniel Russel says Mr. Biden will continue to reinforce the U.S. view that there is "great value" in China renewing dialogue with representatives of the Dalai Lama. President Obama and the Dalai Lama, both Nobel Peace Prize laureates, met at the White House last month. China criticized the meeting, calling it interference in China's affairs. Mr. Biden will also visit Mongolia, where he will be the first U.S. vice president to visit there since 1944. Talks in Mongolia will focus on the country's transition to democracy, and expanding economic and defense cooperation with the United States. Mongolia's president visited the White House in June. In Japan, the vice president's talks will focus on recovery efforts after the so-called "triple disaster" of the earthquake, tsunami and nuclear accident as well as alliance and security issues, including North Korea. The Biden trip to Asia kicks off what U.S. officials describe as a busy diplomatic calendar of Asia Pacific events in coming months. President Obama will host the Asia-Pacific Economic Cooperation summit in Honolulu in November, and then travel to Bali for the East Asia Summit.

Economists: Second US Recession, If It Hits, Could Hit Hard

Laurel Bowman | Washington

Some economists are worried that the United States is poised for another recession. They warn that a so-called "double-dip," if it comes, could be more painful for average Americans than the 2007-2008 recession. Jobs, incomes, output and industrial production are all weaker now than they were then. One sector that has been hit especially hard is housing.

Mark Hudson is a real estate agent in Washington, D.C., one of the areas that has been least affected by the housing and construction bust. He peruses the days list of homes for sale. We are down about 40 percent from June 2005 to June 2011 in home sales. That affects every potential area of the economy everywhere and we are, frankly, being close to Washington, in better shape then a lot of the areas of the country," he said. One of the homes Hudson is currently trying to sell is in a historic district in a suburb of Washington. He says hell sell the house for much less than he would have several years ago. And that reduced

housing prices have a real impact on peoples personal wealth. If they had sold it a few years ago they would have cleared 'X,' now they are going to clear $100,000 to $150,000 less. That is money they could use in retirement or for buying a new house or for putting their kids in college, so it absolutely affects their personal wealth, Hudson said. Robust home sales and construction can help drive an economic recovery. But economist Karen Dynan says that probably wont happen this time around. The real issue now is that demand is so weak because people dont want to buy homes when their income prospects are so weak. When they are worried that house prices are going to fall further and until we can see that demand rise again we are not going to see home-building rise in a way that is contributing to economic growth, Dynan said. Many economists say that fear of the unknown is feeding consumers hesitancy. That fear has rocked global financial markets, following a downgrade of U.S. Treasury debt and a long-running and highly fractious political debate over raising the nations debt ceiling. Pessimism can be self-fulfilling. If a consumer wakes up one day and is worried about the future and doesnt go out and spend, then retailers are going to see weak demand and they are not going to hire as much and income will weaken and that in turn will leader consumers to have even less inclination to spend, Dynan said. Hudson says that with his personal income down by more than 50 percent, hes certainly spending less. And hes worried about whats to come. If theres a recession, I dont know what I would do because I have cut as much as I could, I believe. I guess I could do more but it would be difficult. I have cut as much as I can at this point, so its kind of a scary question, Hudson said.