In Search of Fiscal Responsibility

As we approach another round of debt-ceiling debates–conveniently timed to land after November–Speaker John Boehner made his position crystal clear at Peter G. Peterson’s Fiscal Summit.  As the Speaker proclaimed: Yes, allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without taking dramatic steps to reduce [...]

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Slow Train Coming

Actually, it appears to be accelerating. The train is the impending insolvency of the large entitlement programs. The news today: Social Security. A summary of the latest trustee report (as presented in the Christian Science Monitor): The trust funds that support Social Security will run dry in 2033 — three years earlier than previously projected — the government [...]

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The Ryan Budget as Antithesis

President Obama has moved on from constitutional history (his warning that a Court decision to overturn a statute would be unprecedented) to American history more broadly. His remarks focused on the Ryan budget: “Disguised as [a] deficit reduction plan, it’s really an attempt to impose a radical vision on our country. It’s nothing but thinly-veiled [...]

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The Ryan Budget

There has been much coverage of the Ryan budget plan (details here), most of it is quite predictable. Robert Reich (Christian Science Monitor) tells us that it is an expression of  “pure social Darwinism. Reward the rich and cut off the help to anyone who needs it.” Paul Krugman (New York Times), always cautious about [...]

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Deficits and Delegates

David Corn’s soon-to-be released new book Showdown examines the pivot to address deficits in the summer of 2010-11. Many Democrats were bewildered that the administration would move on to the GOP’s turf and begin addressing the problem of deficits and debt (one might pause for a moment and ask whether there is any empirical evidence [...]

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Imagine There’s No Welfare, Its Easy if You Try…

A few days back I posted (here) on an article in the NYT that focused on recipients of welfare (usually Social Security, Medicaid, disability) who are dependent on the state but also seem without options. My post ended on a somber note: “the expansion of the safety net has been accompanied by changes in social norms [...]

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The Social Safety Net. What are the Alternatives?

Binyamin Appelbaum and Robert Gebeloff had an interesting piece in the NYT this weekend entitled “Even Critics of Safety Net Increasingly Depend on It.”  An early quote provides the context:  The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary [...]

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Extending the Payroll Tax Cut

The House seems ready to vote down the Senate bill extending the payroll tax cut for two months while requiring the President to decide on the Keystone XL oil pipeline within 60 days (see coverage here and here). The bill—apparently negotiated with the Speaker’s blessings—seemed to be a strategic coup. Passed (89-10) by a bipartisan [...]

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Don’t Just Do Something, Stand There

This is the underlying message from Bruce Bartlett (FT). Basic argument: unlike Europe, the US already has the policies in place to stabilize the debt-to-GDP ratio.  On the revenue side, the Bush/Obama tax cuts are scheduled to expire and the alternative minimum tax continues to affect more taxpayers. Absent an extension of cuts and annual [...]

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The Government Bubble Pops (updated)

Events in the Eurozone are unfolding at a more rapid pace than ever, with even the normally staid Economist warning that the Eurozone might break up, with “horrible” consequences. Indeed, while a Greek default might not spell disaster for global finance and might not even require Greece’s exit from the euro, Italy is the third-largest [...]

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Taxes and the Super Committee

Senator Chuck Schumer (D-NY) seems pretty convinced that the Super Committee is going to fail and the blame will fall with the Republicans. As he predicted recently: “I don’t think the Super Committee is going to succeed because our Republican colleagues have said ‘no net revenues…When Democrats move too far left, we lose. We’re now [...]

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Gambling on the Supercommittee? Time to place your bets…

As the 12-member, bipartisan, deficit-cutting super committee spins its wheels in search of $1.2 trillion in deficit reductions, there is a growing sense of skepticism over whether it will reach its goal. The stakes are high. As the Washington Post notes: failure to produce a measure would trigger painful across-the-board cuts to the Pentagon budget [...]

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The Can Has Been Kicked…

Today the President announces his $3 trillion deficit plan. First reaction: meh. We get to count (once again) a trillion from the drawdown in Iraq and Afghanistan. That will be combined with $1.5 trillion in revenue and another $500 billion in cuts. Let’s start with revenue. We are going to hear—endlessly—about the Buffet rule. The [...]

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Is There Still A Case for the Postal Service?

This morning’s email brought a frantic request from a department chair in Boston anxiously awaiting a promotion review that was sent USPS from Connecticut a mere 9 days ago. I responded by sending the materials as pdfs via email (I am assuming the total transmission time could be measured in seconds). I am sure many [...]

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Does London Hold Lessons for the United States?

There is an all too predicable Op-Ed in today’s NYT (“Cameron’s Broken Windows”) by Richard Sennett and Saskia Sassen. The core argument: the riots in London are a product of austerity and if the Tea Party has its way, the same riots may be heading our way. According to the authors, “Mr. Cameron’s austerity program [...]

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Shoot the Messenger…He Didn’t Check His Homework

The response to the S&P downgrade of the US credit rating has been quite interesting thus far. Those who for several weeks spoke in apocalyptic terms about what would happen if the US defaulted on its debt are now filled with shock: “A credit rating should reflect the probability of default, and the probability of [...]

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The Debt Ceiling Raise Aftermath: Confusion Reigns

As Pileus readers know, the spending cuts Congress and the President agreed to in future budgets are a drop in the bucket of future deficits. Nevertheless, the cacophony of protest among partisan hacks is deafening. Jacob Weisberg has a particularly incoherent piece at Slate today. Two selections: But for the federal government to spur growth [...]

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“That Really Worked in 1937″

This is a comment that I have heard a few times in the past few weeks regarding the issue of austerity. The Tea Party forced the GOP to embrace austerity, and we know that when FDR mistakenly listened to Treasury Secretary Morgenthau in 1937 and cut back on expenditures, the economy entered a rapid decline. [...]

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The Tale of the Fat Man

There once was a man who, by every possible measure, had reached a girth that was too great to be compatible with a long and flourishing life. One could have considered any number of indicators if one had wished—percentage of body fat, body mass index, blood pressure—and they all pointed in the same direction and [...]

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A Note on Entitlements

The WSJ has an editorial today entitled “Entitlement Nation“ in which it outlines America’s political history that has led to so many millions of us today receiving, even living off, payments of money, goods, or services from the government. The numbers are shocking: “50.5 million Americans are on Medicaid, 46.5 million are on Medicare, 52 million [...]

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On the President’s Speech

Although I did not watch POTUS live last night, I have seen clips and read the transcript. A few thoughts: 1. POTUS chastised House Republicans for rejecting an increase in the debt ceiling. The President explained: “Understand – raising the debt ceiling does not allow Congress to spend more money. It simply gives our country [...]

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The Circus Continues, as Does the Crisis

It appears that the political theatre of the past few weeks may be drawing to a close. There is little question that we have a significant long-term structural debt problem. In my mind, at least, the tens of trillions of unfunded liabilities and the ever-growing debt cannot be addressed without significant cuts in domestic and [...]

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Escaping the Game of Chicken

The GOP and the President seem locked in a game of chicken over the debt ceiling (remember the scene from Rebel without a Cause). The GOP is hoping the President capitulates on cuts without taxation (i.e., that the President swerves). The President is hoping the GOP accepts taxation with some amorphous spending cuts (i.e., that [...]

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What About the Social Security Trust Fund? Depends on When (Not Who) You Ask

In an interview with CBS News, the President has issued some stark predictions of what will happen should Congress fail to extend the debt ceiling. “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do [...]

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The Real Fiscal Armageddon

Michael Tanner  of Cato has an interesting piece today on the debt ceiling. Tanner is less concerned about the events of the next few weeks than I am but does a good job of placing things in historical context. “If the government is not able to borrow more money after Aug. 2, spending will have [...]

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The Constitutionality of the Debt Ceiling

An increasing number of pols and legal analysts (and the NYT editors) are making the claim that if Congress fails to raise the debt ceiling, the President could claim the constitutional authority to continue borrowing money. After all, section 4 of the 14th amendment notes: The validity of the public debt of the United States, [...]

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The GOP as “an Odd Protest Movement”

David Brooks once again surprised me with a decent op-ed in the NYT.  Curiously, Brooks notes, the GOP may walk away from trillions of dollars in spending cuts to preserve some loopholes and distortionary tax expenditures because it has been “infected by a faction that is more of a psychological protest than a practical, governing [...]

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The Market for Default

This week marked the continuation of the deficit-debt circus with little evidence that members of the bi-factional ruling party are serious about anything other than pursuing their short-term electoral prospects, firming up the base and the donor pool.  Many believe that all parties will come to their senses to prevent default. But the markets seem [...]

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The Return of Rosy Scenario

Those of you who read David Stockman’s memoir The Triumph of Politics will recall his discussion of “Rosy Scenario” and the impact it has in the economic debates internal to the first Reagan term. It appears that Rosy Scenario has returned to town.  As Lawrence Lindsey notes in today’s WSJ (“The Deficit is Worse Than [...]

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The Long-Term Budget Outlook: Fiscal Crisis and Political Crisis

Early summer each year, the Congressional Budget Office releases its Long-Term Budget Outlook.  This year’s installment (found here), unsurprisingly, is particularly bleak. As you may recall, the CBO projects the numbers under two scenarios. The “extended baseline scenario” basically assumes that existing laws will remain in place and all core assumptions hold. The “alternative fiscal [...]

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Streams of Light Into the Darkness

Although I am usually quite pessimistic about the ability of policymakers and transfer-seekers to rise above well established pathologies, there were a few notable events at the end of the week that deserve notice. Ethanol: Despite the odds, the Senate voted (73-27) Thursday to end ethanol subsidies (both the 45 cents a gallon tax credit [...]

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The Taxpayer Protection Pledge and Ethanol

An interesting dispute helped derail the efforts to eliminate government subsidies for ethanol.  Oddly enough, it appears that some of the credit can be awarded to Americans for Tax Reform. Grover Norquist, head of Americans for Tax Reform, has been a powerful voice for tax reductions over the years, convincing Republican legislators to sign the Taxpayer [...]

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Welcome Summer (Recovery Again Deferred)

How quickly one year has passed. It was only one year ago this June  that the White House blogproclaimed: “This summer is sure to be a Summer of Economic Recovery.” As reported at the time, Vice President Joe Biden marked “the Obama administration’s ‘Recovery Summer,’” with “a six-week-long push designed to highlight the jobs accompanying [...]

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A Deficit-Neutral Plan to Slash Unemployment

While the U.S. economy has been officially out of recession for a while and growing at a decent clip (1.8% at a seasonally adjusted annual rate in the first quarter of this year, 3.1% in the last quarter of 2010 – see chart), unemployment remains very unusually high, 9.0% in April 2011 (seasonally adjusted), compared [...]

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The Sorcerer’s Apprentices

Iran’s supreme leader, Ayatollah Ali Khamenei, has decided to clamp down on Ahmadinejad’s inner circle. At least 25 people have been arrested for sorcery, including Abbas Ghaffari, described by the Iranian news website as being “a man with special skills in metaphysics and connections with the unknown worlds.”  Thankfully, the Guardian is on this story. [...]

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Barrier to Reform: The Customer is Always Right

In today’s NYT column, Paul Krugman asks a question that is interesting only because it leads me to a broader question. First Krugman.  He notes that the GOP budget proposal promotes reforms to “make government health care programs more responsive to consumer choice.” Krugman then asks: “How did it become normal, or for that matter [...]

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The Tea Party Speaks

Some have seen the Tea Party as a political force that would drive the fiscal responsibility agenda. For any who hold out hope that the Tea Party is serious, these poll results may prove a bit jarring. 70 percent of Tea Party supporters oppose cuts in Medicare and Medicaid.

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The Lessons of History and Fiscal Responsibility?

“The political process will outperform S&P’s expectations … The fact is when the issues are important, history shows that both sides can come together and get things done.” So says White House Press Secretary Jay Carney, in response to Standard & Poor’s announcement yesterday that it has changed its outlook for US sovereign debt from [...]

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The Path to Credibility and Fiscal Sustainability

The week began with the IMF’s judgment that the US lacks a “credible strategy” to stabilize its debt. As noted in the Financial Times (4/12/2011): In an unusually stern rebuke to its largest shareholder, the IMF said the US was the only advanced economy to be increasing its underlying budget deficit in 2011, at a [...]

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In Search of a Plan

I posted initial reactions to the Ryan plan a few days ago. To recap, I said it was a good starting point for discussions, although I have problems with the lack of defense cuts (they need to be significant in my opinion), the lack of attention to eliminating tax expenditures (I would eliminate ALL tax [...]

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