Austerity in Europe Chart of the Day

General government final consumption expenditures for the 27 member countries of the European Union, from 2002 to 2011 (fiscal years):

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Federalism & Inequality, Part One

Constitutional debates swirling around the PPACA’s individual mandate have much to do with federalism. The core issue the Supreme Court is addressing is whether the federal government has essentially unlimited authority in economic policy, or whether they are yet some areas of economic policy-making (such as whether to compel commerce) exclusive to the states. As [...]

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EJW Symposium on America’s Debt Crisis

I have just finished reading a fascinating symposium of papers on America’s sovereign debt crisis published in the most recent Econ Journal Watch (volume 9, number 1: January 2012). It is introduced by Tyler Cowen, and includes short papers by Jeffrey Rogers Hummel, Garett Jones, Arnold Kling, Joseph Minarik, and Peter Wallinson. It is fascinating, if [...]

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Who Killed Local Autonomy in the U.S.?

Once upon a time, local governments accounted for the lion’s share of economic policy-making in the United States. Before World War I, not only was the federal government’s economic policy-making activity strictly limited to areas such as international trade, management of federal lands, trust-busting, and food and drug regulation, but state governments themselves were also [...]

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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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Stiglitz on Deregulation and the Rich

Nobel Prize-winning economist Joseph Stiglitz argued recently that both the economic downturn of the last two years and the looming debt crisis are the fault of “a powerful ideology—the belief in free and unfettered markets,” whose “30-year ascendance” has “brought the world to the brink of economic ruin.” As an economist, I can’t hold a [...]

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Do Politicians Regulate When They Can’t Spend?

Noel Johnson, Matt Mitchell, and Steve Yamarik have a new working paper answering that question in the affirmative. They look at state fiscal and regulatory policies and find that Democrats generally like to increase taxes and spending when in control of state houses and Republicans do the reverse. But when states have tough balanced-budget requirements [...]

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Liberty as Amenity: Freedom, Migration, and Growth

Is liberty an “amenity” that people find attractive? We know that people do not necessarily tend to vote for liberty, in part because they are politically ignorant or even irrational, but when it comes to where they choose to live, people can be expected to pay close attention to how the laws in different places [...]

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Why Do More Conservative States Take More Federal Grants?

Once you control for everything else, conservative states don’t take more federal grant money than liberal states – in fact, they may even tend to take less.

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Rearranging the Timing of Economic Growth

Interesting piece on Robert Barro in today’s Telegraph.  Money quotes: On the stimulus package: Turning to the $600bn (£373bn) to $800bn US package, he added it was “mainly a waste of money”. Stimulus programmes, he said, offer little more than “rearranging the timing” of economic growth. “Possibly you could make an argument that it’s worth [...]

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Interposition: Part Eight: Federalism, Finance and The War of 1812

When tensions with England finally began to degenerate into violent altercations, first on the western frontier in such places as Tippecanoe and later along the Great Lakes, the Madison administration decided the time had come to vindicate America’s claims of offended sovereignty. Unsurprisingly, these claims also happened to coincide with popular desires to expand into [...]

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Interposition: Part Seven: The Embargo and Noncooperation

With the war in Europe between France and England intensifying, Americans found their rights as neutral traders regularly violated by both French and British navies, and French and British port restrictions further limited American opportunities for commerce. To make matters worse, on numerous occasions, English vessels had boarded American ships and “impressed” many of their [...]

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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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Whistling Past the Grave Yard

There has been lots of good news recently regarding America’s fiscal state of affairs. The life spans of Medicare and Social Security have been adjusted down (and this ignores the fact that the trust funds are not stores of wealth. Under current conditions, the only option is to borrow funds to cover the transfers from [...]

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Interposition:Part Five: Assuming Powers from National Bank to Seditious Libel

Not long after the ratification of the Constitution, Madison came to have serious doubts about his former Federalist friends. Particularly, he came to suspect the sincerity of many who had asserted that the new government would possess only those powers specifically delegated to it. The first disappointment came with Hamilton’s championing of the incorporation of [...]

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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 CEA and the Long-term Fiscal Crisis

Harry Truman (if I recall correctly), frustrated with the economic advice he was receiving from the Council of Economic Advisors, asked for a one-armed economist who could not say “one the one hand…on the other.” Ten former CEA heads have issued a joint letter on the long-term budget crisis: Martin N. Baily (Clinton), Martin S. [...]

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More Unionized States Have Higher Taxes

One of the purposes of “right to work” legislation, currently being debated in Indiana, New Hampshire, and other states, is to reduce the percentage of the workforce covered by collective bargaining agreements. Leaving aside the ethics of collective bargaining as practiced in the U.S. today, what are the political and economic consequences? Since unions donate [...]

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