Gross debt hit 101 percent of GDP at the end of 2013, the highest since the immediate postwar years. And despite the improved outlook for the next few years, the Congressional Budget Office has consistently argued that, in the long term, debt will continue to grow relative to GDP, leaving elected officials with the difficult … Continue reading Inflating Our Way to Fiscal Stability? Not an Option
The Congressional Budget Office has released its updated budget projections. Good news: CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion. Relative to the size of the economy, that deficit—at 2.8 percent of gross domestic product … Continue reading Good News, Bad News and Silence
This week the Congressional Budget Office released The Budget and Economic Outlook: 2014-2024. From the press coverage, one would have guessed the report was either entitled Obamacare: the Job Killer that is Almost as Bad as Benghazi or Obamacare: Ending the “Job Lock” and Opening the Door to Leisure. In reality, the impact of the … Continue reading Once Again, We Chase the Shiny Objects
As you likely know, the Congress seems poised to pass a $1.012 trillion omnibus spending bill to avoid another shutdown (see coverage from the Wall Street Journal, the Washington Post, the Hill). It appears that both the Democrats and Republicans will get things they hold dear in the spending provisions and the riders (Ed O’Keefe … Continue reading Budgetary Realities
Given the events of the past several years—and, most certainly, the past few weeks—one should not be surprised that Fitch has threatened to downgrade the nation’s credit rating (as you may recall, S&P issued a similar warning in 2011, and followed through). Although Fitch believes that Congress will raise the debt limit, it observes that … Continue reading Taking Credit
Forgive me if I am confused. On May 13, 2013, the Social Security Board of Trustees released its annual report on the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds. A few salient points: In 2012, the OASDI Trust Funds had $840 billion in income, including $509 billion in contributions, $27 billion from … Continue reading The Debt Ceiling and Social Security
Ezra Klein has an interesting piece (Wonkblog) on the collective-action problem facing the GOP with respect to Obamacare. Stated concisely: Here's the Republican Party's problem, in two sentences: It would be a disaster for the party to shut down the government over Obamacare. But it's good for every individual Republican politician to support shutting down … Continue reading Collective Action Problems and the GOP
The Economist thinks so, and has dedicated a good deal of space to the question in the newest issue (here and here). A few quotes: Other states and cities should pay heed, not because they might end up like Detroit next year, but because the city is a flashing warning light on America’s fiscal dashboard. … Continue reading The Motor City Mess—A Harbinger of Things to Come?
The Economist provides a concise discussion of the debates surrounding the impact of debt on economic growth. The focus is on the work of Carmen Reinhart and Kenneth Rogoff, drawing on some of the research they conducted for their fine book This Time is Different. The Reinhart/Rogoff paper (link here) had a simple takeaway point: … Continue reading Debt and Growth: The Politics of Ideas
The Washington Post reports on some of the details of the Obama administration’s budget proposal, which is to be released next Wednesday. There are several important proposals (the largest of which have appeared before in the negotiations with the Speaker). Although the devil is in the details, a few salient points: $200 billion cut from … Continue reading A Path to Fiscal Stability or Symbolic Politics?
Yesterday the Senate approved a continuing resolution. One of the casualties was NSF funding for political science, at least political science that cannot be certified "as promoting national security or the economic interests of the United States." The amendment was proposed by Senator Tom Coburn (R-OK) who questioned whether public financing of political science research … Continue reading First they came for the political scientists…
Congressman Paul Ryan has completed his work on the new budget proposal, one that he claims will leave the nation with a budget surplus by 2023. Lori Montgomery (Washington Post) has a decent piece reviewing some of the details. The budget looks like very much like the last one (e.g., reductions in future spending on … Continue reading What is Old is New Again: The New Old Politics of Budgeting
So it looks as if the sequestration is upon us. The past few weeks have witnessed claims about the catastrophic implications of sequestration and ongoing efforts to assign responsibility (it was the GOP’s idea…unless it wasn’t). It has been quite the circus. My chief concern: we are so busy grasping at shadows that we are … Continue reading Grasping at Shadows
As we approach midnight February 28 (tick..tick…tick…) and March 1st arrives, the nation appears to be headed toward a cataclysm. There is an ever-growing number of stories informing us how bad things could get. The sequestration will force a sharp drop in the economy. It will kill the surging stock market. It will delay tax … Continue reading Sequester This
The next few weeks will undoubtedly witness the old back-and-forth on budget cuts and revenue increases combined with claims that this side won’t bargain and that side won’t bring anything specific to the table. The CBO’s Budget and Economic Outlook: Fiscal Years 2013 to 2023 suggests that we should not focus on the shiny objects. … Continue reading Beyond Sequestration
Now that the fiscal cliff has been averted delayed, we move on to the debt ceiling. Critics are correct in noting that there is no principled reason not to raise the debt ceiling, since it is nothing more than the sum of past spending and taxing decisions. One can hardly blame the credit card bill … Continue reading On to the Debt Ceiling
I agree with pretty much everything Marc has to say on the deal below. (For my own thoughts, see here.) Nevertheless, from a political point of view, something very like this deal was inevitable. First, the Republicans held a bad hand. All the Bush tax cuts were going away, so they had very little leverage. … Continue reading A Quick Public Choice Take on the Fiscal Cliff Deal
The Fiscal Cliff has been averted postponed, if not made worse. Big takeaways: Senate Majority Leader Harry Reid has once again proven himself to be incapable of leading the Senate. Is there any stronger rebuke than McConnell’s appeal to Biden as he searched in vain for a negotiating partner in the Senate? The Democrats have … Continue reading Dancing on the Cliff
The protracted negotiations over the fiscal cliff suggest how difficult things will actually become once we begin to address the simple fact that existing entitlements cannot continue to exist in their current form. The one significant reform that was proposed earlier by President Obama during his discussions with the Speaker involved using the chained CPI … Continue reading The Prologue
The fiscal cliff debates seem to be at a standstill as we approach the end of the year. On the spending side, the proposal to change the indexing for Social Security seems to be quite positive. The use of the CPI-W has fueled growth in the real value of benefits and the substitution of a … Continue reading Advice to the GOP: In the Spirit of the Holidays, Accept the Gift
For some time, the Institute for Truth in Accounting has been beating the drum of "accounting truth" in government finances. Recently USA Today picked up on their claim that true federal deficits and debt are several times larger than the official numbers. They ran the numbers and found that "the government ran red ink last … Continue reading “Real” Federal Deficit Four Times Official Number
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 … Continue reading In Search of Fiscal Responsibility
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 … Continue reading Slow Train Coming
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 … Continue reading The Ryan Budget as Antithesis
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 … Continue reading The Ryan Budget
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 … Continue reading Deficits and Delegates
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 … Continue reading Imagine There’s No Welfare, Its Easy if You Try…
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 … Continue reading The Social Safety Net. What are the Alternatives?
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 … Continue reading Extending the Payroll Tax Cut
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 … Continue reading Don’t Just Do Something, Stand There
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 … Continue reading The Government Bubble Pops (updated)
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 … Continue reading Taxes and the Super Committee
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 … Continue reading Gambling on the Supercommittee? Time to place your bets…
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 … Continue reading The Can Has Been Kicked…
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 … Continue reading Is There Still A Case for the Postal Service?
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 … Continue reading Does London Hold Lessons for the United States?
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 … Continue reading Shoot the Messenger…He Didn’t Check His Homework
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 … Continue reading The Debt Ceiling Raise Aftermath: Confusion Reigns
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. … Continue reading “That Really Worked in 1937”
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 … Continue reading The Tale of the Fat Man