"What if we can't make government smaller?" the Niskanen Center's Will Wilkinson asks. He says that the evidence, particularly Wagner's Law, shows that government spending is impervious to political assault, and libertarians should make their peace with big government. Instead, libertarians should focus on reforming regulations to foster competition and the market process. I have … Continue reading Can Government Spending Be Cut After All?
Category: fiscal policies
How Decentralized Is Your State?
In the U.S., states have full authority over local government. Some states strictly centralize power and leave local government little to do. For instance, Hawaii has a single school district for the entire state, so that different localities cannot choose to spend different amounts on the government schools. Michigan effectively has a similar system, because … Continue reading How Decentralized Is Your State?
Once Again, We Chase the Shiny Objects
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
The Growth of Government, Updated
The news has been ripe with administration scandals as of late and will likely be for some time (Memo to BHO: There may be no better way to keep scandals in the news than to use the Justice Department to go after the Associated Press). But soon attention will turn to the issue of fiscal … Continue reading The Growth of Government, Updated
Debt and Growth: The Politics of Ideas
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
A Path to Fiscal Stability or Symbolic Politics?
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?
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
On to the Debt Ceiling
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
Two Cheers for the Seventeenth Amendment
Small-government types have often debated whether the 17th Amendment to the U.S. Constitution, establishing direct election of senators, is in part responsible for the decline of federalism in the U.S. I have long been skeptical of the 17th Amendment repeal movement, because Germany has a system in which states (Länder) elect senators (members of the … Continue reading Two Cheers for the Seventeenth Amendment
A Little Example of “Crowding-In”
In the last budget, the New Hampshire state legislature cut state university funding by nearly half, as part of an effort to deal with a large budget gap opened up by unrealistic revenue forecasts issued by the previous legislature. Today, the NH Union-Leader reports an all-time best in fundraising success for the state university system: … Continue reading A Little Example of “Crowding-In”
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):
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 … Continue reading Federalism & Inequality, Part One
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 … Continue reading EJW Symposium on America’s Debt Crisis
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 … Continue reading Who Killed Local Autonomy in the U.S.?
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 … Continue reading The Government Bubble Pops (updated)
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 … Continue reading Stiglitz on Deregulation and the Rich
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 … Continue reading Do Politicians Regulate When They Can’t Spend?
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 … Continue reading Liberty as Amenity: Freedom, Migration, and Growth
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.
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 … Continue reading Rearranging the Timing of Economic Growth
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 … Continue reading Interposition: Part Eight: Federalism, Finance and The War of 1812
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 … Continue reading Interposition: Part Seven: The Embargo and Noncooperation
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 … Continue reading A Deficit-Neutral Plan to Slash Unemployment
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 … Continue reading Whistling Past the Grave Yard
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 … Continue reading Interposition:Part Five: Assuming Powers from National Bank to Seditious Libel
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 … Continue reading The Lessons of History and Fiscal Responsibility?
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. … Continue reading The CEA and the Long-term Fiscal Crisis
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 … Continue reading More Unionized States Have Higher Taxes