Analytical Summaries of Key Stories of the Week on Economics and Public Policy
Fed’s Trouble with Bubbles
In the Wall Street Journal’s Real Time Economics blog, Michael S. Derby reports that the Fed’s views are evolving beyond their historic reluctance, based on doubts about their ability to detect them accurately, to target interventions at preventing or mitigating price bubbles.
Geithner Goes to Beijing to Manage Bad Marriage: Relationship, Smooth During Recession, May Get Stormy
With the U.S. highly dependent on China, which now holds $1.55 trillion in dollar assets, to purchase U.S. debt, Greg Robb of Marketwatch describes the relationship as “a marriage of convenience” that may have new strains on the horizon.
How Economists Can Misunderstand the Crisis
In an article reprinted from the Financial Times, Harvard University Professor Laurence A Tisch counters many economists by arguing that current U.S. fiscal policy of heavy deficit spending financed by massive issuance of new bonds is likely to lead to inflation and upward pressure on long-term interest rates.
Marginal Workers, Underemployed Push Economic Fringe to Limit
Citing sources from the Center on Budget and Policy Priorities, the Economic Policy Institute, the National Jobs for All Coalition, and the Employee Benefit Research Institute, Martha C. White reports in the Colorado Independent on the plight of the underemployed, “a diffuse, often poorly tracked cross section of citizens … living on the economic fringes” and who, when added to the more widely reported circumstances of the outright jobless, paint a much bigger picture of economic strain in the U.S.
Millionaires Go Missing: Maryland's Fleeced Taxpayers Fight Back
Are millionaires in Maryland pulling a John Galt and disappearing? A column in the Wall Street Journal’s Opinion Journal reports that “nearly one-third of the millionaires have disappeared from Maryland tax roles” since the creation by the state legislature of “a millionaire tax bracket” that raises the state’s top marginal income rate.
Public Health Care and Health Insurance Reform — Varied Preferences, Varied Options
Taking the perspective that healthcare reform is inevitable, with only details in question, Mark V. Pauly, Ph.D., argues in the New England Journal of Medicine in favor of a menu of health insurance plans, available to all population groups, managed by both public and private organizations, to meet highly variable preferences of consumers.
Sphere: Related Content
Showing posts with label deficit spending. Show all posts
Showing posts with label deficit spending. Show all posts
Monday, June 1, 2009
Tuesday, April 21, 2009
Goolsbee’s Comments on C-SPAN Reveal Themes Underlying Obama Administration’s Policies
During a C-SPAN broadcast on Sunday, reporters interviewed Austan Goolsbee, staff director and chief economist of the President’s Economic Recovery Advisory Council, eliciting comments that, both directly and by implication, highlighted key themes driving the Obama administration’s economic policies.
In an a possible attempt to spotlight a contradiction between administration policy and Goolsbee’s past scholarship as an economics professor at the University of Chicago, Associated Press reporter Steve Scully asked Goolsbee to comment, in the light of the Obama administration’s current deficit projections, on a paper Goolsbee published two years ago. The paper asserted that deficit reductions are an important “insurance policy against global economic shocks and over-reliance on foreign lenders.”
Goolsbee clarified that the current policy does not contradict his past scholarship on the role of deficits during emergency situations.
“This economic crisis would warrant large deficit spending by any measure,” Goolsbee said. “The two-year window in which we are in the middle of crisis is absolutely not the time to try to balance the budget. That was one of the terrible mistakes that Herbert Hoover made….”
The view that deficit spending is a crucial government tool in emergency situations is held widely among economists, as is the converse principle that budget surpluses are advisable during a strong economy.
Although responses to questions about the Obama administration’s tax policies were not directly linked during the broadcast to Goolsbee’s past scholarship, the proposal to increase taxes on households earning over $250,000 annually as part of the strategy to reduce the deficit in the coming years is also consistent with his published research.
While many conservatives continue to assert the supply-side doctrine that tax increases on households with higher incomes impact the economy negatively by discouraging investment and “taxing the job creators,” Goolsbee’s research has included findings that policies reducing the tax burden on higher-income groups may not have the desired effect.
For example, a Brookings paper Goolsbee authored with Mihir A. Desai makes the case that the Bush administration’s tax cuts were not effective in stimulating increased capital investment.
Goolsbee has also tied such research findings directly to a refutation of basic supply-side theories, including a column last year in the New York Times in which he asserts that the consensus of academic research makes the Laffer curve look like “a fleeting figment of economic imagination.”
This apparent grounding of administration policies in solid research gives an all the more hollow ring to the shrill voices of many conservative pundits as they continue to blast the administration’s stimulus package and budget, assert incorrectly that government spending created the current crisis, and support a misguided “Tea Party Movement.” Sphere: Related Content
In an a possible attempt to spotlight a contradiction between administration policy and Goolsbee’s past scholarship as an economics professor at the University of Chicago, Associated Press reporter Steve Scully asked Goolsbee to comment, in the light of the Obama administration’s current deficit projections, on a paper Goolsbee published two years ago. The paper asserted that deficit reductions are an important “insurance policy against global economic shocks and over-reliance on foreign lenders.”
Goolsbee clarified that the current policy does not contradict his past scholarship on the role of deficits during emergency situations.
“This economic crisis would warrant large deficit spending by any measure,” Goolsbee said. “The two-year window in which we are in the middle of crisis is absolutely not the time to try to balance the budget. That was one of the terrible mistakes that Herbert Hoover made….”
The view that deficit spending is a crucial government tool in emergency situations is held widely among economists, as is the converse principle that budget surpluses are advisable during a strong economy.
Although responses to questions about the Obama administration’s tax policies were not directly linked during the broadcast to Goolsbee’s past scholarship, the proposal to increase taxes on households earning over $250,000 annually as part of the strategy to reduce the deficit in the coming years is also consistent with his published research.
While many conservatives continue to assert the supply-side doctrine that tax increases on households with higher incomes impact the economy negatively by discouraging investment and “taxing the job creators,” Goolsbee’s research has included findings that policies reducing the tax burden on higher-income groups may not have the desired effect.
For example, a Brookings paper Goolsbee authored with Mihir A. Desai makes the case that the Bush administration’s tax cuts were not effective in stimulating increased capital investment.
Goolsbee has also tied such research findings directly to a refutation of basic supply-side theories, including a column last year in the New York Times in which he asserts that the consensus of academic research makes the Laffer curve look like “a fleeting figment of economic imagination.”
This apparent grounding of administration policies in solid research gives an all the more hollow ring to the shrill voices of many conservative pundits as they continue to blast the administration’s stimulus package and budget, assert incorrectly that government spending created the current crisis, and support a misguided “Tea Party Movement.” Sphere: Related Content
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