Monthly Archives: November 2013

Presidents and the economy

An interesting new research paper by Princeton Professors Alan Blinder and Mark Watson examines differences in performance of the economy under Democratic versus Republican presidents. The paper begins:

The superiority of economic performance under Democrats rather than Republicans is nearly
ubiquitous; it holds almost regardless of how you define success. By many measures, the
performance gap is startlingly large–so large, in fact, that it strains credulity, given how little
influence over the economy most economists (or the Constitution, for that matter) assign to the
President of the United States.

Continue reading

“Fiscal Policy: Accomplishments, Challenges and Opportunities”

That’s the title of CEA Chair Jason Furman’s presentation at the University of Wisconsin at Madison on Monday. Introduced by UW Chancellor Becky Blank, his discussion covered a wide range of issues. From WisBusiness:

Jason Furman, chairman of Obama’s Council of Economic Advisers, said Congress should invest in infrastructure at today’s low borrowing rates, reform the tax code, approve an immigration reform bill projected to cut the deficit and agree on long-term debt reduction, instead of implementing short-term cuts like sequestration that impede economic growth.

Continue reading

Assessing the Crowding Out Hypothesis: An Undergraduate Textbook Analysis

1. From my (undergraduate) Economics 390 “Topics in Macro” midterm:

Consider this statement:

“Borrowing and spending by the public sector will crowd out investment and growth in the private sector.” Paul Ryan, “Path to Prosperity” (April 2012).

1.1 In a standard IS-LM model, where investment spending is given by:

(7’) I = b0 – b2i

 

Will higher government spending crowd out investment? Use a graph to help explain your answer.

Continue reading