A key reason to be concerned about high debt levels is very simple– you’re going to be stuck with the bill for the interest payments for the rest of your life.
Author Archives: James_Hamilton
Is Social Security running out of money?
On Friday, the trustees for the Social Security and Medicare trust funds released their annual reports. A typical summary in the press is this one from the Los Angeles Times:
The trustees overseeing the finances of Social Security and Medicare issued their latest report on Friday, declaring that a) the Social Security Trust Fund is expected to run out of money in 2035, the same estimate as last year; b) Medicare’s hospital trust fund is expected to run out of money in 2026, a two-year improvement over last year’s estimate; and c) the Disability Insurance Trust Fund is expected to run out of money in 2016, just as projected last year.
Here’s why I don’t believe that’s the correct way to think about these numbers.
Reinhart and Rogoff defend themselves
Carmen Reinhart and Kenneth Rogoff have posted an open letter to Paul Krugman to try to correct some of the misrepresentations of their scholarship that continue to be repeated by people who should know better.
Bernanke says no change for now
In testimony before Congress today, Bernanke explained why the Fed’s large-scale asset purchases are continuing.
Sovereign debt concerns in 2013
Interest rates on government debt for a number of European countries– notably Greece, Portugal, Ireland, Italy, and Spain– shot up considerably during 2010-2012. Those yields have fallen significantly from their peaks, though these five countries still face higher borrowing costs than most other countries in Europe.
How Fannie Mae made its profit
Mortgage buyer and insurer Fannie Mae was in the news again this week.
The soaring stock market
Broad market indicators like the S&P500 have been making all-time nominal highs. What’s the significance of that for investors and the economy?
R&D and benchmark revisions of GDP for Robinson Crusoe
Beginning with the third quarter of this year, the BEA plans to report the U.S. GDP and national income accounts on a new basis. One of the purposes of the change is to better reflect the importance of intellectual capital and technological innovation in the modern economy. These changes are expected to cause the reported value of GDP to be about 3% higher than when calculated under the present system. I have been thinking about how I would explain these changes to an undergraduate economics class, and this is what I came up with.
Links for 2013-05-01
Quick links to a few items I found of interest:
- The Congressional Budget Office has prepared informative slides summarizing the U.S. fiscal situation (via Business Insider)
- Betsey Stevenson and Justin Wolfers referee the Reinhart-Rogoff debate (via Free Exchange)
- Herndon, Ash, and Pollin appear to have been using faulty data for New Zealand
- Bill McBride reviews the U.S. decline in vehicle miles driven
- China’s oil imports are down relative to this point last year (via Steven Kopits)
The contributions of Reinhart and Rogoff
With all the heated discussions of the last two weeks, it is important to keep perspective on which issues are in dispute and which are not. Let me state plainly something on which I think we ought to be agreed: Carmen Reinhart and Ken Rogoff’s 2009 book, This Time Is Different: Eight Centuries of Financial Folly, is a valuable work of scholarship that continues to deserve study and praise from any thinking person. Here I review some of my reasons for saying that.