From Fort Worth Star Telegram:
As the Texas Forest Service battles what may be the state’s most destructive wildfire outbreak ever, state lawmakers are facing criticism that they have has taken a penny-wise-pound-foolish approach to funding the agency.
The President laid out a series of policy measures in today’s speech which are, by textbook standards, entirely reasonable. And yet, many have been declared by the pundits to be DOA. I’ll leave the assessment of political feasibility to others, but the very fact that these specific measures [0] are so reasonable by textbook standards makes me wonder if we have in fact experienced technological regress in our politico-economic discourse. Maybe those shocks in RBC models are just the fact that so many individuals with influence never took an intermediate macro course, let alone an economics course [1] (I highly recommend Robert Hall and John Taylor’s Macroeconomics, or the later editions, by Hall and David Papell).
We know that in the aftermath of combined housing busts, financial crises, and recessions, recoveries are typically modest if not halting, even if the recession is deep. [0] This characterization appears to have held true, with the question now whether we will enter into a new recession, or merely plug along with growth that technically constitutes a recovery, but is not sufficient to close the output gap with appreciable speed.
A perennial topic of discussion is the deficiencies of the CPI in measuring the things that are important to “real people”. I actually believe that there is a point to some of these critiques. In particular, we know the CPI is “plutocratic” in that the weights associated with the CPI bundle are consistent with the expenditure shares of a household somewhere in the 4th income quintile. [1] [2] However, I think that other critiques — namely that food, health, and transportation, are missed — are misguided.
Some groups have overstated the need for immediate fiscal retrenchment in order to push an agenda spending cuts, when in fact we face more serious problems of medium and long term spending growth and lagging tax revenues, and overall increasing indebtedness to the rest-of-the world. That second point (which I first made in 2005 [0] ) has been somewhat neglected in the (misplaced) focus on reining in spending at the short horizon.
In the excitement over the debt ceiling debate, the increasing extent of fiscal drag, and anxiety about an economic slowdown, I have neglected discussion of the dollar. I still think that continued dollar depreciation is necessary to effect global rebalancing. I’d prefer it to happen by way of expansionary monetary policy, but we might get dollar depreciation as intransigent policymakers work hard to destroy the safe-haven role of US Treasury securities. [0] So, while all eyes are on Jackson Hole, here’s a quick, stream of consciousness review of some dollar-related issues.
Or, some people continue to defend the view that rapid inflation is just around the corner
An Econbrowser reader writes, in defense of Governor Perry’s assertion that the Fed is debasing the currency: “The CPI is not a valid indicator of ‘debasement.'” I think this comment provides a wonderful example of the Alice in Wonderland world in which some people reside — if the data do not cooperate, redefine the terms!
From the Washington Post:
…”If this guy [Fed Chairman Bernanke] prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion.”