An Historical Analogy applied to today’s debt ceiling crisis, with apologies to Barbara Tuchman
Author Archives: Menzie Chinn
More Data: Debt, and the Origins of Debt
I thought it of interest to see the evolution of Federal debt held by the public, and exactly what Administrations were the most spendthrift.
Data: Spending and Tax Receipts, 1967-2011
I keep on hearing we have a spending problem, but no revenue problem, from you know whom. I decided to appeal to actual data. Below is a time series plot of Federal current expenditures and tax receipts plus contributions to Federal social programs, as a share of GDP, over the 1967Q1-2011Q1 period. The data are based upon the data definitions in the BEA’s national income and product accounts (NIPA), as of June 2011. Outlays are declining, and as of 2011Q1 are at 0.25, which exceeds the previous peak, during the Reagan era, at 0.241 (1982Q4). Federal tax receipts plus social program contributions are at 0.158.
DSGEs, Detrending, and Forecasting
With some implications for the debate over assessing fiscal and monetary policies
Reader Brian writes:
DSGE’s aren’t the answer to everything, but I still find the microfoundations, careful treatment of expectations, etc. still attractive and, in my opinion, the best we have at the moment.
Dividing integrals by integrals versus other calculation
With an application to accurately counting stimulus effects, for the benefit of the numerically challenged
Here I try to explain why dividing a number at a point in time by a cumulative number does not make sense (Warning: some understanding of calculus helpful). Reader Manfred defends the Weekly Standard’s calculation of dividing net jobs created at an instant in time by cumulative spending to obtain a dollars/job figure. Specifically:
Assessing the Stimulus and Its Aftermath
Or, on reading those who can do math, and those who can’t (i.e., yet more from Heritage)
The Moral Imperative for the Continuation of Low Tax Rates for the Top Income Fractiles
Or lack thereof
Reports indicate that one of the reasons the “grand bargain” failed was the refusal of one party to accede to an increase in tax rates on households with AGI above $250,000. [1]. I can understand this reluctance, given that the share of total income going to the top 5% of households fell from 38.7% to 36.5%, going from 2007 to 2008 (just ignore the increase of 17.6 percentage points in the previous 30 years). Below is an updated graph from our forthcoming book Lost Decades by myself and Jeffry Frieden, illustrating the grievous harm that these households have endured.
Jeff Frankel: “The Federal Government Races to the Cliff”
At the NBER meetings, I have been asking around what will happen if the Federal government defaults, and Treasurys go down a notch in ratings. Keep in mind pension funds and financial institutions are constrained to hold at least some AAA rated securities. What happens if those securities are downgraded; should we expect a smooth, re-balancing of portfolios worldwide?
Jeff Frankel dissects why we are in this situation, using fable (well, a movie fable):
Multiplier estimates, across countries, across states, across time
Today’s two sessions — one in the NBER’s International Finance and Macro group and one in Monetary Economics — included papers that tackled multipliers from a variety of directions. The general results indicated to me that, while multipliers are sometimes below unity, for conditions prevailing in the United States in 2011, they are typically above.
The Employment Report, and the Need for Maintaining Stimulus
The Employment Report in Brief
The WSJ RTE post title says it pretty clearly: Economists React: Jobs Report an ‘Unmitigated Disaster’. My two observations are:
- Overall employment is being reduced by continuous reductions in government (primarily state and local) employment. Private sector employment growth was 57,000.
- Hours continue to rise faster than employment in the private sector.