From The 2009 Budget Deficit: How did we get here? by John Irons, Kathryn Edwards, and Anna Turner:
This Issue Brief examines the details and causes of the current budget deficit and the role the current recession has played. The years between 2001 and 2007 saw a large deterioration in the budget balance, which was driven chiefly by legislated policy changes. The Bush-era tax cuts are the largest contributors to this period of policy-induced increases to the federal budget deficit. . . .
From Arnold Kling‘s entry yesterday:
Kwak goes on to endorse Chinn’s ideological rant that the Bush tax cuts caused the financial crisis. Yes, I know that Chinn is speaking in the tone of economic analysis rather than a rant, but only a left-wing ideologue would take the thesis seriously. I bet Kwak cannot find a blog post of Chinn’s where he made a policy point against Democrats/liberals or for Republicans/conservatives.
By Richard Posner’s math…On August 25th he wrote, regarding Dr. Romer’s August 6 speech:
From “Reflections on the Causes and Consequences of the Debt Crisis of 2008,” in the La Follette Policy Report by Menzie Chinn and Jeffry Frieden:
In late 2008, the world’s financial system seized up. Billions of dollars worth of financial assets were frozen in place, the value of securities uncertain, and hence the solvency of seemingly rock solid financial institutions in question. By the
end of the year, growth rates in the industrial world had gone negative, and even developing country growth had declined sharply.
The WHite House has just released the Mid Session Review and the CBO the Budget and Economic Outlook: An Update. Here are the economic projections:
Richard Posner displays his failure to understand the difference between expenditures (reported on Recovery.com) and tax rebates (not reported online, but have to be estimated).
Since Richard Posner has decided to exhibit his math skills again, I thought it useful to work through some math to see how one can obtain back-of-the-envelope estimates for the stimulus package. I’ll use Mr. Posner’s numbers to illustrate.
Here are the latest reads on monthly GDP:
Richard Posner has a critique of public intellectuals who work in the public sphere (with special reference to Christina Romer), either in government service, or in journalistic fora. Mark Thoma and Brad Delong have already made clear the (many) points at which Mr. Posner has gone astray. Parenthetically, I’ll add that I wonder about the analytical abilities of anybody who lumps Philip Glass (!) and Elliott Carter together into the highbrow music category (see page 18 in his tome Public Intellectuals: A Study of Decline (1991)). More substantively, I have a few of additional observations, some of which are amplifications of Brad Delong’s points.
John Fernald and Kyle Matoba of the San Francisco Fed have just released a utilization adjusted total factor productivity series (data here). The importance of this development is clearly laid out by the authors:
This Economic Letter looks at potential output from the perspective of growth accounting, which assesses some of the key supply-side factors determining sustainable, noninflationary potential output. Perhaps most importantly, we find that the underlying pace of efficiency improvements — “technological progress,” broadly construed– has remained strong during the recession. This strength offers a reason for cautious optimism about potential output and the long-term health of the American economy. More immediately, stronger potential relative to the same observed output implies substantial slack in the economy.