Dispatches (VI): Where Do Those Budget Numbers Come From?

Wisconsin Governor Walker has been stating that if his “budget repair bill” is not passed, then the state will lose $165 million dollars. It is unclear what exactly would be “lost” if the bill is not passed. From the New York Times:

“One day left to save the state $165 million,” said the governor’s office on Monday, announcing the latest deadline.

If Democrats do not return by Tuesday, taxpayers would lose an option to save that money through a “refinancing,” the governor’s office said, citing the Wisconsin Legislative Fiscal Bureau, a nonpartisan agency that conducts budget analysis.

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CBO on the Stimulus Package, and Still No Expansionary Fiscal Contraction in UK

Two Items Regarding Fiscal Policy

US GDP and the Stimulus Package

The 2nd release for US GDP revealed a downward revision BEA; CR reports the breakdown. What is interesting is that the downward revision is due in part to a greater than previously estimated decline in the state and local government spending contribution. Something useful to keep in mind as state and local governments move to rely solely upon spending cuts instead of revenue increases as means to reduce budget deficits (e.g., as in Wisconsin).

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Exchange Rates: Two Stylized Facts and Yet Another (Consequent) Puzzle

My colleague, Charles Engel, has a new paper entitled The Real Exchange Rate, Real Interest Rates, and the Risk Premium, in which he tries to identify what characteristics an exchange rate model must possess in order to explain two stylized facts.

…The well-known interest parity puzzle in foreign exchange markets finds … the high interest rate country tends to have the higher expected return in the short run. The second stylized fact concerns evidence that when a country’s relative real interest rate rises above its average, its currency tends to be stronger than average in real terms.

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Brent-WTI spread

Lots of action in oil prices today, as the unrest has spread from Tunisia and Egypt– which produce relatively modest amounts of crude oil— to Libya, the country sandwiched between them, and producer of over 2% of the world’s crude oil supply. Rather than try to guess where those developments are going to lead, I wanted today to try to make sense of another equally striking development in oil markets over the last 6 weeks– the disparity between the price of oil in the Midwest United States and that elsewhere in the world.

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Dispatches (IV): Wisconsin National Guard Makes Routine Visits to Correctional Institutions

Following up on Walker says National Guard is prepared (2/11), from Wisconsin State Journal:

Madison — As large labor protests continue at the Capitol, the Wisconsin National Guard has toured more than one prison in the state, a spokeswoman said Tuesday.

The Journal Sentinel reported Monday that National Guard members last week had toured Redgranite Correctional Institution with its security director. On Tuesday, Lt. Col. Jackie Guthrie, spokeswoman for the National Guard, confirmed that other prisons had been visited as well.

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On the Underfunded Liabilities Problem (Or Lack Thereof in Wisconsin)

Econbrowser reader Bob_in_MA has argued that Governor Walker’s [the] (edit 7:50am 2/22) desire to strip collective bargaining rights from Wisconsin public employees is derived in part from the high labor costs, hidden in part by large unfunded liabilities (e.g. pensions) in the state. This might be an apt characterization for Massachusetts. It is not for Wisconsin. From the Pew Center for the States:

Some states are doing a far better job than others of managing this bill coming due. States such as Florida, Idaho, New York, North Carolina and Wisconsin all entered the current recession with fully funded pensions.

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Dispatches (III): I Regret…

From “Wis. Law Enforcement Association ‘Regrets’ Endorsing Walker; Thousands Protest At Capitol,” Channel 3000:

[Executive board president of the Wisconsin Law Enforcement Association] Tracy Fuller writes, “I am going to make an effort to speak for myself, and every member of the Wisconsin State Patrol when I say this … I specifically regret the endorsement of the Wisconsin Trooper’s Association for Gov. Scott Walker. I regret the governor’s decision to ‘endorse’ the troopers and inspectors of the Wisconsin State Patrol. I regret being the recipient of any of the perceived benefits provided by the governor’s anointing. …

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