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Tag Archives: Fiscal Policy

Lorna Collier on the Universal Basic Income

Lorna Collier wrote a post on the Universal Basic Income that appeared yesterday. She interviewed me for it, but didn’t use anything I said. That’s alright because she took the arguments I made, fashioned them into a short op/ed by me, and gave me veto power. So the op/ed by me in the piece faithfully reflects my views. She did quote other people saying the same things I said: the huge expense of a UBI; the huge tax increases required pay for it and still leave us...

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A Missed Opportunity on Reindexing Social Security

The low point between the two men [President Obama and Senator Bernie Sanders] was a 2013 meeting with other Democratic senators. Obama had just put a chained Consumer Price Index in his budget, a proposal that would cut Social Security benefits by tying them to the rate of inflation. Many Senate Democrats were angry about it. But when they arrived for the meeting, it was Sanders who bubbled up, ripping into Obama for giving in to Republicans and not understanding...

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Fiscal stimulus doesn’t require big government or budget deficits

In the Keynesian model, fiscal stimulus is measured by the change in the size of the budget deficit, or perhaps the change in the cyclically adjusted budget deficit. In that model, a shrinking budget surplus is every bit as expansionary as an increasing budget deficit.  Because it has nothing to do with “big government”, Keynesianism is neither “liberal” nor “conservative”. Hong Kong provides an interesting example.  A recent Bloomberg article shows the expected...

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Friedman, Heller, and the Audience

Here’s an interesting discussion between Keynesian Walter Heller and monetarist Milton Friedman in 1978. It was one of the early productions of Bob Chitester who, in the next year, put together the famous PBS series “Free to Choose.” The moderator, Marina von Neumman Whitman, does a good job. I found her more impressive on this show than I did when she was one of my bosses at the Council of Economic Advisers in 1973, when I was a summer intern. Some highlights:...

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We’ve seen this movie before

The media reports that Japan’s GDP plunged at a 6.3% annual rate in the 4th quarter of 2019.  Here’s the Financial Times headline and subhead: Japan on course for technical recession, economists warnCoronavirus impact looms as GDP shrinks at 6.3% rate after consumption tax rise The consumption tax increase on October 1, 2019 does largely explain the fall in GDP, but it won’t cause a recession.  The coronavirus might cause a recession this year, but it obviously had no...

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Is Powell relying on help from fiscal policy?

There’s been a lot of buzz regarding some recent statements by Jay Powell on the possible role of fiscal policy during the next recession: The current low level of interest rates “means that it would be important for fiscal policy to support the economy if it weakens,” he told the House Financial Services Committee on Tuesday. Less emphasis is being placed on some of his other statements, which suggest that fiscal policy is unlikely to be effective during the next...

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California Government Pensions and Opportunity Costs

Steven Greenhut over at the Reason blog had an excellent article last week on the really scary state of the California Public Employees’ Retirement System (CalPERS). It’s titled “What, Us Worry? California Lawmakers Still Ignoring Dark Pension Clouds,” Reason, December 13. First, some facts that many Californians are familiar with but most non-Californians are not. Greenhut writes: It’s been a little more than 20 years since the California Legislature passed, and...

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Stress test the government?

During the 1920s, real interest rates were fairly high. Then during the period from 1933 to the 1950s, both nominal and real rates were fairly low. Then nominal rates rose in the 1960s, and somewhat later the real interest rate also increased. Since 2000, both nominal and real interest rates have fallen to very low levels. What lesson can we learn from this historical pattern of ups and downs? If you believe most of the pundits that I read, the proper lesson is...

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Pay attention to what people are not talking about

The Treasury Department just released the budget figures for fiscal 2019, and they are mind-boggling: Revenues increased by 4%, roughly in line with nominal GDP.  Spending soared by 8.25%, more than twice as fast as NGDP.  The budget deficit increased from $779 billion to $984 billion. Normally, spending grows faster than NGDP during recessions and slower than NGDP during booms.  Thus you’d expect federal spending to be growing at less than 4%/year.  It’s very...

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The China (manipulation) shock and the (mostly) Trump fiscal shock

During the 2000s, China was accused of currency manipulation. Many observers claimed that this policy hurt America’s tradable goods sector, boosting our current account deficit. Some argue that this led to a net loss of jobs, and/or de-industrialization. Here I’d like to point out that the same models that suggest China’s currency manipulation hurt our tradable goods sector also imply that America’s recent fiscal policy hurts this sector even more, indeed by much,...

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