“If you want to know whether things like the 2009 stimulus bill and the various iterations of quantitative easing have worked, this is the comparison you need to look at.”

Brad DeLong points us to Matt Yglesias, The US recovery has been a disaster; the eurozone’s has been much worse:

As this chart from the OECD’s new report on the US economy shows, the economic recovery in the United States has been incredibly weak.


But it’s also been enormously stronger than the recovery in the eurozone. If you want to know whether things like the 2009 stimulus bill and the various iterations of quantitative easing have worked, this is the comparison you need to look at. Have they worked to make the economy healthy? No. Have they worked to make the economy healthier than it’s been in the place where they didn’t do that stuff? Absolutely.

There’s no such thing as a well-controlled experiment in macroeconomics.   This is about as you’re ever going to see.   The US enacted a modest stimulus.  In contrast, Europe went all in for austerity.   Modest stimulus won.


President Obama’s budget proposal

The President has released his budget proposal for Fiscal Year 2014.  The President’s proposal as well as multiple others are summarized in graphical form here.  (It’s a nice graphic.  The overall length of the bar indicates spending.  The projected deficit/surplus is indicated by the position of the bar.)

Robert Greenstein of the Center on Budget and Policy Priorities (CBPP) has a good summary of Obama’s proposal here.   An excerpt:

The budget contains a mix of spending cuts and revenue increases that would replace the sequestration cuts and achieve the important goal of stabilizing the debt over the next decade…  The budget is designed to protect the still-weak economy from the effects of premature deficit reduction — by both including short-term investments to address infrastructure needs and by phasing in some of the deficit reduction measures that would replace sequestration in order to allow the economy to continue its recovery…

That would be a welcome change from the current budget path.  The Congressional Budget Office estimates that if sequestration remains in effect, it will cost the economy 750,000 jobs by the end of this year.

As it stands, the package makes tough policy choices while largely adhering to the principle… that deficit reduction should not increase poverty or inequality.  Nevertheless, the budget’s substantial spending cuts, both in entitlements and discretionary programs, would have real-world consequences for millions of individuals and families….

Politically speaking, I had thought that the White House should not put these concessions in its budget, as distinguished from offering them in bipartisan negotiations if and when Republicans agreed to dedicate substantial savings from curbing tax credits, deductions, and other preferences (known as “tax expenditures”) to deficit reduction.

There’s the thing, Obama came to the table with what would be an acceptable compromise proposal.   The Republicans aren’t going to compromise with him.  Boehner and McConnell’s statements last year that they’d want Chained CPI as a condition for considering tax increases?  Just words.  Boehner and McConnell are disingenuous shits.  They weren’t ever going to consider tax increases.  Why on Earth does Obama lead with a compromise position that will be summarily rejected?  What does he think that’s going to accomplish?  I am at a loss to understand…

Continue reading

Bruce Bartlett: Mismeasurement of Federal Spending, Investment and Saving

The other night I said to myself, “I haven’t checked Bruce Barlett’s web pages in awhile.”  Sure enough, he’s got a good piece on deficit reduction and infrastructure investment in the NY Times.  I’ll quote it at length here:

Much of the motivation for deficit reduction, a goal shared by policy makers across the political spectrum, is the belief that deficits consume the nation’s seed corn. That is, deficits represent negative saving. Because saving is presumed to be the key determinant of long-term real economic growth, deficits deplete the supply of saving and thus reduce growth.

There are many problems with this analysis. Continue reading

Sequestration due to take effect March 2, would cut $85.3B from 2013 federal budget

Courtesy of Brad Plumer:

On March 2, the sequester spending cuts will start clamping down unless Congress votes to avert them. And on Friday afternoon, the White House explained just how those cuts would work.

The sequester, recall, will cut $85.3 billion from the federal budget in 2013 and affect everything except Social Security, Medicaid, a few targeted anti-poverty programs, and the ongoing wars. The Pentagon budget would face an immediate 7.3 percent cut and domestic discretionary programs would be cut by more than 5 percent.

The key feature of the cuts is that they would affect all agencies and programs equally — federal officials would not be able to pick and choose which programs get protected and which get the ax. The White House fact sheet below lists some examples of programs that would see cuts:  [Note:  Click through to Plumer’s article or on the ‘fact sheet’ link for details.]