Bruce Bartlett, over at Capital Gains & Games, raises the possibility that the new Congress, with its enhanced compliment of Tea Party-type Republicans, might be willing to bring about an immediate fiscal crisis by refusing to raise the federal government's statutory debt limit ( Read more... )

Brad DeLong writes (pdf):Three weeks ago I was talking to some activists from the California Tea Party. I was trying to explain the Keynesian perspective: "Shouldn’t we keep public employment from falling," I said, "because right the government can borrow at such extraordinarily good terms, and if we keep our teachers at work then they educate our ( Read more... )

The Congressional Budget Office has released its latest estimate of the costs of the Troubled Asset Relief Program (TARP), a.k.a. "the bailout(s)." The results will probably drive some folks insane with rage since they don't exactly fit the Approved Narrative (tm). But here's the story in a few numbers ( Read more... )

A modest -- but serious! -- proposal, that might actually appeal across partisan lines:

• We suspend the Social Security payroll tax for three years;
• We issue inflation-adjusted 10-year bonds (TIPS) in the amount of the foregone revenue (estimated by the Social Security Trustees as about $2.2 trillion from 2011 - 2013). The real interest rate on ten- ( Read more... )

The Federal Reserve Bank of Philadelphia has just released its Fourth Quarter 2010 Survey of Professional Forecasters. Professional forecasters see a pretty grim future, as it turns out. No surprise, I suppose, but I want to focus on the political implications for a minute ( Read more... )

"Let it burn," seems to be gaining popularity as preferred policy in the face of financial crises like that of 2007-8. Let's call this the Emperor Nero option. Essentially, this option rests on the claim that the consequences of allowing the events to run their course are preferable to the actions necessary to halt the crisis. More specifically ( Read more... )

If you don't keep track of the interest rates on government debt, you might not know that investors are willing to pay the Treasury to take their money. That's right: for the last couple of weeks, the real interest rate on five-year Treasuries (i.e. the five year TIPS yield) has been negative. And the real rate on ten-year debt was a minuscule 0. ( Read more... )

I may have to go to Berkeley after all....

http://ineteconomics.org/grant/berkeley-economics-history-lab

Most of the world's economies are in a trap. Unemployment is painfully high, but businesses are reluctant to expand -- and hire -- until their sales start increasing. But sales can grow only slowly, if at all, until unemployment starts to fall. D'oh ( Read more... )

As some of my friends may know, I attended the America Speaks "Our Budget, Our Economy" event which was held last Saturday (June 26th). The event was billed as a "national town meeting" to discuss the federal budget and, more specifically, to talk about options for long-term deficit reduction. It was conducted simultaneously at nineteen primary ( Read more... )