At times, the fiscal debate can be confusing, as it is often set up as a simplistic contest between an argument for austerity against an argument for stimulus. However, the budget debate is much more complex than that, and many positions, including CRFB's, do not fit strictly into one of those two categories.
When the financial crisis began at the end of 2007, it soon became clear that the government would need to run higher deficits in response. Tax revenue fell, spending on "automatic stabilizers" rose, and policymakers enacted new spending to stimulate the economy. At that time, the debt level was lower and in line with historical averages, giving lawmakers the room to borrow what they needed to adequately respond.
Bipartisanship will be a crucial element when it comes to reforming Social Security and achieving other budget related reforms in the near future. In this regard, the introduction of the bipartisan Reducing Overlapping Payments Act, by Senators Tom Coburn (R-OK), Jeff Flake (R-AZ), Angus King (I-ME), and Joe Manchin (D-WV) is an encouraging sign and a step in the right direction for more reform of the Social Security and other parts of the budget.
In light of the recent controversy over the findings from economists Carmen Reinhart and Ken Rogoff on the relationship between debt and growth, there has been much speculation about what the critiques of those findings mean for what we know about that correlation.
Economists Carmen Reinhart and Kenneth Rogoff of Harvard University have issued an erratum to their 2010 paper, “Growth in a Time of Debt.” Their original paper found some evidence of a possible tipping point at which higher debt levels would significantly restrict economic growth, with median growth rates falling from 2.9 percent among countries with debt levels between 60 percent and 90 percent of GDP to 1.5 percent among countries with debt levels greater
Today, the Peter G. Peterson Foundation held its third annual Fiscal Summit, assembling a number of prominent current and former lawmakers, experts, and commentators to discuss the current state and future of our economy and the nation's finances. The discussion was kicked off by Juan Enriquez, co-founder of Synthetic Genomics Inc., a biotechnology company.
Regular readers of The Bottom Line are probably familiar with our goal of putting the debt on a downward path as a share of the economy over the long term. Much of the conversation on fiscal policy recently has centered around arguments against "austerity," but smart deficit reduction is different.
As lawmakers gear up to debate immigration reform in the weeks and months ahead, it will likely coincide with the ongoing budget debate in Washington, meaning that there will be heightened attention paid to the legislation's economic impact and budgetary impact. While CBO has not yet analyzed the immigration legislation recently introduced in the Senate, they have released a report outlining the methods used to estimate the effects of immigration reform legislation in 2006 that illustrates how an immigration bill may be scored.
Harvard professors Carmen Reinhart and Kenneth Rogoff’s (R&R) 2010 paper, Growth in a Time of Debt, has been all over the news in the past few weeks due to a critique of their methodology by a team of University of Massachusetts-Amherst economists.