Economy

The OECD and Robert Solow on the Effects of Debt

As our national debt and deficit continue to rise, a question that continues to be on many people’s minds is how rising debt levels impact the economy, especially as the American economy remains far from a full recovery. A report from the Organization for Economic Cooperation and Development (OECD)’s Economics Department on Debt and Macroeconomic Stability explains how rising public and private debt levels are related to macroeconomic instability.

Bowles: National Debt Threatens U.S. Innovation

In an interview with Forbes contributor Henry Doss, former Fiscal Commission co-chair Erskine Bowles explains just how our unsustainable debt trajectory threatens the future of U.S. innovation and may be preventing some businesses from investing due to the uncertainty.

First, Bowles says that debt and deficits really do deserve the center stage:

The Economic Effects of Avoiding (Much of) the Fiscal Cliff

Update: CBO confirmed our numbers today, finding a remaining fiscal contraction of about 1 1/4 percent.

QE 3.1: The Fed Gets Specific

In September, the Federal Open Market Committee (FOMC) announced a third round of quantitative easing, consisting of purchases of mortgage-backed securities and long-term Treasuries. QE3 represented a break from previous rounds of easing because it did not involve an end date for the purchases. With that modification, there was some speculation that the FOMC would also set inflation and unemployment thresholds after which, if reached, the Fed would wind down its easing policy.

Could We Go Bungee Jumping Off the Fiscal Cliff?

It is a point of consensus among those following the budget that the fiscal cliff would likely be very damaging for the economy in the short term, likely pushing it into a recession. However, there is less agreement on how quickly the cliff would hurt the economy. 

Changes to Income-Based Repayment for Student Loans: "Safety Net or Windfall?"

Our colleagues Jason Delisle and Alex Holt of the New America Foundation's Federal Education Budget Project have released a new paper "Safety Net or Windfall?" on the 2010 changes to federal student loan program's Income-Based Repayment (IBR) plan. The IBR plan was designed to help with student's loan repayment by limiting payments to 15 percent of their income and forgiving the remaining balance after 25 years.

Social Security Adjustments Announced Today

With the release of September inflation numbers from the Bureau of Labor Statistics, the Social Security Administration also announced its cost-of-living adjustments (COLA) and change to the maximum amount of income to which the payroll tax is applied. The COLA for Social Security benefits next year will be a 1.7 percent increase, while the taxable maximum will rise from $110,100 to $113,700.

Quantifying the Effects of Uncertainty

We have seen many lawmakers and business leaders claim that the fiscal cliff is holding back the recovery and leading to higher unemployment, and in today's The Wall Street Journal, a Bank of America survey shows that in the mind of investors it is the top risk for the U.S. economy.

Event Recap: "Economic and Foreign Policy Implications of America's Debt"

The Center for Strategic and International Studies hosted an event today chaired by former Senators Sam Nunn (D-GA), who is a member of the steering committee for the Campaign to Fix the Debt, and Pete Domenici (R-NM) entitled "Economic and Foreign Policy Implications of America's Debt." It featured comments from former Treasury Secretary Robert Rubin, former Treasury Secretary and Secretary of State James Baker, and a panel of former members of Congress.

CBO Projects a Recession -- But How Deep?

We've warned many times before that going off the fiscal cliff would throw the economy into a double dip recession.

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