Economy

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.

How Long Will Low Interest Rates Last?

Are we really borrowing for free, and should we be taking advantage of it?

Goldman Sachs On the Fiscal Cliff

In a new investor note, Alec Philips of Goldman Sachs produced a useful new chart comparing three different scenarios for extending all the fiscal cliff and letting them all expire.

The Concord Coalition Provides Fiscal Lessons From Europe

The Concord Coalition has just unveiled a new paper, authored by Edmund Andrews, Joe Minarik, and Diane Lim Rodgers, called "Not Just Their Problem: The Euro Debt Crisis and U.S. Fiscal Policy," shedding some light on our fiscal outlook in an international context.

It's Not Free Money

Paul Krugman and other advocates of more federal stimulus spending cite today’s extremely low real interest rates, near zero or negative, as reason to borrow and spend this "free money." As Jared Bernstein, another stimulus advocate, points out, though, the notion of free federal debt is a fallacy.

How Does the Fiscal Cliff Compare to Past Deficit Reduction in the U.S.?

In evaluating the fiscal cliff, it is interesting to see how it compares to past cases where the federal government has rapidly reduced deficits. The OMB has historical data on deficits as a percent of GDP going back to 1930, so we can evaluate based on this time period. For simplicity's sake, we will compare "cliffs" by the change in deficits from the previous year.

Zero-Sum Doesn't Quite Cut It

The New York Times has an article today entitled "In Washington’s New Mood of Austerity, Legislating Turns Into a Zero-Sum Game," detailing how the recent surface transportation/student loan/flood insurance bill involved some pay-fors that had avoided the budget axe in the past. As the author Jonathan Weisman describes it:

IMF: U.S. Must Get Its Timing Right

Today, the IMF released the concluding statement of its Article IV Consultation, calling for the U.S. to pass a deficit reduction plan quickly but phase in implementation to avoid unduly harming the recovery. Their economic forecast shows a continued slow recovery ahead--even with much of the fiscal cliff averted--as real GDP growth is projected to average 2.0 and 2.3 percent in 2012 and 2013, respectively.

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