Update: CBO confirmed our numbers today, finding a remaining fiscal contraction of about 1 1/4 percent.
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.
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.
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.
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.
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.
Are we really borrowing for free, and should we be taking advantage of it?