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.

Bill Bradley Joins the Announcement Effect Club

Already a member of the Basketball Hall of Fame, former Sen. Bill Bradley (D-NJ) joined another exclusive club over the weekend: the Announcement Effect Club. His comments came during an appearance on Meet the Press yesterday (see here for a full transcript).


What the U.S. Could Learn from Germany

Steep budget cuts are linked to recession and higher unemployment in Europe, argue several commentators (see here for example). Are they right? Certainly, some countries have struggled economically when reducing deficits before their economies have made a recovery.

How Big is the Fiscal Cliff?

UPDATE: This blog has been updated to include CBO's brief about the fiscal cliff.

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