How Does Simpson-Bowles Compare to What Europe Is Doing?

As Senator Mark Warner pointed out last week in the Christian Science Monitor, the United States is still in a position where long-term debt reduction is much easier than in several European countries now in fiscal crisis.

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.

When It Comes to Deficit Reduction, Timing Matters

The news that Britain has entered into a double-dip recession touched off a fierce debate last week over the role of austerity in the country's downturn.

Eurozone Challenges Should Give Pause to U.S. Lawmakers

Europe's worsening debt crisis--notably Italy's--should serve as a warning to the United States of what can happen to an otherwise steady, solvent economy whose debt is too high. In short, when debt gets so precariously high that interest payments become a very large budget line, debt markets can expand a slight decrease of confidence into a significant increase in interest rates. From there, the crisis can quickly descend into a national failure to refinance expiring bonds, and then possibly into national bankruptcy and default.

‘Line’ Items: Looking Abroad Edition

To the Shores of Tripoli – With President Obama on vacation and Congress in recess, most eyes are turned away from Washington and towards developments overseas. The Middle East is being closely watched with a strongman in Libya on the verge of falling and another in Syria involved in bloody fighting to stay in power. But Europe also is worthy of attention with the debt crisis there compelling leaders to discuss major fiscal and economic policy changes.

How Other Countries Have Regained AAA Ratings

Over at Ezra Klein's blog, Sarah Kliff writes about the "Maple Leaf Miracle," or how Canada was able to turn itself around after it was downgraded.

Recent Study Ranks U.S. Debt Fifth Largest Among Major Economies

A recent report from the Associated Press Global Economy Tracker found that the U.S. national debt (as a percentage of GDP) is the fifth largest among the world's major economies. According to the Tracker, which analyzes financial and economic data from thirty of the world's largest economies, U.S. debt in the first three months of the year equaled 95 percent of GDP.

What Happens If China Stops Buying Our Debt

Megan McArdle at The Atlantic writes about what happens if China stops buying U.S. Treasury bonds. She points out that a fiscal crisis is unlikely to be foreshadowed by signs such as a gradual rise in interest rates or other countries merely slowing down lending. Rather, citing the studies of Carmen Reinhart, she argues that changes would be much more precipitous.

The IMF on Fiscal Adjustments

As we have been looking at a number of fiscal plans for the US recently, the IMF has a useful appendix in its most recent Fiscal Monitor on what has worked and what has failed in past fiscal consolidation attempts (a topic we have delved into in the past).

Fiscal Power Rankings

Students at Stanford University, under the guidance of Comeback America Initiative (CAI) CEO and CRFB board member David Walker, have developed a Sovereign Fiscal Responsibility Index (SFRI) in an attempt to compare the quality of fiscal policy across different countries. The study, unsurpringly, does not contain good news for the US.

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