Some Good Reading on Economics
The blog has been quiet for the past two weeks due to a combination of (real) work, work for my masters (part time, History (a real subject)) and, to be honest, bit of a lack of inspiration.
I’ll try and be better this week.
In the meantime some stuff to keep you all going.
The FT reports today that some bond market analysts believe that the low yield on UK gilts is signal that “that there will be no real growth in the economy in the next few years”.
Here’s an excellent article on CiF about the changing global balance of economic power.
The task is even more daunting than in the years after 1945, for today a number of fiercely independent-minded, aspiring world powers must be herded into the global order. As the main architect of globalisation, which awakened awareness worldwide of the need for global public goods, the US must, even in its weariness, summon its creative resources.
Paul Krugman shares some interesting polling on perceptions of the deficit in the 1990s. Even as Clinton vastily improved the budget position – Republicans still believed it was getting worse!
Finally Brad DeLong outlines some “centrist technocratic” ways to deal with the deficit in the States. There is a lot in here relevant to the UK and worth considering.
Here is the platform for the bipartisan technocrats of the center:
- Ten-Year PAYGO: a 2/3 supermajority in both houses commitment to ten-year PAYGO starting now, and a pledge by every president and presidential candidate that they will veto all bills that do not meet ten-year PAYGO standards. Everything Congress passes must be projected to reduce the outstanding national debt within ten years.
- “Starting now” means starting now: no middle-class tax cut this month or next month without a pay-for within ten years. Taking current law rather than current policy as our baseline and requiring PAYGO for everything gets our 25-year fiscal gap down to 1.2% of GDP (as opposed to 4.8% of GDP) and gets our 50-year fiscal gap down to 0.8% of GDP (as opposed to 6.9% of GDP). Our long-run deficit problem is overwhelmingly due to things that Congress is about to do, not things that Congress has done.
- Carbon tax: a 1.0% of GDP carbon tax is the best policy to provide American businesses with the incentives they need to invent the clean energy technologies of the future. Half of it should be channeled into the Social Security Trust Fund to improve its solvency. Half should be used to help close our remaining operating fiscal gap.
- Pick-your-poison: Additional stand-by tax increases and stand-by spending cuts to close the remaining 0.3% of GDP long-run fiscal gap.
- Private add-on Social Security accounts: At their option, all Americans can add up to 2% of their Social Security wages to a private Social Security account run through the U.S. government’s Thrift Savings Program. Private contributions will be matched two-for-one by the federal government out of carbon tax revenue
- Recovery: when every fired local, state, and federal worker takes a private sector job down as well and when the U.S. government can borrow at today’s absurdly-low terms, it is criminal stupidity not to pull government spending forward into the present and push taxes back into the future (all within the ten-year PAYGO rule, of course). Since the macroeconomic situation is worse now than it was ever projected to get when the first Recovery Act was passed and since the U.S. government can borrow on better terms now than it could at the time of the first Recovery Act, it is time for a second Recovery Act–fifty percent federal government purchases and aid to the states, fifty percent tax cuts–somewhat larger than the first was.
- Certainty: The principal sources of uncertainty in American economics right now are three: we don’t know how the long-run fiscal gap will be closed (but we think it will be), we don’t know how our health-care system will be reformed and transformed (but we know it will be), and we don’t know what our policy toward global warming will be in a generation (but we know that we will have one). The best things the government could do to diminish uncertainty would be to: (1) commit immediately to the full implementation of the version of RomneyCare-plus-cuts-in-Medicare-and-taxes-on-gold-plated-health-plans that was this year’s PPACA, (2) commit immediately to a long-run climate policy in the form of a carbon tax coupled with research incentives for future energy technologies, and (3) commit immediately to a plan to cover the long-term fiscal gap.