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Renewing America

Ideas and initiatives for rebuilding American economic strength.

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Showing posts for "Debt and Deficits"

Fiscal Malaise

by Renewing America Staff

The fact that U.S. fiscal policy has moved out of the media spotlight is both good news and bad news, writes CFR’s Robert Kahn on his blog “Macro and Markets.” While it’s good there is some general optimism that the next round of fiscal cliffs will be navigated with little disruption to the economy, the growing pessimism about the chances of a grand fiscal bargain is discouraging. Kahn highlights several factors that might be contributing to this dynamic, including a better economic backdrop and debt limit fatigue. Read more »

Learning About Growth from Austerity

by Michael Spence
U.S. Congressman Paul Ryan (R-WI) speaks in front of the "national debt clock" in New Hampshire, September 2012 (Brian Snyder/Courtesy Reuters.) U.S. Congressman Paul Ryan (R-WI) speaks in front of the "national debt clock" in New Hampshire, September 2012 (Brian Snyder/Courtesy Reuters.)

MILAN – In a recent set of studies, Carmen Reinhart and Kenneth Rogoff used a vast array of historical data to show that the accumulation of high levels of public (and private) debt relative to GDP has an extended negative effect on growth. The size of the effect incited debate about errors in their calculations. Few, however, doubt the validity of the pattern. Read more »

U.S. Debt Ceiling: A Plan to Kick the Can?

by Renewing America Staff

House Republicans are looking at legislative options that would couple a hike in the federal debt ceiling, likely due in the fall, with progress on corporate tax reform, writes CFR’s Robert Kahn on his blog “Macro and Markets.” However, significant disagreement between the two parties on major policy points, including on rate levels and the taxing of foreign profits, would probably preclude a grand bargain in the coming months, he says. Read more »

Fiscal Revisionism

by Renewing America Staff

Following the controversy sparked by errors found in Harvard professors Carmen Reinhart and Ken Rogoff’s This Time is Different that has played a central role in supporting austerity policies in the debate over deficit reduction, CFR senior fellow Robert Kahn responds to the question of how the work’s revision changes the landscape for macroeconomic policy, if at all. Read more »

Policy Initiative Spotlight: Multiyear Budgeting

by Steven J. Markovich
President Obama's FY 2014 budget proposal is released (Gary Cameron/Courtesy Reuters). President Obama's FY 2014 budget proposal is released (Gary Cameron/Courtesy Reuters).

The U.S. budget process has become increasingly dysfunctional, a large factor in Standard and Poor’s downgrading the U.S. sovereign credit rating in 2011. Budgets were always passed for each fiscal year from 1977 to 1998, but in the thirteen fiscal years since, Congress has failed to adopt a budget five times, including for FY 2013. A continuing resolution—a stopgap spending measure—was passed in late March to fund discretionary programs of the federal government through the end of September, the last month of the 2013 fiscal year. Read more »

Battleground Budget

by Michael Spence
House Budget Committee member Marsha Blackburn (R-TN) displays a copy of U.S. President Barack Obama's FY2014 budget proposal on April 10, 2013 (Kevin Lamarque/Courtesy Reuters). House Budget Committee member Marsha Blackburn (R-TN) displays a copy of U.S. President Barack Obama's FY2014 budget proposal on April 10, 2013 (Kevin Lamarque/Courtesy Reuters).

MILAN – The world’s developed economies, of which the United States is by far the largest and systemically most important, face a range of difficult political and social choices. President Barack Obama’s proposed U.S. budget acknowledges and addresses those choices and tradeoffs directly and fully for the first time in the post-crisis period. Obama’s proposal is an important, honest, and politically courageous document. The debate that follows will largely determine whether the United States shifts toward a strong, inclusive, and sustainable pattern of growth and employment, and how the burden of moving to such a path will be shared by Americans of various ages, educational levels, incomes, and wealth. Read more »

U.S. Budget Policy: Problem Solved?

by Renewing America Staff

The Obama administration’s long-term budget projection estimates government debt as a share of GDP will remain stable until 2050, then decline, and in seventy-five years place the U.S. federal government in a net creditor position equal to around 60 percent of GDP. This is a more optimistic projection than produced by the Congressional Budget Office and independent commissions studying deficit reduction. Read more »

Chained CPI’s Diminishing Returns for U.S. Budget

by Renewing America Staff

On Wednesday, President Obama will send his proposed budget to Capitol Hill. While it includes many ideas floated in the president’s previous budget plans, it proposes a switch to an inflation formula intended to reduce cost-of-living payments to Social Security beneficiaries, known as the chained Consumer Price Index (CPI), which has excited some deficit hawks and worried some Social Security defenders. Read more »

The Sales Tax: The New Way to Fund Transportation?

by Rebecca Strauss
Cars wait in a traffic jam in New York City (Mike Segar/Courtesy Reuters). Cars wait in a traffic jam in New York City (Mike Segar/Courtesy Reuters).

Engineers have been browbeating U.S. policymakers about the dire state of the country’s infrastructure for years. This year is no different. Last week the American Society of Civil Engineers gave U.S. infrastructure a barely passing grade of D+ and warned that “it’s time to stop duct-taping this problem.” Much of the problem has to do with how the country pays for its infrastructure, which does not raise enough revenue to keep up with the costs of needed repairs and improvements. But the engineers may finally have the ear of policymakers in one state, Virginia, who are making real changes about how the state funds its highways and roads. Read more »

Europe, Italian-Style

by Michael Spence
Outgoing Italian prime minister Mario Monti speaks during a news conference at a European Union leaders summit to discuss the EU's long-term budget on February 8, 2013 (Eric Vidal/Courtesy Reuters). Outgoing Italian prime minister Mario Monti speaks during a news conference at a European Union leaders summit to discuss the EU's long-term budget on February 8, 2013 (Eric Vidal/Courtesy Reuters).

Last summer, after two years of growing uncertainty, systemic risk in the eurozone finally began to wane, as conditional commitments came together. Italy and Spain offered credible fiscal and growth-oriented reforms, and the European Central Bank, with Germany’s backing, promised intervention as needed to stabilize the banking sector and sovereign-debt markets.=Unfortunately, that trend may be reversing. Growth in the eurozone has turned negative overall, significantly so in the south. Unemployment stands at about 12% in Italy, and 38% for the young. Likewise, Spain’s unemployment rate is above 25% (and 55% for young people). And French economic indicators are slipping quickly. Read more »