Tag Archives: fiscal cliff

12.28.2012 | A Treasury Note

Secretary of the Treasury Geithner just sent Senate Majority Leader Harry Reid a letter.

Noting that in 5 days the US will again have hit the debt ceiling, Secretary Geithner explains that actually, we might have an extra 2 months. In an appendix to his letter, he outlines 4 types of “extraordinary measures” that will let us avoid a debt default for awhile. He adds though, that he is not sure how long he can stretch it because of the uncertainty created by the current negotiations over tax increases and spending cuts. (Ironically, no Congressional tax and spending deal means more time to get a new ceiling.)

Where is the debt ceiling? $16.394 trillion.

Where were we on December 26th? $16.027 trillion.

Some history…

In 1917, Congress decided it could not keep track of every U.S. loan. So, to maintain some control over national finance, they said, “We will decide the maximum amount the U.S. can borrow.” And, from that day onward, whenever necessary, they voted to increase how much the U.S. could borrow. Since 1962, the U.S. Congress has raised its debt ceiling 76 times.

Sources and Resources: Here is Secretary Geithner’s letter and the Treasury Department daily update of US debt totals. For some debt history, John Steele Gordon’s Hamilton’s Blessing The Extraordinary Life and Times of the National Debt is wonderful. Also, this CNN article and these these econlife posts, Debt Ceiling 101 and Looking at the Debt Ceiling, provide some background and some of the above history.

Posted by: adminEcon
Tags: Alexander Hamilton, debt ceiling, deficit, federal budget, federal debt, fiscal cliff, Harry Reid, John Boehner, Nancy Pelosi, recession, Second Liberty Bond Act, Timothy Geithner, treasury
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12.20.2012 | Where is the World Economy Going?

Yesterday, the UN published a preview of its world economic outlook. While projections are always debatable, their graphs provide a snapshot of key economic issues.

GDP Outlook:

Oil Prices:

Grain Prices:

These projections and comments from a Société Générale Report also are helpful. Most enlightening, perhaps, is the potential drag on the world economy from the euro zone.

Sources and Resources: Société Générale data is from Business Insider while the preview of the UN Report is here. For a summary, this NY Times article discusses its dismal outlook.

Posted by: adminEcon
Tags: austerity, Australia, Businessinsider, China, developed economies, developing economies, euro zone, fiscal cliff, GDP growth, grain prices, oil prices, Societe Generale, US
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11.11.2012 | Fiscal Cliff Notes

There might be 2 ways to look at the fiscal cliff.

Specifically, we can focus on tax increases and spending cuts:

Tax Increases

Bush era tax cuts: expire
2010-2011 2% payroll tax cut: expire
Affordable Care Act taxes: kick in

Spending Cuts

Emergency unemployment benefits: expire
Budget sequester (cuts) from Super Committee failure: kick in
Previously legislated budget cuts: kick in
Defense cuts from Iran/Afghanistan reductions: kick in
Medicare payment rates for physicians: reduced

More broadly, we can take a step backward and look at the bigger problems that really have to be solved:

63% of the 2011 federal budget was on “autopilot.” Debating cuts, the Congress only looked at 37% of spending.
1 of 4 budget dollars is spent on healthcare. Looking back 50 years ago, less than 10% of all spending was healthcare, and looking forward, we are heading toward 33%.
Slicing federal employees and agencies would save money but not nearly enough. Even if we fired the entire federal payroll, the deficit would dip by less than one third.
Defense spending is massive. We spent 1 out of every 5 dollars on defense in 2011.
We now borrow close to 36 cents for every dollar we spend. And yet still, the more affluent are paying a larger proportion in taxes and the middle of the middle class (as expressed in the video) is paying a lower proportion.

Where does this leave us? Defined as taxing, spending and borrowing, US fiscal policy is the real fiscal cliff.

Sources and Resources: The specifics of the fiscal cliff are from a past econlife post while the summary of the big issues is from the David Wessel/WSJ video that follows. For even more detail, this Tax Foundation description of the fiscal cliff is good.

Posted by: adminEcon
Tags: Affordable Care Act, Bush tax cuts, defense, economic growth, federal spending, fiscal cliff, health care, recession, unemployment benefits
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11.07.2012 | Economic Uncertainty

Uncertainty might impede economic growth.

The research of several economists indicates that policy uncertainty foreshadows and might even cause slower economic activity. To prove their hypothesis, they created an Index of Economic Policy Uncertainty with 3 data components: 1) The frequency that uncertainty and economic appears in news articles. 2) The number of expiring tax provisions. 3) The volume of economic forecasting disagreement. Very simply, they think that when employers are unsure of future regulation, taxes and interest rates, they postpone hiring and investment decisions rather than risk having to reverse them in the future.

This takes us to election results. Will the political gridlock that creates economic uncertainty continue?

Sources and Resources: The economists, Scott R. Baker (Stanford), Nicholas Bloom (Stanford), and Steven Davis (U. of Chicago) have a website that presents their indices and links to their research (the source of the graph that follows) and further discussion of their ideas. For a briefer summary, I suggest this Vox article and a Stanford summary of their work. Do take a look. It certainly relates to election results.

Posted by: adminEcon
Tags: Bush tax cuts, economic forecasting, economic uncertainty, fiscal cliff, Index of Economic Policy Uncertainty, Nicholas Bloom, political gridlock, political uncertainty, Scott R. Baker, Stanford University, Steven Davis, University of Chicago
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10.16.2012 | A New View of the Fiscal Cliff and Greece

Merle Hazard’s newest song is “Fiscal Cliff.”

While he recorded his “Greek Debt Song” several years ago, it still is relevant and fun to watch.

Econlife looked at fiscal cliff details here and, for more on Greece, you might want to go back to econlife’s posts on their spending, taxes, and austerity.

Posted by: adminEcon
Tags: Congress, economic humor, fiscal cliff, Greek austerity, Greek debt, Harry Reid, John Boehner
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