J. Bradford DeLong's Blog, page 2281

Worst-of-Both-Worlds Fiscal Policy

For a couple of years now--ever since we slammed into the zero nominal interest rate lower bound--I have been wandering around saying:

The obvious policy is the long-term debt neutral stimulus: spending increases and tax cuts for the next three years, standby tax increases with triggers and spending caps with triggers thereafter, all calculated to guarantee that the debt is no larger ten years from now than in the baseline.

I haven't found takers--even though those who believe...

Fiscal Policy: Tyler Cowen Has Five Strange Propositions

I'm not sure what he is getting at here. But I do have answers:

TC: The monetary authority moves last anyway.

Yes, the central bank can neutralize any additional fiscal stimulus by raising interest rates. (It is not clear that it can undo any fiscal contraction by some combination of lowering interest rates and quantitative easing: it may be able to.) What is clear is that the U.S. Federal Reserve and the Bank of England are right now definitely not in a place where they would...

links for 2010-06-17

Cuortney Knapp: The Case for Tipping Well







Jane Hamsher: Alan Simpson: Cutting Social Security Benefits to "Take Care of the Lesser People in Society" | FDL Action







Mark Thoma: Weekly Claims for Unemployment Insurance Increase







Kevin Drum: Unemployment in 2012

KD: "So two and a half years from now unemployment will still be at 8.6%, a rate that...

Winston Churchill Liveblogs World War II: June 18, 1940: "Here is where we come to the Navy--and after all, we have a Navy. Some people seem to forget that we have a Navy. We must remind them..."

Winston Churchill in the House of Commons:

I spoke the other day of the colossal military disaster which occurred when the French High Command failed to withdraw the northern Armies from Belgium at the moment when they knew that the French front was decisively broken at Sedan and on the Meuse. This delay entailed the loss of fifteen or sixteen French divisions and threw out of action for the critical period the whole of the British Expeditionary Force. Our Army and 120,000 French...

And Ryan Avent Calls Out the Shoggoth that Is Ben Nelson...

Ryan:

Fiscal policy: Not serious: LAST night, the Senate opted to kill an economic assistance package.... The reason? Well, according to Ben Nelson the problem was that, "$77 billion or more of this is not paid for... and that translates into deficit spending and adding to the debt, and the American people are right: We've got to stop doing that." This is... completely absurd. The reasons to be concerned about debt levels are that you're worried about the ability to continue funding...

I Recall That the People Went About with Pale and Worried Faces, and Whispered Warnings and Prophecies Which No One Dared Consciously Repeat or Acknowledge to Himself that He Had Heard: a Sense of Monstrous Guilt Was Upon the Land, and Out of the Abysses

Yes, Paul Krugman reports from Europe. He talks to the Great and Good of Germany. And what he hears would shatter any lesser man.

Paul Krugman:

That ’30s Feeling: Here’s roughly how the typical conversation goes....

German Deficit Hawk: We must cut deficits immediately, because we have to deal with the fiscal burden of an aging population.

Ugly American: But that doesn’t make sense. Even if you manage to save 80 billion euros — which you won’t, because the budget cuts will...

If Nobody Sees Him by Midnight, Be Alarmed...

Radley Balko twitters:

Twitter / radleybalko: Bad sign: DC cab driver ju ...: Bad sign: DC cab driver just asked me if College Park is in Virginia...

Why Oh Why Can't We Have a Better Government?

It's not "the Senate" that is moving on: it is the 15 members of the Senate needed to pass stimulus2 that are moving on.

Otherwise, nicely done by Ezra Klein:

EUnemployment may be at 9.7%, but the Senate is moving on: Or, at the least, they care about the deficit more. By a vote of 52 to 45, the Senate rejected a jobs package that would've extended unemployment insurance, offered some tax breaks to individuals and businesses, kept doctors in the Medicare program and more. "$77...

Sam Brittan Fears the Zero Lower Bound and Rallies Round the Keynesian Flag

Sam Brittan:

Samuel Brittan - Are these hardships necessary?: The government’s real case is that an expansionary monetary policy will not only offset any contractionary influence of the forthcoming Budget, in the way outlined by Mervyn King in his Mansion House speech, but gradually erode the existing output gap. I would buy this if the Bank rate were 5 or 6 per cent. But it is a much more dubious proposition when it is already near its minimum level at ½ per cent. Of course...

Bharat Trehan on Debt Levels and Worried Markets

Mark Thoma sends us to Bharat Trehan:

Economist's View: The Correlation Between Debt Levels and Worried Markets: Here's an interesting observation from the latest economic outlook from Bharat Trehan of the the SF Fed:

looking only at current and projected debt levels, it becomes hard to distinguish the countries that markets are worried about from the countries markets are not worried about.

So the message for the debt-heads is that it's not just debt levels...