In a December 2 commentary, Morgan Stanley economist Gerard Minack warned that one cost of a sovereign debt crisis is that it forces countries to adopt fiscal contraction before they have fully recovered from the recession. The result could be a double-dip recession.
Also on December 2, Brookings Institution economist Henry Aaron was highly critical of the Simpson-Bowles budget plan in a Fiscal Times commentary.
On December 1, the cochairmen of the National Commission on Fiscal Responsibility and Reform, Alan Simpson and Erskine Bowles, issued a revised version of their previously released deficit reduction proposal.
Also on December 1, the International Monetary Fund published a working paper which reviewed the progress of selected countries in achieving fiscal goals. It finds that few have put in place measures to achieve long-term goals.
In a November 30 Gallup poll, people were asked their preferred means of deficit reduction. Only 19 percent favor the conservative policy of only cutting spending and not raising taxes, 30 percent favor the liberal policy of only raising taxes and not cutting spending, with 46 percent favoring a combination of the two.
Also on November 30, an Associated Press/CNBC poll found that only 33 percent of people think the budget can be balanced without raising taxes; 65 percent think taxes will have to be raised.
And on November 30, a World Public Opinion poll found that on average people think foreign aid constitutes about one-fourth of the federal budget. The true figure is about one half of one percent.
On November 29, a group of liberal organizations published a deficit reduction plan that relies more heavily on higher taxes and cuts in defense spending to achieve its objective than other deficit reduction plans being discussed.
In a November 28 commentary, economist Mark Zandi of Moody’s Analytics argued that our fiscal problems are less insurmountable than they may appear. As the economy recovers, tax revenues will naturally rise and spending will fall, bringing the necessary fiscal adjustment within a range that can be achieved with relatively modest adjustments to taxes and spending, he says.
In a November 23 commentary, economic historians Nicholas Crafts and Peter Fearon reviewed the experience of the 1937-38 economic downturn, which was caused by abrupt fiscal and monetary tightening – policies favored by Republicans today.
On November 22, the National Bureau of Economic Research released a working paper that attempted to correlate a nation’s indebtedness to the effectiveness of its fiscal stimulus. It finds that the lower the debt ratio at the beginning of the economic crisis the more effective fiscal stimulus was.
In a November 21 commentary, economists Christiane Nickel, Philipp Rother, and Lilli Zimmerman examined cases of public debt reduction. They recommend that fiscal consolidation take place primarily on the spending side of the budget and that increased revenue from an economic upswing be used for debt reduction rather than tax cuts. A longer version of this analysis was published by the European Central Bank in September.
On October 26, the Congressional Research Service published a study of the Joint Committee on Reduction of Non-Essential Government Expenditures, which existed from 1941 to 1974.
I last posted items on this topic on November 22.
Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here . Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).
