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Without It, States’ Steps to Balance Their Budgets Could Cost Economy 900,000 Jobs Next Year
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In Washington, the term "fiscal conservative" often gets applied very loosely to people who complain about debt and deficits a lot but never, ever put any real deficit reduction proposals on the table--Evan Bayh, I'm thinking of you. Such people always say we need yet another commission to study the issue, the time isn't right, we need to wait until after the next election or better weather or whatever. So I'm pleased to call attention to a real fiscal conservative--economist Jeff Frankel of Harvard, who has put together a 10-point plan of serious, honest-to-God deficit reduction proposals. Half involve higher revenues and half reduced spending; they include entitlements as well as discretionary programs. I won't steal Jeff's thunder by listing them; follow the link below. I don't necessarily endorse every item on the list, but it's a good place to start. Any member of Congress who wishes to be considered a fiscal conservative should be willing to endorse a plan as detailed as this one
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The health reform bills passed by the House of Representatives (H.R. 3962) and introduced by Senate Majority Leader Reid (as an amendment to H.R. 3590) contain a wide range of measures to restructure the U.S. health system and slow the growth of health care costs, particularly Medicare costs. The bills begin to move in most of the areas that health policy experts consider promising avenues for reducing the growth of health care spending and where specific steps can be identified. “Pretty much every proposed innovation found in the health policy literature these days is encapsulated in these measures,” John Iglehart, founding editor of Health Affairs, recently wrote in the New England Journal of Medicine. Similarly, Jonathan Gruber of MIT, one of the nation’s most respected health economists, recently said of the Senate bill, “It’s really hard to figure out how to bend the cost curve, but I can’t think of a thing to try that they didn’t try. They really make the best effort anyone has e
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BIG THINK is putting together a special report on the financial and economic crisis in which they interview lots of smart folks and then ask economics and finance bloggers to weigh in on the issues raised. And they've invited me to participate. The first interviewee is David Wessel, economics editor at the Wall Street Journal...
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Leading the list of high-multiplier items is direct spending by the federal government, infrastructure aid to states and localities, other types of aid to states and localities, and transfer payments (think unemployment insurance and food stamps) to individuals. At the bottom of the list are corporate tax cuts, the new homeowner's tax credit and individual tax cuts. Of course, of that list, the only policy we've rushed to expand is the homeowner's tax credit, which turns out to be among the two worst approaches if you're worried about stimulus. The good news is that Kent Conrad says there's support for expanding aid to states and localities in the Senate, but I'll believe that when I see it.
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Although long obscured by the Great Depression, the nationwide “bubble” that appeared in the early 1920s and burst in 1926 was similar in magnitude to the recent real estate boom and bust. Fundamentals, including a post-war construction catch-up, low interest rates and a “Greenspan put,” helped to ignite the boom in the twenties, but alternative monetary policies would have only dampened not eliminated it. Both booms were accompanied by securitization, a reduction in lending standards, and weaker supervision. Yet, the bust in the twenties, which drove up foreclosures, did not induce a collapse of the banking system. The elements absent in the 1920s were federal deposit insurance, the “Too Big To Fail” doctrine, and federal policies to increase mortgages to higher risk homeowners. This comparison suggests that these factors combined to induce increased risk-taking that was crucial to the eruption of the recent and worst financial crisis since the Great Depression.
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