Tuesday, September 30, 2008
Saturday, September 27, 2008
"Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many friends in investment banking said that there is plenty of money to invest in financial services, but right now it is "sitting on the sidelines." Why? Because the financial services industry does not want to pay the terms required to get that money back in circulation (e.g., give up equity). As he put it, why do business with Warren Buffett who will negotiate a tough deal, if you believe that the government will ride in soon with cheaper cash?
Ken also talked about the need to shrink the financial services sector. He thinks it is good that the investment banking houses are failing and many people on Wall Street are losing their jobs because, in his view, we have an oversupply in that sector and our economy just can't support it.
Ken's background with the IMF and on the Board of the Federal Reserve add a certain credibility to his assessment of conditions on Wall Street. If he is right, the $700 bailout is saving some investment bankers' jobs in the short term, but overall it is just making the financial system worse."
Friday, September 26, 2008
Thursday, September 25, 2008
Wednesday, September 24, 2008
"True just sending money is not incentive compatible. But there is no reason to bail out homeowners. Just intervene in any mortgage default. Seize the property and continue making the mortgage payments. In the short run rent the property back to the homeowner.
This is what I have been advocating to my colleagues. I don't know why it is not under discussion. Before going with the arbitrary implememtation that Paulson is proposing now there should be some convincing argument that it's more efficient than this alternative. It is clearly the most direct approach and therefore should be the default (so to speak.)"
Here is another post along the same lines from Cowen.
Tuesday, September 23, 2008
Monday, September 22, 2008
Sunday, September 21, 2008
Saturday, September 20, 2008
Friday, September 19, 2008
Thursday, September 18, 2008
Wednesday, September 17, 2008
"The Bush administration, the Fed and Congress, meanwhile, continue to focus on the immediate crises, with little attention to the underlying reasons that the economy has gotten into this mess — a stagnation of incomes, an explosion of debt and a decidedly outdated, and limp, approach to government oversight. Remarkably, the presidential campaign has gotten less serious, while the economy’s problems have become more so."
Tuesday, September 16, 2008
Monday, September 15, 2008
"GIBSON: So let me summarize the three things that you’d change in the Bush economic plans. One, two, three.
PALIN: Reduce taxes, control spending, reform the oversight and the overseeing agencies and committees to make sure that America’s dollars and investments are protected.
GIBSON: So let me break some of those down. You talk about spending. How much smaller would a McCain budget be? Where would you cut?
PALIN: We’re going to find efficiencies in every department. We have got to. There are some things that I think should be off the table. Veterans’ programs, off the table. You know, we owe it to our veterans and that’s the greatest manifestation that we can show in terms of support for our military, those who are in public service fighting for America. …It’s to make sure that our veterans are taken care of and the promises that we’ve made to them are fulfilled.
GIBSON: So you’d take military off the table, the veterans’ benefits. That’s 20 percent of the budget. & Do you talk about entitlement reform? Is there money you can save in Social Security, Medicare and Medicaid?
PALIN: I am sure that there are efficiencies that are going to be found in all of these agencies. I’m confident in that."Palin is pulling the whole fraud, waste and abuse line. Repeat after me: the government is an insurance company with a side business in defense. If you are going to try to bring the budget into balance on the spending side you will have to tackle a combination of defense, medicare, medicaid, and social security.
To be fair, this is not necessarily a fair reflection of Palin's knowledge or lack of knowledge. Many on the right have been peddling this bullshit for ages. This has been a pet peeve of mine for awhile.
hat tip: economist mom
Sunday, September 14, 2008
Here is a pie graph courtesy of Mark Thoma that shows the portion of the federal budget that earmarks constitute (it's the barely visible sliver). McCain's plan to bring the budget into balance by eliminating earmarks is simply not credible. Remember, the government is an insurance company with a side business in defense. That is where the money is and thus where any savings will have to come from.
Friday, September 12, 2008
hat tip: Ezra Klein
Thursday, September 11, 2008
Wednesday, September 10, 2008
'the obligations of the [Social Security] trust fund aren't tangible obligations fungible with other government debt. But at the same time they are obligations: they oblige the government to issue debt in the future, insofar as its tax revenue won't be able to cover its pension promises.'
A trust fund = an obligation to borrow? If your uncle Louie told you he was setting up a trust fund for you, and its assets consisted of his obligation to borrow the money, how secure would you feel?
On the other hand, you may feel confident that Uncle Sam will always be able to borrow. Don't be so sure. A few months ago, one might have thought that Uncle Freddie and Aunt Fannie would always be able to borrow. That ended rather suddenly.
What do you like better about Sam? His balance sheet? His management team?"This is one of the things I have never understood when those who claim that Social Security is not a problem or even has a strong financial position. The trust fund presently has $5 trillion dollars worth of obligations that we have pissed away. These are funds that will have to be paid out between 2018-2040. To state Social Security's finances are in sound shape presumes faith in the taxpayers willingness to accept higher marginal tax rates to redeem those bonds in the trust fund. I don't share that faith.
Tuesday, September 09, 2008
Sunday, September 07, 2008
Ta-Nahisi Coates is a blogger for the Atlantic and blogs about anything and everything. I find him fascinating and he discusses race and culture extensively in a manner that is seldom found on the blog0sphere or elsewhere.
Friday, September 05, 2008
long-run fiscal situation – is to replace the employer exclusion with a tax credit, a step that has been proposed many times before (e.g., Butler 1991 and Pauly and Hoff 2002). Firms would still be allowed to deduct the cost of their contributions to employee premiums, just as they can deduct wages and other expenses today for the purpose of calculating taxable income. But workers would now have to include employer contributions to health insurance in their earnings for the purpose of calculating taxes (precisely which taxes is discussed below). In exchange for, workers who purchased qualifying insurance would get a refundable tax credit. Qualifying insurance would be along the lines proposed by the President in his standard deduction for health insurance, including limits on out-of-pocket payments, coverage of a general range of medical care, and guaranteed renewability by the provider (Treasury 2008)."
This is a pretty fair description of the McCain health care plan. The funny thing is, this is not be found in McCain campaign literature or on his senate website, but rather in a paper written by Jason Furman, Obama's Economic Policy Director, who now is arguing about the perils of this very plan. Now Furman would probably be right to respond that the McCain plan doesn't go far enough to facilitate risk pooling in the individual market and maybe that the tax credits are insufficient. But the general thrust of the McCain plan is one that he championed before he became an Obama staffer, now his job is to criticize that very plan.
Furman's counterpart in the McCain campaign, Douglas Holtz-Eakin, was a real deficit hawk and had a sterling reputation coming from the CEA and a stint as the CBO director. Now Holtz-Eakin's main task is defending the indefensible, McCain's tax policy. He surely knows that he will not bring the budget with the tax cuts McCain has proposed back into balance merely by curtailing earmarks. But that is the company line.
Both are incredibly intelligent men, highly accomplished in their fields, but their current job description is to say stupid and false things. That is politics.
Here is a video of the two going at it on CNBC and in Arnold Kling's words, "squandering their cognitive surplus."
hat tip: Greg Mankiw and Arnold Kling
random note: Mankiw was actually Furman's dissertation adviser.
Thursday, September 04, 2008
Wednesday, September 03, 2008
On the plus side, she is a stone cold fox. I think Michelle Obama is immensely attractive and so is Governor Palin and that makes this election much more palatable.