Focus on Budget and Debt

Focus on Budget and Debt

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In a November 8 commentary, Tax Foundation economist Scott Hodge said that Republicans should concentrate on cutting small, budgetarily insignificant government programs in order to gain the “credibility” for cutting entitlements.

Also on November 8, the International Monetary Fund released a study of Fiscal Responsibility Laws in a number of countries. It finds mixed evidence on whether they have been successful in imposing budgetary discipline.

In two commentaries on November 1 and November 8, economist Martin Sullivan describes the development of a debt crisis that appears unstoppable at this point.

On November 5, the European Central Bank published a working paper that supports the implementation of immediate fiscal consolidation and is highly critical of what it termed “fiscal engineering.”

On November 4, the IMF published the latest edition of its Fiscal Monitor. It contains a wealth of internationally comparable data on government debts and deficits, and discusses strategies for achieving stable debt-to-GDP ratios. IMF economists Oliver Blanchard and Carlo Cottarelli summarized the recommendations in a November 4 blog post.

Also on November 4, the IMF established a new database of national debts, in some cases going back to the 19th century. An accompanying working paper describes details of the database and sources of data.

And on November 4, the Mercatus Center published a working paper by economist David Henderson arguing that the immediate post-World War II experience, in which government spending was very sharply cut even as the economy expanded, proves that massive budget cuts are not economically contractionary. (Conservatives like Henderson always ignore the key counter example of 1937-38, when fiscal contraction unquestionably brought on a sharp recession. They also tend to understate the uniqueness of the immediate post-World War II economy.)

On November 4, MIT economist Simon Johnson posted a commentary that was highly critical of Rep. Paul Ryan’s budgetary strategy, ridiculing his insistence on tax cuts while the nation faces a debt crisis. (Note: Ryan will be chairman of the House Budget Committee in the next Congress.)

Also on November 4, former Office of Management and Budget director David Stockman lambasted both parties for a lack of seriousness and demagoguery on the budget – Democrats for refusing to consider cuts in entitlements and Republicans for refusing to discuss tax increases.

I last posted items on this topic on November 4.

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).

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.