Back in August, I wrote a piece called “Fiscal Cliff Madness” about the set of consequences produced by the law enacted by the government that will severely reduce spending and raise taxes. Today, new research has surfaced from the non-partisan Congressional Budget Office (CBO) that gives us a clearer idea of just what exactly the fiscal cliff might do to the United States’ economy if it comes to pass. The new information is even more dire than the information we had in August, and so the “madness” has now been upgraded to “insanity”.
Category: Economics
Concerning the nature of man and the economic system, and how best the latter can be structured to augment the former.
The Obama Economy
It has become a common sense view that the US economy has performed poorly under Barack Obama. The assorted punditry are all trying to explain how Obama managed to win the election despite this fact. Perhaps they should stop to consider that perhaps this fact is not a fact at all? Well, if no one else is going to do it, it might as well be me.
Misconceptions: “Obama has Vastly Increased the Size of the Government”
It is a commonly held belief that the Obama administration has been spending money all over the place, increasing the size of the government and the number of people it employs. There is a bit of a problem with this, though–it is factually inaccurate. Today I intend to illustrate and prove that this belief is not in line with reality.
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The Mother of All Output Gaps
There’s an interesting assumption going on behind the estimation of the output gaps (the difference between the economy’s current output and the economy’s estimated maximum potential output)–that not only did the economy decline during the recent crisis, but that the economy’s potential declined as well. This assumption leads to governments believing that their economies are less capable than perhaps they are, that the output gaps are not especially large, and that there is little revenue to be raised to offset stimulus spending, but what if it is not true? The idea comes from Capital Economics, a macroeconomics research company, has received attention from the Financial Times and Paul Krugman, and now it will receive attention from me as today’s topic.
Fed-Bashing Tomfoolery
It has become fashionable on the political right to attack the Federal Reserve and its policy of quantitative easing, the process by which the Federal Reserve increases the money supply by purchasing assets owned by the private sector with cash that it prints. The right argues that quantitative easing encourages inflation and makes it easier for the government to borrow money, that it discourages saving, and that these are bad things. In contrast, these are very good things, and I shall endeavour to argue as to why.
Benjamin Studebaker 