September 30, 2014

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Monday, December 12, 2011 - 1:00 AM

If Congress were to simply follow the budget path laid out in current law, the federal government might escape some of its widely anticipated fiscal problems over the next few years. But that is a big “if,” as became clear Friday at a forum at the University of New Hampshire School of Law.

In the keynote speech, Mark Zandi, chief economist for Moody’s Analytics, said he was more optimistic than many economists about the nation’s prospects and the likelihood that Washington would move the country onto a more sustainable track.

Robert L. Bixby, executive director of The Concord Coalition, offered a more guarded assessment of the nation’s fiscal problems and noted the possibility that elected officials could stray far from the promising budget path laid out by current law. “The catch is following through,” he said.

The forum was sponsored by the law school, the Whittemore School of Business and Economics, the New Hampshire Business and Industry Association, and Concord. It was part of “Next-Generation Matters,” a series of conversations in New Hampshire about the country’s economic future.

Despite this year’s political squabbles over increasing the federal debt limit, Zandi said, elected officials in both parties see the need to...

Tuesday, December 6, 2011 - 10:49 AM

The current debate over extending the payroll tax cut well demonstrates that policymakers often mean different things when referring to policies that “help” or “expand” the economy. I often hear the words “stimulus” and “growth” used interchangeably, but when economists use them, we typically are making a distinction between different economic goals that apply to different circumstances.

“Stimulus” usually refers to short-term policies to increase demand for goods and services in an economy  operating at less-than-full capacity -- i.e., an economy with high unemployment. In such a recessionary economy, the problem is not a lack of productive resources (capital and labor), but a lack of demand for the goods and services that those resources produce. Under such conditions, public sector deficits -- whether through tax cuts or direct spending -- can be an effective way to increase demand (consumption) and the level of economic activity.

“Growth” usually refers to the long-term expansion of the “supply side” of the economy -- that is, the supply of capital and labor. When the economy is at “full employment,” the binding constraint on it is not the demand for goods and services, but the supply of inputs to production. Fiscal policies that are good at growing the economy over the longer term are therefore those...

Wednesday, November 16, 2011 - 1:00 AM

It is now a little under one week until the deadline for the congressional joint committee on deficit reduction, or super committee, to report its recommendations.  Inside Washington, many are skeptical that committee members will meet their goal of $1.5 trillion in further deficit reduction. One of the challenges for elected officials is that the political environment surrounding the super committee, including events on the presidential campaign trail, makes finding real solutions very difficult.

What happens, though, when average Americans are asked to help find solutions?
 
Something quite amazing, actually.
 
On Monday night, nearly 200 people in Des Moines, Iowa worked in “committees” of seven or eight to confront the nation’s fiscal challenges and came to some startling conclusions.
 
For example, to help reduce federal spending, 84 percent of the groups supported eliminating some agriculture subsides.  In Iowa!
 
Students, community leaders, seniors and other Iowans took part in The Concord Coalition’s interactive budget exercise Principles and Priorities.  The event was co-sponsored by The Des Moines Register...
Friday, November 4, 2011 - 4:21 PM

The Concord Coalition this week recognized Senators Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.) for their leadership of the "Gang of Six" in the search for bipartisan fiscal reform. 

Former Sen. Sam Nunn (D-Ga.), a member of Concord's board of directors,  presented Chambliss and Warner with the 2011 Paul E. Tsongas Economic Patriot Award at the organization’s annual dinner Wednesday night in Washington.

Nunn praised both senators for their political courage, noting that each had incurred the wrath of some party colleagues for championing reform efforts that would protect the country. Chambliss called this “the issue of our lifetime” and Warner emphasized that the American public had the right to expect responsible corrective measures from their elected officials.

Concord’s 18th Annual Economic Patriots Dinner also featured a panel discussion on the fiscal, economic and demographic challenges facing the country.  The topics included the prospects for the special congressional committee on deficit reduction, which faces a Nov. 23 deadline to submit its recommendations to Congress.

Panel members expressed varying degrees of optimism or pessimism about the likelihood of effective...

Tuesday, November 1, 2011 - 12:00 AM

Members of the Joint Select Committee on Deficit Reduction (“super committee”) have a timing problem that compounds their political problem. Put simply, they may run out of time to reach agreement on the kind of comprehensive changes that are needed to put the nation’s finances on a sustainable path. However, with a little cooperation and a strong dose of leadership, they need not let the clock run out on their efforts.

The super committee’s political problem is easy to see. Its official goal is to cut the deficit by $1.5 trillion over 10 years. This won’t be easy, but as the Government Accountability Office (GAO) recently pointed out, even if lawmakers are able to achieve this goal it would still leave the debt on an unsustainable growth track. That is why the President, the chairman of the Federal Reserve Board, many members of Congress and countless outside commentators have urged the super committee to aim for a more ambitious target – anywhere from $3 trillion to $5 trillion.

However, to reach this goal, often described as “going big,” the super committee will have to tackle the two thorniest fiscal policy issues – entitlement and tax reform. These issues have stymied every other long-term budget negotiation this year because they are where the parties have their biggest differences.

And yet, we...

Monday, October 24, 2011 - 12:00 AM

Last week, AARP doubled-down on its insistence that Social Security and Medicare benefits should be off the table in negotiations to stabilize the nation’s debt. It did so in a letter to members of the deficit reduction “super committee” and in response to a Concord Coalition statement criticizing AARP’s new ad campaign, which warns that 50 million seniors will be heard from on election day if Congress even thinks about touching their benefits or asking them to pay more.
 
AARP’s further explanations are not encouraging. It continues to insist that Social Security poses little, if any, budgetary challenge because of an ample trust fund surplus and that cutting unspecified “waste” in Medicare can avoid hard choices on benefits and cost-sharing. AARP’s response to Concord’s statement:   
 

  • Does not acknowledge the magnitude of the fiscal challenge we are facing or the key role...
Thursday, October 20, 2011 - 12:00 AM

Last January, members of Congress paired up with colleagues of the opposite party for the State of the Union Address. It was a welcome, if symbolic, display of political civility.

In the ensuing months, Congress and the Obama administration have struggled to put this civility into practice as they have grappled with sincere disagreements over the best approach to meeting the nation’s fiscal and economic challenges.

Agreements were eventually reached on funding levels for the remainder of the 2011 fiscal year and on a complex process for raising the statutory debt limit. These agreements, however, largely avoided entitlement and tax reform -- the core issues on which Democrats and Republicans disagree and on which so much of our future depends.

Moreover, the partisan, petty and contentious atmosphere that continues to hang over Capitol Hill has angered the public and rattled financial markets.

There is hope, however, that the new joint congressional committee -- set up to find ways to reduce projected deficits by $1.5 trillion over the next 10 years -- can change things.

With an even split between the two parties and the backing of congressional leaders and the President, the committee has an opportunity to transcend politics as usual, exceed its modest mandate and forge a fiscal...

Thursday, October 6, 2011 - 9:39 AM

NOTE: an earlier version of this post appears on EconomistMom.com

It would seem we have heard this so many times before that we shouldn't need to hear it again. The U.S. faces two major economic challenges at the same time: (1) an economy still desperately struggling to get out of (or avoid falling back into) recession; and (2) a fiscal outlook on such an unsustainable longer-term path that it threatens our near-term, and not just longer-term, economic health. The first is mostly a "lack of demand" problem, and the second is more about failing to keep up the supply of productive resources in our economy. The two challenges are very different and might suggest very different policy strategies, but we really can and should address both. We've heard this ("we can do both") principle many times before, but it always helps when someone as prominent as the Chair of the Federal Reserve Board makes it crystal clear in his written and oral (and official) remarks. From Bernanke's testimony before the...

Tuesday, September 27, 2011 - 7:49 AM

The “dynamic scoring” debate is back again. Last week the House Ways and Means Committee—chaired by Dave Camp (R-MI), who also happens to be a member of the debt-limit deal’s “super committee”—held a hearing on the subject, calling on the Joint Committee on Taxation’s chief of staff, economist Tom Barthold, to explain why that committee still estimates the revenue effects of tax legislation using “static” methods.

The Washington Post’s Lori Montgomery reported on this “old battle,” wondering out loud whether the super committee will resort to dynamic scoring as a “magic elixir that greases the skids to a more far-reaching compromise.”

Well, unfortunately for certain policymakers, dynamic scoring is not so magical.

“Dynamic scoring” refers to revenue estimates that would be...

Monday, September 19, 2011 - 12:00 AM

President Obama deserves credit for putting Medicare and Medicaid on the table for deficit-reduction efforts and for encouraging the new super committee to exceed its assigned goal. But the President’s  new proposals to that panel, released today, fall short of comprehensive structural reform in health care and tax policy, and his decision to leave Social Security out of the plan is disappointing as well.

Amid growing concerns about a double-dip recession, the administration has focused this month largely on short-term measures to support the economy. These measures should not preclude putting long-term deficit reduction plans in place, and in fact such plans can dramatically boost the effectiveness of the short-term initiatives.

So Obama’s suggestion that Washington proceed on both the short- and long-term fronts is welcome.  So is his willingness to discuss changes in Medicare and Medicaid, two of the federal government’s largest and most rapidly growing programs. Significant changes will be needed in those programs  if the nation is to have any hope of eventually putting itself on a more responsible and sustainable fiscal course.

The proposals to change other mandatory spending programs, such as cutting agriculture subsidies and increased cost-sharing in...