Good News Coming On The Deficit. Well, Sort Of.

Syriza party leader Alexis  Tsipras hopes to prevail in today's Greek elections, which could mark a turning point in his nation's struggle against a crushing load of debt. Meanwhile, U.S. government deficits are improving. Sort of.

Syriza party leader Alexis Tsipras hopes to prevail in today’s Greek elections, which could provoke a showdown between European leaders and Greece, which struggles under a crushing load of debt. Meanwhile, U.S. government deficits are improving. Sort of. [Credit: BBC]

On Tuesday morning, the Congressional Budget Office will announce that the federal deficit continued to decline last year.

The announcement will trigger an orgy of self-congratulation in Washington.  The Administration will claim that its policies have been vindicated.  Republicans also will take a bow, touting spending constraints they’ve imposed since winning the House majority.

But you’ll hear nothing from the Washingtonians who most deserve credit for reduced deficits: the Federal Reserve Board of Governors.  By holding interest rates near zero and lending trillions in free money to the Treasury, the Fed has allowed the government to reduce deficits even as it gorged on debt. Continue reading

Debt And The New American Exceptionalism

Federal Reserve Chairman Janet Yellen plans to increase interest rates.  Can government and households survive the shock? [Credit: Huffington Post]

Federal Reserve Chairman Janet Yellen plans to increase interest rates. Can government and households survive the shock? [Credit: Huffington Post]

The American economy is back.  After years of tepid growth and a first quarter contraction, GDP grew by a robust 4.6 percent in the third quarter of last year.  The unemployment rate remained at 5.8 percent in November, and analysts expect the Labor Department to announce tomorrow that the economy added substantially more than 200,000 jobs in December.  Inflation is low, the dollar is strong, oil prices have tumbled, and federal deficits are lower.  Nearly six years after the recession ended, the long-awaited recovery appears at last to have arrived.

That recovery has in part been driven by a force that could be its undoing: debt.  Nearly $46 trillion of it, or more than 2-1/2 times our annual economic output. Continue reading

When Dead Men Rule

G.K. Chesterton worried that our predecessors would have too little influence on our politics. But Gene Steuerle says that they have too much. [Credit: christiancompletely blog]

G.K. Chesterton worried that our ancestors would have too little influence on our society. But a new book by the Urban Institute’s Gene Steuerle says that they exert too much control over our politics. [Credit: christiancompletely blog]

“Tradition means giving votes to the most obscure of all classes, our ancestors.  It is the democracy of the dead.”G.K. Chesterton

Chesterton fretted that modern democracies might show too little deference to past generations.  But according to the Urban Institute’s Gene Steuerle, the very opposite is true: in American democracy, dead men rule. Continue reading

Economic Inequality Not Obama’s Fault

 

The "Occupy Wall Street" demonstrations are a distant memory, but the economic disparities they decried still persist.  [Credit: ABC News]

The “Occupy Wall Street” demonstrations are a distant memory, but the economic disparities they decried still persist. [Credit: ABC News]

President Obama has a new plan to revitalize the middle class.  It almost certainly won’t work, but that almost certainly isn’t his fault.  Continue reading