Bruce Bartlett's blog
As every economist knows, Stein's Law says that trends which can't continue don't. Unfortunately, it doesn't tell us anything about when or how they come to an end. Since our national debt is assumed by virtually all economists except my friend Jamie Galbraith to be unsustainable, and since it seems increasingly unlikely that Congress will act before it has a gun at its head, a few analysts are starting to think about when and how a debt crisis will ultimately emerge and how the government will respond.
I see that my old boss Ron Paul wants an audit of the nation's gold holdings to make sure the gold is really there and isn't lead bars covered with gold paint or something. This reminds me of a conversation I had with then-congressman Phil Crane many years ago.
Crane told me that one day he happened to be in Louisville, Kentucky and he had some time to spare so he drove out to Fort Knox. He went to the guard, introduced himself, and said he wanted to see the gold. The guard said that wasn't possible because he didn't have an appointment and a bunch of other reasons.
So Crane asked if he could use the phone and he called the Treasury Department and asked to speak to Bill Simon, who was then Treasury secretary. Because Crane was an important Republican congressman on the House Banking Committee, Simon took the call. According to Crane, Simon asked to talk to the guard and he told him to let Crane see the gold.
The Congressional Research Service published a good discussion of this topic back in March that does not appear to be available online. As a public service, I am attaching this document here. Below is the summary.
D. Andrew Austin, "Running Deficits: Positives and Pitfalls."
I have a short piece in the New York Times about those who draw Social Security benefits before the "normal" retirement age--traditionally age 65, raised in 1983 to 66 this year, and rising to 67. However, in the early 1960s Congress allowed people to begin drawing lower benefits as early as age 62. These days, two thirds or more of those on Social Security begin drawing benefits well before the normal retirement age.
This is not something I spend much time worrying about, but it seems to matter to Arnold Kling, who criticizes Ezra Klein for locating me on the right side of the political spectrum in a recent post about the Laffer Curve. Kling approvingly cites someone named Tino Sanandaji as his authority. This is a little odd since I know Arnold fairly well and not only have never met this Tino person, but never heard of him before today. Based on what evidence, I don't know, Tino seems to think that I am best categorized as a European-style Social Democrat. I believe he means this as an insult.
Apparently, Tino is upset because supposedly I said that the top marginal income tax rate could go as high as 83 percent before a Laffer Curve effect kicked in and revenues would fall if the rate went higher. This is what I am quoted as saying by Dylan Matthews, who actually wrote the Laffer Curve post:
Both Andrew and I are quoted in a mini-symposium on the revenue-maximizing top income tax rate; that is, the peak of the Laffer Curve, at which point a higher rate would leader to lower revenues.
I declined to offer a specific rate for various reasons: the short-term peak rate is probably higher than the long-term rate, it depends on whether there is an alternative lower rate on capital gains, it depends on the income threshold at which the top rates applies (see below), and various other things. And I certainly don't think that the top rate ought to be based solely on revenue considerations; the rate that maximizes growth is certainly well below the rate that maximizes revenue. That's why I said that we really shouldn't go above 50 percent even if it would raise net revenue, which it undoubtedly would up to a point.
With the departure of Christie Romer as chair of the Council of Economic Advisers, various commentators are pointing their fingers at National Economic Council director Larry Summers for pushing her out. I think this is not correct. It's rare for someone to stay in Romer's position much longer than she has and there is every reason to believe that she was anxious to return to Berkeley and also be considered for the position of president of the Federal Reserve Bank of San Francisco.
Tyler Cowen wonders why businesses pay for private economic forecasts since they are unlikely to be better than what is freely available. If they are only interested in a forecast of real GDP or unemployment or something of that sort, he is quite right. Paying for such information is a waste of money.
Why Tyler may not realize is that forecasting companies do far more than generate aggregate data; they also produce a vast amount of industry specific data that is enormously useful for investors, managers and others that need to know how a particular industry is expected to perform given the forecast for GDP, inflation etc.
In some cases, the industry data may even contribute to price collusion. I learned this from someone in the paper industry who told me that her company subscribed to what was then called the Data Resources Inc. model--at great cost I would add.
