Thursday, June 16, 2011
Monday, June 13, 2011
Here are nine policies from around the world that just might work. I particularly like the policy from Australia, taxes should be based on age and income, not just income. The younger generations will have lower tax rates, all else equal. This is good, they didn't start the wars, the housing bubble, health care and retirement messes, but are paying for it.
Thursday, June 9, 2011
Martin Feldstein (Harvard economist) on the current state of the economy. I tend to agree with him on a lot of areas, but military spending is not the biggest multiplier effect. Direct government spending into heavy production that is also has a use within the economy is much more valuable. For example, buying new (more fuel efficient) school buses would have at least the same effect as building tanks in terms of production, but without the costs of shipping them to Iraq/Afghanistan. Additionally, new buses will lower transportation costs for many school districts. Another directing spending example could be police, fire, or ambulances. If you want to spend it on military then look for things that can also provide a productive use domestically (i.e. cargo planes). Estimates of the military spending multiplier are approximately one. Yesterday we saw direct government spending in goods used domestically has a multiplier effect between one and 2.5.The benefits of military spending are in the production of new goods, we can get the same benefits of production combined with an added multiplier effect if these goods are also usefully in the domestic economy.
Wednesday, June 8, 2011
Friday, June 3, 2011
For the last 12-18 months the economy has been run on autopilot. No one has done anything to help it along. The Federal Reserve set interest rates really low to help facilitate borrowing, but Congress has been a disaster. We need Congress to come together now and figure out the debt ceiling, future tax rates, and spending. Households and firms are growing tired of the uncertainty. With an increase in unemployment it's time to act now.
The recent unemployment numbers are out and they are not good. The economy only created 54,000 for the month of May. To maintain unemployment at the current rate we need to create more than 200,000. The result for May, an increase in the unemployment rate to 9.1%.