JB’s DC 4/5/16

April 5th, 2016 at 1:34 pm

I’d like to try out a new feature here at OTE (don’t worry, this won’t change the cost of visiting the site, which remains your shadow wage…).

It’s called JB’s DC and will be comprised of short references to something/anything I think you should know/think about. Some references will be the source for longer posts. Not sure if this will be a daily feature.

–Began the day on a panel for the Miller Center’s First Year Project where I discussed this paper with the great econ journalist Greg Ip and my good pal Maya MacGuineas from CRFB. Yes, they are a lot more hawkish than me, but I value friends from all fiscal walks of life.

Read my paper! I tried to identify what fiscal rectitude really means in a dynamic world where there’s great confusion about debt and deficits.

–Low unemployment, check. Low underemployment, NOT check. Here’s what I mean when I say we’re not at full employment.

–Yes, the Panama Papers are a huge deal, and the only reason they’re not bigger news here is because no Yankees (ie, Americans) have been found–YET–to be participating in this massive tax haven. Obviously, these data don’t show up in wealth surveys, and my guess is that this problem has grown over time, suggesting our estimates of both the level and trend in global wealth inequality may be biased down.

–Which reminds me, and I’ll try to write a bit more on this: The US Treasury surprised with their latest, and as far as I can tell, most impactful anti-inversion initiative to date. These new rules could be a deal breaker for some high visibility inversions, most notably, Pfizer/Allergan.

–It’s bloody freezing in DC today. I hate to be “that guy” who gets wound up about climate change based on what kind of day it is outside–and, for the record, I’ve leaned hard into a carbon tax in much recent work–but it did make me think. We know human-induced climate change has increased the temp level, but hasn’t it also increased the variance? I thought so, but the internet says, “maybe not.” Still, at least one expert I spoke to told me that climate change will increase the swings and extremes in our weather; shouldn’t that show up as higher variance in the global temp?


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2 comments in reply to "JB’s DC 4/5/16"

  1. Tom_in_MN says:

    Higher variance in local temperatures, which are typically driven by large gradients that power storms. But I would expect them to somewhat average out globally as you get hotter one place and colder another, both contribute to variance but cancel on average. So more like AC than DC ;

  2. Nick Estes says:

    Good column highlighting some basic budgetary considerations for the near future. However, if we really want to reduce the national debt to GDP ratio to reduce continuing interest expense, the best thing we could do would be to change the law and have all future deficits (including those necessary to pay interest on the debt) financed by the Fed by creating money in the amount of the deficit and transferring it to the Treasury. This would freeze the absolute level of the national debt and the ratio would quickly decline as the nominal GDP increases. As to the size of the deficit, it should depend exclusively on the inflation indicators; scale back the deficit only when it’s needed to avoid increasing prices faster than the Fed’s 2% target. I agree that the best way to decrease the deficit when the economy calls for it would be to enact steady tax increases to pay for necessary programs. In the meantime, until inflation seems ready to go above 2%, keep the deficits to stimulate the economy and let the Fed pay for them by creating money. If they ever want to increase the interest rate in the future, they can sell some of the Treasury bonds they already hold; they don’t need to acquire more. Thanks.