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Imaginary Squabbles Part 4: Krugman and DeLong on the Top 1 Percent
Alan Reynolds In End This Depression Now! (pages 77-78) Paul Krugman offers the strangest arguments I have seen.   The story opens with familiar fulminations about the “top 1 percent” (those earning more than $366,623 in 2011).  As he put it in a 2011 column, “income inequality in America really is about oligarchs versus everyone else.” “Incomes of the rich,” his book claims, “are at the heart of what has been happening to America’s economy and society.”  Yet it apparently requires great bravery to even dare to mention “the rising incomes” of the top 1 percent or top 0.1 percent: ...
Source: Cato-at-liberty - May 27, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Imaginary Squabbles Part 3: Krugman and DeLong’s Changing Theories and Missing Facts
Alan Reynolds Responding to a student question after a recent Kansas State debate with Brad DeLong I posed a conceptual puzzle.  I asked students to ponder why textbooks treat Treasury sales of government bonds as a “stimulus” to demand (nominal GDP) in the same sense as Federal Reserve purchases of such bonds.  “Those are very different polices,” I noted; “Why should they have the same effect?”   The remark was intended to encourage students to probe more deeply into what such metaphors as “stimulating” or “jump starting” really mean, not to accept as dogma that fiscal and monetary poli...
Source: Cato-at-liberty - May 24, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Tax Reform Error #2: Phasing-in Lower Tax Rates
Alan Reynolds Since 1981, Republican legislators have shown a strong penchant for phasing-in tax rate reductions over several years.  That tradition is maintained in Ways and Means Committee Chair Dave Camp’s proposed 979-page “simplification” of the U.S. tax system.  The Camp draft retains a very high top tax rate of 38.8 percent on businesses that file under the individual income tax as partnerships, proprietorships, LLCs or Subchapter S corporations. For those choosing to file as C-corporations, by contrast, the Camp proposal would gradually reduce the corporate tax rate by two percentage points a ...
Source: Cato-at-liberty - March 9, 2014 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Distinguishing Home ‐​Grown Inflation from Global Inflation
Alan ReynoldsEach country imagines inflation to be anational problem to be entirely blamed on national fiscal authorities or on each nation ' s central bank. Yet March CPI inflation averaged 8.8% for all 38 countries in theOECD, and 7.8% for the 27 EU countries.Economists at the Federal Reserve Bank of San Francisco, in theFRBSF Economic Letter, ask a narrower question: "Why is U.S. Inflation Higher Than in Other Countries?"  They first begin by acknowledging that there have been some uniquely huge global events driving world pricesdownin 2020 (COVID-19 lockdowns causing long-term loss of productive capacity) and other po...
Source: Cato-at-liberty - May 9, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

Imaginary Squabbles Part 2: Krugman and DeLong on Ireland
Alan Reynolds A short 2010 article of mine in Politico, which still annoys Paul Krugman and Brad DeLong, dealt with Ireland’s brief effort to restrain spending, which (while it lasted) was smarter than imposing uncompetitive tax rates as Greece had done.  Krugman ridiculed my Politico article in at least four columns.  He imagines I predicted a “boom” in Ireland, because I wrote in June 2010 that, “the Irish economy is showing encouraging signs of recovery.”  That the Irish economy was turning up at the time is undeniable. Although I did not yet have the benefit of real GDP data, Ireland’s GDP w...
Source: Cato-at-liberty - May 23, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Larry Summers Redefines Balanced Budgets as Stimulus and Big Deficits as Austerity
Alan Reynolds Former Treasury Secretary Larry Summers, in June 4 testimony before the Senate Budget Committee, offers a scatter diagram which allegedly shows “that countries that pursued harsher austerity policies in recent years also had lower real GDP growth.”  He acknowledges, but does not adequately explain, that the causality may well be backwards: Bond markets would not allow countries in severe economic distress (Portugal, Ireland, Greece and Spain) to continue financing deficits at the peak levels of 2010. Summers defines “austerity” as the three-year change (regardless of the level) from 2010 to 201...
Source: Cato-at-liberty - June 10, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

The Old Infrastructure Excuse for Bigger Deficits
Alan Reynolds Washington Post columnist/blogger Ezra Klein recently echoed the latest White House rationale for additional “stimulus” spending for 2013-15 and postponing spending restraint (including sequestration) until after the 2014 elections. Klein argues for “a 10- or 12-year deficit reduction plan that includes a substantial infrastructure investment in the next two or three years.” In other words, a “deficit-reduction plan” that increases deficits until the next presidential election year. Citing Larry Summers (who similarly promoted Obama’s 2009 stimulus plan while head of the National Economic Counc...
Source: Cato-at-liberty - June 16, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Immigration Illusions Part One: “Average Wages” Severely Muddled
Alan Reynolds The Senate immigration bill would ease quotas on legal immigration (particularly for highly-skilled and farm workers), and also allow those now here unlawfully to apply for a green card after ten years if they pay a fine and back taxes.  In an effort to defend our current tight but leaky immigration quotas, a few legislators and commentators seized on the first half of a sentence in the Congressional Budget Office report on this bill:  “CBO’s central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023… under the legislation than under curre...
Source: Cato-at-liberty - July 1, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Immigration Illusions Part Two: Rector and Richwine Rediscover Budget Deficits
Alan Reynolds A recent paper by Robert Rector and Jason Richwine  (“The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer”) went to a lot of unnecessary trouble to estimate that governments at all levels spent $54.5 billion more on services and benefits to households headed by unlawful immigrants (which includes children and spouses who are citizens) than was collected in taxes from them in 2010.   It is hardly shocking to learn that federal, state, and local governments spent more on unlawful immigrants than they received in taxes, since governments spent more on nearly everyone than they ...
Source: Cato-at-liberty - July 2, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Imaginary Squabbles Part 5: Comparing Krugman’s 2005 Housing Bubble Forecasts to Mine
Alan Reynolds New York Times columnist Paul Krugman has recycled another phony argument about something I wrote many years ago.  He begins by citing Matt O’Brien who found that Fed governor Janet Yellen in October 2005 was predicting there would be no great impact on the economy “were the house-price bubble to deflate.” O’Brien concludes that, “Back in 2005, she didn’t appreciate how much shadow banks relied on AAA-rated mortgage-backed-securities (MBS) as collateral to fund their day-to-day operations—or how much even this supposedly high-quality collateral could go bust if housing did....
Source: Cato-at-liberty - August 9, 2013 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Tax Reform Error #1: Confusing Tax Expenditures with Revenues
Alan Reynolds House Ways and Means Chairman Dave Camp has released a complex 182-page “discussion draft” called The Tax Reform Act of 2014. Rather get bogged down in details, I will take this opportunity to review several fundamental errors that repeatedly plagued most past and present efforts to reform the federal income tax, including the Camp proposal. One of the most pernicious errors among would-be tax reformers is to assume that, as the Tax Policy Center asserts, “tax expenditures are revenue losses” attributable to various “loopholes.” On the contrary, the Joint Committee on Taxation (JCT) cle...
Source: Cato-at-liberty - March 7, 2014 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

When Mean-Tested Benefits Rose, Labor Force Participation Fell
Alan Reynolds The U.S. job market has tightened by many measures – more advertised job openings, fewer claims for initial unemployment insurance, substantial reduction in long-term unemployment and the number of discouraged workers.  Yet the percentage of working-age population that is either working or looking for work (the labor force participation rate) remains extremely low.  This is a big problem, since projections of future economic growth are constructed by adding expected growth of productivity to growth of the labor force. Why have so many people dropped out of the labor force?  Since they’re not wor...
Source: Cato-at-liberty - February 5, 2015 Category: American Health Authors: Alan Reynolds Source Type: blogs

Furman’s Folly: Nostalgia about 1973 and Nonsense about the Bottom 90 Percent
Alan Reynolds Jason Furman, chairman of the Council of Economic Advisers, set out to explain “middle-class economics” in the Wall Street Journal, March 11, in an earlier Vox blog and in a presentation to National Association of Business Economists (NABE), as well as the first chapter of the Economic Report of The President.  The intent is to make the recent economy look healthier (massaging 2.3-2.4 percent growth for 2013-14 into 2.7 percent), and to claim that “subpar” 2010-14 income gains for the middle class (generously defined as the bottom 90 percent) are not due to a subpar recovery but to something that h...
Source: Cato-at-liberty - March 11, 2015 Category: American Health Authors: Alan Reynolds Source Type: blogs

Can Inequality Get Worse If Poverty Gets Better?
Alan Reynolds Jim Tankersley of the Washington Post believes he has discovered “The Big Issue With Hillary Clinton Running Against Inequality”: “Inequality got worse under Bill Clinton, not better. That’s true if you look at the share of American incomes going to the 1 percent, per economists Emmanuel Saez and Thomas Piketty. It’s also true when you look at the share of American wealth going to the super-super-rich, the top 0.1%, per research by Saez and Gabriel Zucman.” What this actually reveals is the absurdity of (1) defining inequality solely by top 1% shares of pretax income less government benefits, and...
Source: Cato-at-liberty - April 14, 2015 Category: American Health Authors: Alan Reynolds Source Type: blogs