Stop freaking out about debt by Yglesias

Austerians

Perils in Philosophy for Austerity in the U.S. by Eduardo Porter

Age of Niallism: the turn towards deficits and away from Obamacare

Whiskey-Tango-Foxtrot Wall Street Journal Bang-Query-Bang-Query: Is This Some Strange Berkeley Acid Trip I Am on? Weblogging by DeLong

Republicans will probably lose the House.

priorities

NYT Says Ignore Those 9 Million Missing Jobs, the Budget Is Projected to Be Out of Balance in Ten Years by Dean Baker

good chart on Lehman + 5 years

The Arguments of the Great Recession Are Over. Hooray by Jonathan Chait

From July 1, 2007 to today:

Financial profits: +59 percent
Corporate profits: +42 percent
S&P 500: +8
Employment/population ratio: -6.7 percent

(via DeLong)

Rooseveltian lack of resolve (circa '37) or dithering

Make Japan Chaste and Continent, But Not Yet by Krugman

Japanese Q2 growth revised upwards but Abe might enact sales tax.

optimal policy and debt scolds

Years of Tragic Waste by Krugman

But wouldn’t the kind of spending program I’m suggesting have meant more debt? Yes — according to my rough calculation, at this point federal debt held by the public would have been about $1 trillion more than it actually is. But alarmist warnings about the dangers of modestly higher debt have proved false. Meanwhile, the economy would also have been stronger, so that the ratio of debt to G.D.P. — the usual measure of a country’s fiscal position — would have been only a few points higher. Does anyone seriously think that this difference would have provoked a fiscal crisis?

And, on the other side of the ledger, we would be a richer nation, with a brighter future — not a nation where millions of discouraged Americans have probably dropped permanently out of the labor force, where millions of young Americans have probably seen their lifetime career prospects permanently damaged, where cuts in public investment have inflicted long-term damage on our infrastructure and our educational system.

Look, I know that as a political matter an adequate job-creation program was never a real possibility. And it’s not just the politicians who fell short: Many economists, instead of pointing the way toward a solution of the jobs crisis, became part of the problem, fueling exaggerated fears of inflation and debt.

emphasis on balancing the budget from Clinton through Bush and Obama

How Did Fiscal Policy Get Turned Upside Down? by Jared Bernstein

The Problem of Collapsed Asset Bubbles

Steven Pearlstein Tries to Rescue His Austerity Pushing Friends by Dean Baker

These countries are suffering today from the fallout from collapsed asset bubbles, not their internal structural problems.The fault for these bubbles sits squarely with all the wise people at the ECB and EU who are now pushing austerity. Somehow they thought everything was fine in the years of the "Great Moderation" even though all the danger signs were flashing bright red. 

Making the people in these countries suffer does not in any obvious way fix their structural problems. It just ruins lives. Yeah, me and my fellow crusaders don't think that's cute. Better to ruin the lives of the elites who caused this crisis.

How the Case for Austerity Has Crumbled by Krugman

U.S. Budget Deficit Shrinks Far Faster Than Expected by Annie Lowrey

The Facts Are In and Paul Ryan Is Wrong by Jonathan Chait

(via DeLong)

Twins No More by Krugman

Back in the Reagan years two unprecedented things began happening to the US economy. For the first time ever, we began running large peacetime budget deficits; and for the first time ever we began running large trade deficits. In a famous analysis, Martin Feldstein pronounced them “twin deficits”, linking the external deficit to the budget deficit, a proposition that made sense at the time: the budget deficit was helping to drive up interest rates, and high rates led to an overvalued dollar. 

It’s occurred to me recently that much discussion of deficits these days implicitly assumes that something similar applies in today’s world — that by running budget deficits we’re indebting ourselves, as a nation, to foreigners (especially China). So it’s worth pointing out that this isn’t remotely true.

Triffin dilemma?

Will Republicans come to regret the payroll tax hikes and Sequestration, electorally speaking.

'A Serious Warning That Consumers May Be Tightening Their Belts' by Mark Thoma

Consumer Confidence Index (the one that matters) Declines by Dean Baker

What motivates James Hamilton, whose Econbrowser blog I link to on the right side? Menzie Chinn is Very good. I feel bad for Chinn, here, but I seem to vaguely remember that Chinn dwells on debt too.

WHEN WILL IT BE "CRUNCH TIME" FOR U.S. DEBT ACCUMULATION? by DeLong

Fed Watch: The Importance of Printing Your Own Currency by Tim Duy

Allan Sloan Explains the Relationship Between Interest Rates and Bond Prices and How the Government Can Costlessly Eliminate Large Amounts of Debt by Dean Baker

Allan Sloan used his column today to explain a simple but often overlooked point, when interest rates rise, bond prices fall. This means that if long-term interest rates rise substantially in a few years, as the Congressional Budget Office predicts, then the bonds issued at very low interest rates today will be selling at large discounts. 

The implication of this fact is that in 2015 or 2016, the Treasury would be able to purchase back much of the debt issued today at substantial discounts. This would allow it to drastically reduce the government's debt at no cost. For example, if it bought back debt with a face value of $4 trillion at an average discount of 20 percent, it could instantly eliminate $800 billion in debt, reducing the debt to GDP ratio by almost 5 percentage points. 

This step would be pointless from either an economic or financial standpoint since it would not change the interest burden facing the country, but it should make many of the deficit cultists happy. Since these cultists, who largely control the economic debate in the United States, assign some mystical power to specific debt to GDP ratios, they should be pacified by the knowledge that we can buy bonds back at a discount to keep the debt burden under their magic number. This route is much simpler than raising taxes or cutting spending.

Economics Lesson for Charles Lane by Dean Baker