Posts tagged with: Economic policy

my fair ladyAs I wrote here a couple of weeks ago, nail salons across the country are under scrutiny for abusive labor tactics and human trafficking. New York City has taken a hard look at this issue (thank goodness!) and is considering implementing some not-so-well-thought-out policies. Included in this are:

Gov. Andrew Cuomo invoking “emergency measures,” Sen. Dianne Feinstein (D., Calif.) citing federal legislation on product safety she’s introduced and of course New York City Mayor Bill de Blasio presiding over a “day of action.” The left-leaning Economic Policy Institute declares nail salon abuses a function of “national policy failures.”

This approach wants to crack down on salon licensing, shutting down those that are not toeing the line. But will this really help the women being overworked and underpaid? William McGurn doesn’t think so. He also thinks Audrey Hepburn – My Fair Lady – has some answers. (more…)


What is the President’s budget?

Technically, it’s only a budget request—a proposal telling Congress how much money the President believes should be spent on the various Cabinet-level federal functions, like agriculture, defense, education, etc.

Why does the President submit a budget to Congress?

The Congressional Budget Act of 1974 requires that the President of the United States submit to Congress, on or before the first Monday in February of each year, a detailed budget request for the coming federal fiscal year, which begins on October 1.

If it’s due the first Monday in February, why are we just now hearing about it?

President Obama turned in his budget late—again. This will be Obama’s fifth late budget submission in five years, making him the first President to present three consecutive late budgets. According to the House Budget Committee, “All presidents from Harding to Reagan’s first term met the statutory budget submission deadline in every year.” Reagan and Clinton both missed their deadlines once in eight years.

What is the function of the President’s budget request?

The President’s annual budget request serves three functions:

Blog author: jcarter
Thursday, February 6, 2014

Napkin003During a meeting in a restaurant with two officials from the Ford Administration — Dick Cheney and Donald Rumsfeld — a young economist sketched a curve on a napkin to illustrate an argument he was making. Arthur Laffer was explaining to the policymakers the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation.

By 1974, the idea was already ancient. Ibn Khaldun, a 14th century Muslim philosopher, wrote in his work The Muqaddimah: “It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.” John Maynard Keynes had made the same point in 1933. But for American politicians the idea that people change their behavior based on rates of taxation seemed revolutionary, so the concept became popularized as “The Laffer Curve.”

The crucial point, as Laffer has explained, is that,

RedistributionofWealthAre you a fan of redistribution? Do you think those with more money should willingly or unwillingly spread the wealth? Do you believe the government should step in and help with the redistribution process? Well, economist Donald Boudreaux has a few questions for you.

  • Do you teach your children to envy what other children have? Do you encourage your children to form gangs with their playmates to “redistribute” toys away from richer kids on the schoolyard toward kids not so rich? If not, what reason have you to suppose that envy and “redistribution” become acceptable when carried out on a large scale by government?


Untitled 4Even when we agree on what Biblical principles should guide our political choices, evangelicals from the left and right rarely agree on policy solutions. But there is one area where there appears to be an increasingly significant level of agreement: the immorality of our national debt.

At Christianity Today, David P. Gushee — an ethicist and politically progressive evangelical — explains why the $17 trillion national debt is both immoral and unwise:

Most progressive evangelicals who address government spending focus on compassion issues. They connect God’s care for the poor to U.S. government spending priorities. This often seems to mean by default that all cuts to social welfare spending are bad, and that all increases are good.

I agree with my progressive evangelical allies that our government—which projects spending $3.77 trillion in fiscal 2014—seems to have sufficient resources to provide for the sick, the aged, the poor, and the uninsured. I agree with an overall reading of the Bible that prioritizes physical human needs over most other priorities. But I protest a too-easy move from “God cares for the poor and calls Christians to do the same” to “God wants the secular government of the United States to spend x on social welfare.” Translating a sacred text into a political ethic is not that easy.

Still, we have a moral problem on our hands: While our nation budgets $3.77 trillion for spending in fiscal 2014, it forecasts revenue of $744 billion less than that. If a nation does that for long enough, it ends up with a debt of $17 trillion—and rising.

A government that develops a pattern of spending considerably more than it raises behaves immorally. But its immorality is not simply the immorality-as-immediate-hardheartedness-to-the-poor, so often decried by my friends.

Read more . . .

636_debt_ceiling_0What is the debt limit or debt ceiling?

In most years the federal government brings in less revenue than it spends. To cover this difference, the Treasury Department has to issue government bonds which increases the national debt. The debt limit is legislative restriction on the total amount of national debt the Treasury is authorized to borrow to meet its existing legal obligations.

What is the current debt limit?

The current statutory limit on total debt issued by the Treasury is just under $16.7 trillion.

Shouldn’t we want Congress to refuses to raise the debt ceiling since it will lower our national debt?

The debt ceiling does not lower the national debt. The legal obligation to pay the debt has already been incurred by the government so the money is already owed. Refusing to raise the debt ceiling merely prevents the Treasury Department from borrowing money to pay the government’s bills.

When will the government run out of money to pay its bills?

The current estimate is October 17, 2013.

What happens when the government doesn’t have money to pay its bills?

Remember the “fiscal cliff”? It wasn’t a cliff.

Over at Neighborhood Effects, James Broughel asks the question, “Has the Sequester Hurt the Economy?”

So have the sequester cuts hurt the economy? One possible answer comes from a new paper by Scott Sumner of Bentley University. Sumner argues that cuts to government spending don’t have serious deleterious macroeconomic effects when the Federal Reserve is targeting inflation. This is because the Fed ensures that prices stay stable under an inflation targeting regime, which keeps demand stable even in the face of government spending cuts. Similarly, when the Fed stabilizes the price level it also offsets any beneficial effects that fiscal stimulus might have, which helps explain the lackluster results from the 2009 American Recovery and Reinvestment Act (aka the “stimulus”).

Implicit in Sumner’s theory is that expansionary austerity, or the idea that the economy can grow even in the face of large government spending cuts, is indeed possible. Some of my colleagues at the Mercatus Center have described other ways in which expansionary austerity is possible.

First of all, I would like to be clear that I do not disagree that “expansionary austerity” may be possible. Nor do I disagree that the sequester cuts have not significantly hurt the economy. However, while the sequester included spending cuts and, therefore, technically qualifies as “austerity,” it was not what everyone was making it out to be. (more…)