Author Archives: jfrankel

The US & Europe Could Look South to Re-learn Countercyclical Fiscal Policy

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During much of the last decade, U.S. fiscal policy has been procyclical, that is, destabilizing.   We wasted the opportunity of the 2003-07 expansion by running large budget deficits.   As a result, in 2010, Washington now feels constrained by inherited debts to withdraw fiscal stimulus at a time when unemployment is still high.   Fiscal policy in the UK and other European countries has been even more destabilizing over the last decade.  Governments decide to expand when the economy is strong and then contract when it is weak, thereby exacerbating the business cycle.     read more

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Republican Congressmen Pledge to Repeal the Laws of Arithmetic

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The National Journal asks what would happen if the Pledge to America, proposed last week by congressional Republicans, were fully implemented.

     As I understand it, the authors of the “Pledge to America” want not just to renew permanently all Bush-era tax cuts, but also to balance the budget while exempting social security, Medicare, and military spending.   To ask what would be the effects if the Republicans put this pledge into law is to ask what would be the effects if they repeal the laws of arithmetic.   It can’t be done.  All the money is in the parts of the budget they are putting off limits.  (That is what we all assume they mean by “common sense exceptions for seniors, veterans and troops” when cutting spending.  Admittedly, it is hard to tell what they are really proposing, due to the usual lack of specifics in the 21-page document.)  read more

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NBER Eggheads Finally Proclaim End of Recession

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              The NBER‘s Business Cycle Dating Committee, of which I am a member, announced this morning that June 2009 was the trough of the recession that began in December 2007.    It was the longest recession since the 1930s.

              It is the fate of the Committee to be teased mercilessly every time we make one of our formal declarations of a turning point in the economy.   We get it from both directions:    We waited too late to call the end of the recession, or we did it too early.     (Occasionally someone makes both criticisms simultaneously!)   Even The Daily Show got in on the fun this time. read more

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