Arnold Kling  

Economic Advice

Quiggin's Zombie... Absurdist Passages of the Year...

An open letter signed by

Martin N. Baily
Martin S. Feldstein
R. Glenn Hubbard
Edward P. Lazear
N. Gregory Mankiw
Christina D. Romer
Harvey S. Rosen
Charles L. Schultze
Laura D. Tyson
Murray L. Weidenbaum

All ten are former chairs of the President's Council of Economic Advisers. One worked under Carter, two worked under Reagan, two worked under Clinton, four worked under Bush, and one worked under Obama.

Of course, it was another former Clinton economic adviser, Alan Blinder, who once wrote that when economists are most in agreement they are least likely to be listened to.

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CATEGORIES: Fiscal Policy

COMMENTS (2 to date)
Michael Strong writes:

For a contrary perspective, see the Roosevelt Institute's "The Deficit: Nine Myths We Can't Afford." Joe Stiglitz and Paul Sarbanes are among the luminaries formally associated with this organization whose tagline is "Carrying forth the legacy and values of Franklin and Eleanor Roosevelt." (HT Don Boudreaux). The Nine Myths:

Myth #1: The government should balance its books like a private household.
Reality: Our federal government is the issuer of the currency, which makes its budget fundamentally different than the average citizen’s.

Myth #2: Fixing Social Security and Medicare will require “tough choices”.
Reality: Social Security and Medicare are not facing a financial crisis.

Myth #3: We are passing on debt to our grandchildren.
Reality: Payments on Treasury securities are a matter of data entry, not a financial burden.

MYTH #4: What we don’t tax we have to borrow from the likes of China for our children to pay back.
Reality: Paying our debt holders back consists of transferring funds between accounts.

Myth #5: The government must tax or borrow to get money to spend.
Reality: Government spending is not constrained by revenue.

Myth #6: Deficits and government borrowing takes away savings.
Reality: Deficits add to income and savings.

Myth #7: We’ll end up just like Weimar Germany or Zimbabwe.
Reality: Hyperinflation in both countries was caused by circumstances far different than ours.

MYTH #8: Government spending increases interest rates and ‘crowds out’ valuable private sector investment.
Reality: Banks can lend essentially without limit, and the Fed can hit any interest rate target it chooses.

Myth #9: The money spent paying interest on the national debt could be spent elsewhere.
Reality: Interest rates can easily be brought to zero and are not an obstacle to federal spending.

Mark Brophy writes:

The Simpson committee report proposes only minor cuts while Rand Paul notes that at least $500b of cuts is necessary merely to start. There is no realistic hope that the government will act responsibly even though 10 economists from both sides of the political duopoly favor cuts.

Arnold has mentioned many times that exit is more powerful than voice, or in other words, voting with your feet is more powerful than voting in a ballot booth. Imagine an alternative, living with a responsible government like Hong Kong, in a Mediterranean climate like California. Chile offers a combination of pleasant climate and fewer government burdens than many others. If you’re ready to shed the debt your government has imposed upon you, it is a good destination to consider:

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