John Irons's Blog


Economic News, Data and Analysis

$44 Billion Debt – The story

The treasury department recently did an internal study a while back about what the debt would be if you counted all the future obligations and revenue and discounted them ot the present. The result was an estimame of a $44 trillion debt.
This number was recently used in a Boston Globe editorial by Kotlikoff and Sachs and has gotten some attention since then as well.
There seems to be some intrigue as to the $44 trillion number – it’s been suggested that the calculation was set to go into the Budget, but then got pulled after O’Neill was fired.
The financial times has the full story as told by the primary author of the internal study, Kent Smetters. click on the link below, it’s interesting reading.

Transcript of the interview with Kent Smetters
FT: When was this study initiated and at who’s request?
KS: The work was never meant to be a Treasury study. It was meant to be some internal thinking, something for O’Neill. It was meant to be an internal part of thought process on how to reform the budget – in particular, budget accounting.
FT: What was the idea here?
KS: I’ve gotten a lot of calls about this.
FT: From who?
KS: Lots of media organisations, and I’ve just refused to talk to people in the past. I’m not sure how you got my cell phone number.
FT: You haven’t talked to anyone about this?
KS: No, I just refuse to return calls. But this Boston Globe editorial kind of let the cat out of the bag. So maybe this is a good opportunity to set the record straight.

See also
Smetters testimonry to congress on the topic.

Filed under: Economics


Is the NBER’s business cycle dating committee* AWOL?
*Note: the dating committee is not an economists’ “love connection,” but rather the group that follows recessions and announces the dates of the beginning and end of recessions.
They normally release a report once a month clarifying their thinking about the recession, and whether it has (or has not) come to an end.
The most recent report is dated April 10, so an update is over-due. Is the dating committee meeting? Are they ready to declare that the recession has already ended? (The likely date would be sometime in February *2002* as the trough.)
Inquiring minds want to know!
Here is the most recent news relase
Also, GDP has been revised up slighty to 1.9%… not recession, but not very good either. U.S. economic growth revised up in Q1
U.S. gross domestic product, the broadest measure of economic output within U.S. borders, grew at a revised 1.9 percent annual rate in the January-March quarter, in line with Wall Street economists’ forecasts and a revision upward from 1.6 percent estimated a month ago. The first-quarter expansion exceeded the slim 1.4 percent rate of growth posted in the fourth quarter of last year, but still reflects a slow crawl back to growth rates needed to generate more jobs.

Filed under: Data, Economics, Economy, Recession

New Blog

There’s a new weblog in town, and it’s calling itself “It’s Still the Economy, Stupid.” I’m not quite sure what the deal is, but it looks like several left-leaning economics webloggers have teamed up to produce this, shall I say, meta-blog.
It’s Still The Economy, Stupid

Filed under: Website

Poverty Declines in the 1990s

FYI – the 1990s were not a bubble for millions of people who were able to escape poverty…

The Brookings Institution: Stunning Progress, Hidden Problems: The Dramatic Decline of Concentrated Poverty in the 1990s
A national analysis of high-poverty neighborhoods, and the concentration of poor individuals in those neighborhoods, in 1990 and 2000 indicates that:
* The number of people living in high-poverty neighborhoods — where the poverty rate is 40 percent or higher — declined by a dramatic 24 percent, or 2.5 million people, in the 1990s. This improvement marked a significant turnaround from the 1970-1990 period, during which the population in high-poverty neighborhoods doubled.
* The steepest declines in high-poverty neighborhoods occurred in metropolitan areas in the Midwest and South. In Detroit, for instance, the number of people living in high-poverty neighborhoods dropped nearly 75 percent over the decade.
* Concentrated poverty–the share of the poor living in high-poverty neighborhoods–declined among all racial and ethnic groups, especially African Americans. The share of poor black individuals living in high-poverty neighborhoods declined from 30 percent in 1990 to 19 percent in 2000.
* The number of high-poverty neighborhoods declined in rural areas and central cities, but suburbs experienced almost no change. A number of older, inner-ring suburbs around major metropolitan areas actually experienced increases in poverty over the decade, though poverty rates there generally remain well below 40 percent.
While the 1990s brought a landmark reversal of decades of increasingly concentrated poverty, the recent economic downturn and the weakening state of many older suburbs underscore that the trend may reverse once again without continued efforts to promote economic and residential opportunity for low-income families.

Filed under: Economics, Economy

Distribution of the Senate Tax Plan

Just the facts…
Jobs and Growth Tax Relief Reconciliation Act of 2003 as Passed by the Senate:
Distribution of Income Tax Change by AGI Class, 2003

(AG) Income Class Average Tax Change
Less than $10,000 -2
$10,000-$20,000 -97
20,000-30,000 -225
30,000-40,000 -324
40,000-50,000 -445
50,000-75,000 -688
75,000-100,000 -1,597
100,000-200,000 -2,497
200,000-500,000 -4,997
500,000-1,000,000 -15,452
More than 1,000,000 -73,790
All -692

Source: Urban-Brookings Tax Policy Center Microsimulation Model (version 0503-1).
See Tax Policy Center | A Project of the Urban Institute & the Brookings Institution for more distribution tables.

Filed under: Economics, Fiscal Policy, Policy, Politics

T minus 9 days

Nine days until default….
The Senate is currently considering a $1 trillion increase in the debt ceiling, which now stands at $6.4 trillion. Just last year Congress and the President boosted the debt limit by $450 billion.
If Congress does not pass the debt-limit increase by May 28th, the government will not be able to meet its obligations to, among other things, pay social security recipients, make tax refunds, etc.
And Congress is about to pass, and the President is about to sign, the third largest tax cut in history – in the form of a dividend tax cut – that will have very little effect on the economy in the short run…
(Why a $1 trillion increase in the debt? And not something like last years’ 450 million? Well, at the rate of current deficits, that ought to last for the next couple of years, until the end of 2004 at least…) – Treasury Scrambles to Avoid Debt Ceiling
WASHINGTON — With the national debt standing just $25 million below its limit, the Treasury Department warned Congress on Monday that it would run out of room to juggle the government’s books by May 28 unless the government passed an increase in the debt limit by that time — an action caught up in the battle over President Bush’s tax cuts.
Treasury Secretary John Snow said in a letter to congressional leaders that Monday’s orders to temporarily halt investments to various trust funds would allow the government to meet its payment obligations only until May 28.
“The Treasury has now taken all prudent and legal steps to avoid reaching the statutory debt limit, including reducing the size of our regular bill auctions and drawing down available cash,” Snow said.
“An immediate permanent increase in the debt limit is crucial to preserve the confidence in the U.S. government and to prevent uncertainty that would adversely affect our economic recovery,” he said.

Filed under: Economics, Economy, Fiscal Policy, Policy, Politics

Senate Passes Tax Cut

The Senate republican tax plan, which passed yesterday, will phase-in a dividend tax cut, and then repeal it after three years.
The Senate plan calls for the dividend tax will be cut by 50% this year, and fully eliminated for 2004, 2005, 2006 and then reinstated for 2007 and beyond.
The sole reason for this gimmick is to reduce the cost below the previously agreed $350 billion, and hence to make the bill filibuster-proof. The true cost of the permanent tax reform is thus much greater than $350 billion.
The additional problem is that the phase in is terrible economics. As a company, will you pay out dividends this year, when they will be taxed at 50%, or next year, when they will not be taxed at all?
The likely result is a large reduction in dividends this year – exactly when we need economic stimulus.

Senate Approves Tax Cut Proposal (
The Senate bill actually is more generous to corporations and investors than either the House-approved tax cut package or the president’s original proposal — at least until 2007. It would exclude half of all dividend income from taxes this year, then would shield all dividends from taxes until 2007, when the tax cut disappears altogether.

Filed under: Economics, Economy, Fiscal Policy, Policy, Politics

Happy Birthday To ArgMax

It’s been almost a year since opened its doors in June, 2002. I though I would document some of the growth of the site.
Perhaps this information will be helpful for comparison if you have started a website or a blog, or are thinking of starting one.
According to my count, since June 2002, argmax has received over 415,000 page views. Accorging to sitemeter, ArgMax is now getting over 10,000 visits, and over 30,000 pageviews per month.
About 1,500 economists’ webpages are listed on the search page, and there are 40 registered users on the forum.
Nearly 100 users have signed up for data emails, and about 500 have signed up for the email list.
People seem to like the site. Altavista shows over 150 links to Argmax. In addition, ArgMax has won a couple awards.
The highlights: – Best economics blogs (#2) (3.19.2003)
MSNBC – Best of Blogs (10.18.2002)
Scout Report Selection (5.19.2003)
Click for more awards/comments. – Economics News, Data, and Analysis

Filed under: Website

New Color of Money

In case you haven’t heard, the $20 bill is getting a color makeover.
(Click on the image below to get a larger version.)

U.S. Bureau of Engraving and Printing | New Money | Welcome

Filed under: Economics

Clark Medal Awarded

Delong congratulates Steve Levitt on winning the John Bates Clark medal.
By my count, 10 of the 28 (36%) of the past medal winners have gone on to win the Nobel Prize. Winners of both: Samuelson, Friedman, Klein, Tobin, Arrow, Solow, Becker, Stiglitz, Spence, Heckman.
Here’s a trivia question, John Bates Clark and one of the past winners of the Medal both graduated from the same college… name the college and the past winner.

Congratulations to Steve Levitt!!: Archive Entry From Brad DeLong’s Webjournal
Congratulations to Steve Levitt!!
The American Economic Association awards the John Bates Clark medal every second year to the outstanding economist under forty who has not previously received the award. This year’s winner is Steve Levitt.
1947 Paul Samuelson
1949 Kenneth Boulding
1951 Milton Friedman
1953 —-
1955 Jim Tobin
1957 Ken Arrow
1959 Larry Klein
1961 Biob Solow
1963 Hendrick Houthakker
1965 Zvi Griliches
1967 Gary Becker
1969 Marc Nerlove
1971 Dale Jorgenson
1973 Frank Fisher
1975 Dan McFadden
1977 Marty Feldstein
1979 Joe Stiglitz
1981 Michael Spence
1983 Jim Heckman
1985 Jerry Hausman
1987 Sandy Grossman
1989 David Kreps
1991 Paul Krugman
1993 Larry Summers
1995 David Card
1997 Kevin Murphy
1999 Andrei Shleifer
2001 Matt Rabin
2003 Steve Levitt
Some lean left. Some lean right. Some are aggressive. Some are thoughtful. Some are nice. Some are not-so-nice. Some are easy going. Some believe that to allow any error to go uncorrected is to encourage intellectual immorality.

Filed under: Economists