IMF on US Budget

IMF doesn’t like the US budget situation.

IMF chides U.S. over budget – Aug. 27, 2003
IMF slams U.S. over budget Global lending agency says government assumptions too optimistic, not doing enough to fix deficits.
August 27, 2003: 6:16 AM EDT
MILAN, Italy (Reuters) – The International Monetary Fund is set to reproach the United States for being too optimistic in its assumptions on government spending and revenues and lacking a coherent budget plan, according to a summary of a draft report.
The report “criticizes the U.S. government’s excessively optimistic assumptions regarding the development of overall state spending and revenues and the lack of a medium-term concept to consolidate budgets and reform the social insurance system,” the draft said.
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News of the IMF report comes a day after a congressional budget agency forecast a federal budget deficit of $480 billion in 2004, a record shortfall…

Filed under: Economics

Deficit to hit $500 billion

Downward budget spiral continues…

Congressional Budget Office says deficit could reach $500B – Aug. 25, 2003
Report: Deficit could reach $500B
Budget office to predict deficit will hit $500B record by 2004; may hurt Bush re-election.
August 25, 2003: 5:15 PM EDT
WASHINGTON (Reuters) – The Congressional Budget Office appears set to predict a federal budget deficit of close to $500 billion in 2004, a record shortfall that could pose problems for President Bush as he seeks re-election next year, budget analysts said Monday.
[…]

Filed under: Economics

State of Economic Policy

The EPI has posted a conference call transcript from August 12 on the state of the economy. Participants included two Nobel prize winners and several other prominent economists.
State of the economy

Filed under: Economics, Economists, Economy

2001 Recession In Perspective: Economic and Budget Situation

OMB Watch – 2001 Recession In Perspective: Economic and Budget Situation
A comparison of the last three recessions shows that even while declines in total output in the 2001 recession were smaller than average, the recovery has been weaker than average. In particular, the employment situation has seen substantial deterioration relative to the start of the recession as well as compared to past recessions.
The budget outlook is particularly troubling. Despite the relatively small drop in total output, federal government revenue has dropped to record levels, and record surpluses have turned into record deficits in a few short years. Comparisons with past recessions show that the deterioration in the budget situation is unlikely to be due to the economic situation, and that current tax and budget policy are likely to blame.
Download full report (.pdf)

Filed under: Economics

Tribune on National Debt

Chicago Tribune | Bush fails consumer credit test, critics say
WASHINGTON — The government outlined five “fundamental practices” Wednesday that people should follow to get control of their personal credit, such as building savings, paying down debt, and understanding one’s credit history.
Unfortunately, say budget experts and officials in prior administrations, the government is not heeding its own advice. A government deep in the red has little credibility when trying to advise consumers on how to get in the black, they said.
With personal bankruptcies and debt at record levels, the Federal Reserve Board and the Treasury Department issued a five-step plan to help debt-ridden consumers better manage their credit–essentially in one-sentence admonitions like “pay bills on time.”
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John Irons, economist at OMB Watch, an organization that monitors the budget, said that too many people do not understand how the deficit affects them. The state and local fiscal crisis is forcing job layoffs and a reduction in services across the board, he said, yet few people pin the blame on the deficit or Bush’s tax cuts.
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Filed under: Economy

Back to economics

Krugman gets back to some economics…

Twilight Zone Economics
For about 20 months the U.S. economy has been operating in a twilight zone: growing too fast to meet the classic definition of a recession, but too slowly to meet the usual criteria for economic recovery. There’s nothing particularly mysterious about our situation. But recent news coverage and commentaryin particular, the enthusiastic headlines that followed a modest increase — in growth and a modest decline in jobless claims — suggest that some people still don’t get it.

Filed under: Economics

$20 Million Wasted for PR

OMB Watch – Federal Budget – Weblog
$20 Million Wasted for PR
The first round of IRS rebate checks to middle and upper income families with dependent children have been mailed. In addition, a second mailing by the IRS was conducted, at a cost of $20 million, letting people know a check would be on the way.
This second mailing (see text below) is completely unnecessary and wastes valuable resources at a time when deficits are already exploding.
Text of the letter:
“We are pleased to inform you that the United States Congress has passed and President George W. Bush has signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003,” the letters read. “Within two weeks of receiving this notice, you will receive a check.”

Taxpayers to Receive Advance Child Tax Credit This Summer
“If you qualify, we will send you a notice. There’s no need to call, no need to apply, no need to fill out another form. The IRS will do all the work. A few days after the notice, you will get the check.”

NY Daily News – World and National Report – Tax-refund letter hit as $20M waste
The personal touch is not cheap – the letters cost taxpayers about $20 million in postage, printing and labor costs, according to the General Accounting Office.

Filed under: Economy

Economy and the ’04 Election

An article in Business week begins to look at forecasting the ’04 election based on economic data….

BW Online | August 4, 2003 | Bush in ’04, Even with This Economy
[…]
Many economists feel the economy will have to grow at 3.5% before employment starts picking up. But whether the nation will enjoy that kind of rebound next year is problematic at best. Says John S. Irons, another election-and-economy watcher: “Usually, it’s clear. The economy is doing well and employment is strong, or GDP and employment are terrible. This election might test that. GDP has been slow, but employment has been unambiguously bad.”
[…]

Filed under: Economy

Akerlof on the Current GWB Administration

Nobel Laureate George Akerlof pulls very few punches in a recent interview.
“I think this is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy. This is not normal government policy. Now is the time for people to engage in civil disobedience.”

“A form of looting”: Das Akerlof-Interview im englischen Orginal – Wirtschaft – SPIEGEL ONLINE
[…]
SPIEGEL ONLINE: So the government’s just bad at doing the correct math?
Akerlof: There is a systematic reason. The government is not really telling the truth to the American people. Past administrations from the time of Alexander Hamilton have on the average run responsible budgetary policies. What we have here is a form of looting.
SPIEGEL ONLINE: If so, why’s the President still popular?
Akerlof: For some reason the American people does not yet recognize the dire consequences of our government budgets. It’s my hope that voters are going to see how irresponsible this policy is and are going to respond in 2004 and we’re going to see a reversal.
SPIEGEL ONLINE: What if that doesn’t happen?
Akerlof: Future generations and even people in ten years are going to face massive public deficits and huge government debt. Then we have a choice. We can be like a very poor country with problems of threatening bankruptcy. Or we’re going to have to cut back seriously on Medicare and Social Security. So the money that is going overwhelmingly to the wealthy is going to be paid by cutting services for the elderly. And people depend on those. It’s only among the richest 40 percent that you begin to get households who have sizeable fractions of their own retirement income.
[…]

Filed under: Economics