John Irons's Blog


Economic News, Data and Analysis

Getting Married

I am getting married this weekend – so no posts for a while… check back in a week or so!

Filed under: Website

War and the Economy

From a CS Monitor artilce:
“America’s spending for defense will exceed that of all other nations combined.”
“‘A waste of a phenomenal amount of money,’ says Jeffrey Sachs, director of the Earth Institute at Columbia University in New York. ‘It should have been spent for something useful to Americans.'”

War’s mixed impact on a reviving economy |
Adding in the $87 billion for Iraq and Afghanistan recently requested by President Bush, America’s spending for defense will exceed that of all other nations combined.
It’s a sign that the United States may be the most dominant single military power on the globe since the Roman Empire.
It’s also a sign that Pax Americana is a costly affair, with major impact on the economy as well as on the world’s political landscape.
Wars, in general, can stimulate economic growth or weigh down a nation with burdensome costs. This one could do both.
Most economists would say the US is now only partially in a “wartime economy.” Defense costs are rising, but as a share of the US economy they are below levels seen in the cold war.
But war’s imprint remains significant. In this year’s April-June quarter, when the economy grew at a 3.1 percent annual rate, defense spending accounted for about one full percentage point of that gain, estimates economist Cynthia Latta of Global Insight in Lexington, Mass. It could provide about the same boost in the current quarter, as a US recovery gathers momentum.

Filed under: Economics, Economy

Krugman on Tax Cuts

The Tax-Cut Con

Nobody likes paying taxes, and no doubt some Americans are as angry about their taxes as Tinsley’s imaginary character. But most Americans also care a lot about the things taxes pay for. All politicians say they’re for public education; almost all of them also say they support a strong national defense, maintaining Social Security and, if anything, expanding the coverage of Medicare. When the ”guy on the news” asks whether we can afford a tax cut, he’s asking whether, after yet another tax cut goes through, there will be enough money to pay for those things. And the answer is no.
But it’s very difficult to get that answer across in modern American politics, which has been dominated for 25 years by a crusade against taxes.

Filed under: Economics

Buzzflah interviews Krugman

Paul Krugman talks about economic policy, and what it’s like writing for the NY Times.

Paul Krugman, New York Times Columnist and Author of “The Great Unraveling: Losing Our Way in the New Century” – A BuzzFlash Interview
KRUGMAN: There is no economic policy. That’s really important to say. The general modus operandi of the Bushies is that they don’t make policies to deal with problems. They use problems to justify things they wanted to do anyway. So there is no policy to deal with the lack of jobs. There really isn’t even a policy to deal with terrorism. It’s all about how can we spin what’s happening out there to do what we want to do.
Now if you ask what do the people who keep pushing for one tax cut after another want to accomplish, the answer is they are basically aiming to create a fiscal crisis which will provide the environment in which they can basically eliminate the welfare state.

Filed under: Economists

DeLong on Productivity Growth

Grab a sandwitch and read:
(Especially the handout)

Semi-Daily Journal
Growth Lunch Talk
I’m supposed to give a very informal talk about American productivity growth at the inaugural growth lunch tomorrow. Here is my handout.
Eighteen months ago I would have been pretty confident about what to say. (And, indeed, I said it.) I would have said that the information technology revolution had attained critical mass, and was boosting American prosperity through three channels:
1. Faster productivity growth meant that the labor market could deliver sustained wage increases no greater than the productivity-warranted rate of real wage growth at a lower unemployment rate, and thus that the infotech revoution had reduced the economy’s natural rate of unemployment–perhaps by as much as two percentage points.
2. Outstanding productivity growth in the making of infotech products was boosting economy-wide productivity growth by the rate of leading-sector productivity growth times the share of economy-wide total expenditure spent on infotech products.
3. Outstanding productivity growth in infotech boosts economy-wide productivity growth by a further important channel: cheap infotech capital goods raise the economy’s capital intensity and boost productivity growth by the rate of leading-sector productivity growth times the quotient of the infotech production-function share divided by labor’s production-function share.
But the past year and a half’s data have been really weird: extraordinary labor-productivity growth unaccompanied by capital deepening, an unprecedented employment-productivity pattern, plus evidence of a large shift away from the “cyclical employment” model. A lot of things are up for grabs right now…

Filed under: Economics

Launching tomorrow!
I know what it is… do you? 🙂

Filed under: Economics

Budget Outlook

OMB Watch – Beyond the Baseline: 10 Year Deficits Likely to Reach $5.9 Trillion
The Congressional Budget Office’s (CBO) August 2003 Budget and Economic Update shows a baseline projection of a $401 billion deficit for 2003, and a $480 billion deficit for 2004. The 10-year baseline projections show a $1.4 trillion deficit over the next ten years; however, as the report notes, the baseline is not intended to be a good predictor of actual budgetary outcomes. A better predictor of budget deficits under current policy would put the deficit for 2004 at $496 billion and the 10-year deficit at nearly $6 trillion.

OMB Watch – Half of 2004 Deficit Deterioration Due to Revenue-Reduction Legislation
The Congressional Budget Office (CBO) is currently estimating a baseline $401 billion deficit for 2003 and a $480 billion deficit for 2004. In March, just six months ago, the CBO’s baseline indicated a much smaller $246 billion deficit for 2003 and a $200 billion deficit for 2004.
For 2004, this represents a $279 billion deterioration in the budget outlook (see Table 1). A detailed breakdown of the CBO data shows that 48% of the budget deterioration that occurred between March and August was due to legislative changes affecting revenue (see Table 2). At just over 16 percent of gross domestic product, revenue is now at its lowest level in 40 years.

Filed under: Economics