To say that “we have a budget deficit” is no different than saying “we’re in the middle of a recession.” The correlation between deficits and economic growth is very tight. A large part of deficits are composed of reduced tax receipts from less people working, and increase in utilization of automatic stabilizers like unemployment benefits, Medicaid and food stamps, which recedes in better economic times.
|By: David Dayen Tuesday November 20, 2012 7:33 am|
Morgan Stanley continues to predict a weak 1.4% growth for the US in 2013. I assume some of this pessimism has to do with the potential for a nasty fiscal slope. But this forecast mirrors their previous forecast in September, so nothing has changed in their analysis in the two months where policymakers crept closer to the slope. In other words, there’s something more structural at work. You can see that in the sharp pullback in investment at the corporate level
|By: David Dayen Monday October 15, 2012 9:40 am|
The US got a good retail sales number for September today, which portends a decent holiday shopping season. But even this indicator led to forecasters predicting a sluggish 1.6% GDP growth for the third quarter. And with electronics up 4.5% for the month, we could simply be seeing an iPhone 5-generated sugar high.
This slow growth is expected to continue into 2013, which should serve as a reminder that the next President, whether an Obama second term or a Romney first term, will find a stuttering economy for much of their first year.
|By: David Dayen Tuesday September 11, 2012 12:50 pm|
Good to know that the credit rating agencies have learned approximately nothing since last year. Then, they initiated a downgrade of the United States, determining that their debt would be a riskier instrument after the debacle of the debt limit deal. Investors responded by pouring money into US Treasuries and dropping the yields at one point to under 1.5% (it’s at around 1.676% today). The markets, then, thoroughly ignored the warnings of the rating agencies, and by extension discredited them. They saw US treasuries as a safe instrument rather than a downgraded one.
So what does Moody’s come out and say today? That the US credit rating depends on fiscal cliff talks:
|By: David Dayen Wednesday September 5, 2012 12:39 pm|
The flip side to the fact that deficit spending in a recession is responsible is that the story of the 1990s, the story of prosperity through surpluses, was actually deeply irresponsible, laying the conditions for the current crisis. Joe Weisenthal has a masterful article out, drawing on the work of UMKC professor and MMT theorist Stephanie Kelton, explaining how Clinton’s balanced budgets created trouble for the economy. I’m not certain I buy all of it, but it’s too important not to share.
|By: David Dayen Friday June 1, 2012 9:20 am|
|By: David Dayen Tuesday May 29, 2012 8:30 am|
It’s often said that Democrats have no bumper sticker argument, nothing that can be said in an elevator pitch to boil down the principles of the party. That can be seen in the utter confusion with which the party is approaching the lame duck session and the fiscal cliff. I follow this stuff fairly closely, and I can say without reservation that I have no idea what the overarching plan for the lame duck is coming out of Democrats in Congress or the White House.
|By: David Dayen Wednesday May 23, 2012 7:00 am|
CBO predicts that if all of the 2012 tax and spending cut measures occur under current law, it would reduce the deficit but also drag down GDP by 4% or more and cause a recession next year.
|By: David Dayen Thursday May 17, 2012 6:40 pm|
You can feel the heat being turned up on Europe. Greece is in the middle of what the Guardian has called a bank jog. In the 10 days since the elections which led to a political stalemate, a caretaker government, and new elections, Greek depositors have removed €3 billion from their banking system. It’s not like the banking system was super-secure before the May 6 elections, either.
|By: David Dayen Tuesday May 15, 2012 1:00 pm|
On a day when Greece called for new elections, with serious implications for the European economy and the future of the euro, the other country with elections on May 6 swore in their new President. Francois Hollande came to power in France calling for a return to growth rather than a single-minded focus on debt reduction and austerity in Europe. He called his program a new pact