Who is really responsible for the mess we are in? Consider two assertions: 1. Federal spending during the Obama administration has averaged 23.5 percent of gross domestic product, which is well above the post-World War II average of 19.1 percent.…
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Understanding the issues behind Dayton’s budget proposal
Gov. Mark Dayton has dropped the fiscal puck into play with his proposals for a broader-based but lower-rate sales tax plus higher marginal income tax rates on high incomes. Which goal the puck ends up in is anyone’s guess. Given…
Credit is as tough to regulate as is it to define
Economic theory long has failed to fully appreciate the role of “credit” in an economy, while the idea of there being a “money supply” is an old one. Undergraduates taking money and banking courses all learn how supply and demand…
Balancing the risks — and rights — of borrowers and lenders
Balancing the rights and responsibilities of borrowers and lenders isn’t easy, but it is important that a society do it well. This not only involves issues of fairness but also of economic efficiency. Get it wrong and not only will…
Better choices would have fixed Social Security
Social Security is very popular with Americans, even if most don’t understand very well how it operates. It is not difficult to make such a social insurance program financially sustainable if the nation has a stable population, or one that…
What went wrong with Social Security
Hubbub about the fiscal cliff has died down temporarily. But in a few weeks we will be back at it and the misunderstandings and misrepresentations on both sides will be worse than in the round just ended. The lull gives…
Estate tax escapes fiscal cliff scrutiny, and here’s why
The estate tax is one facet of this week’s fiscal cliff agreement that has gotten little attention. This is interesting, as the amounts of money potentially in play were at least as large as those for other issues. The switch…
Debt reduction is the real issue in ‘fiscal cliff’ vote
After much drama, both houses of Congress have agreed with the president on a short-term plan to deal with the “fiscal cliff.” No party seems very happy with it. This general lack of enthusiasm might be a good sign, an…
Pro- or anti-Keynes, something has to give on fiscal cliff
When one category of national production, such as consumption spending, decreases, then one or more of the three other categories must increase by at least the same amount or Gross Domestic Product will decline. And that means national income declines.…
The inescapable arithmetic of GDP
When Federal Reserve Chairman Ben Bernanke coined the phrase “fiscal cliff” nearly a year ago, the danger he saw was the recessionary effect of cutting spending and increasing taxes too drastically. So it is ironic that all the debate right…