February 28, 2011
Dispatches (VI): Where Do Those Budget Numbers Come From?
Wisconsin Governor Walker has been stating that if his "budget repair bill" is not passed, then the state will lose $165 million dollars. It is unclear what exactly would be "lost" if the bill is not passed. From the New York Times:
"One day left to save the state $165 million," said the governor’s office on Monday, announcing the latest deadline.
If Democrats do not return by Tuesday, taxpayers would lose an option to save that money through a "refinancing," the governor’s office said, citing the Wisconsin Legislative Fiscal Bureau, a nonpartisan agency that conducts budget analysis.
February 27, 2011
Dispatches (V): Wisconsin - Open for Business or For Sale?
In light of the provision to sell off power plants in Wisconsin under no-bid contracts, this photo caught my eye:
Source: Capital Times
February 26, 2011
The Economic Report of the President
The Economic Report of the President, 2011 is out. The topical chapters are:
February 25, 2011
CBO on the Stimulus Package, and Still No Expansionary Fiscal Contraction in UK
Two Items Regarding Fiscal Policy
US GDP and the Stimulus Package
The 2nd release for US GDP revealed a downward revision BEA; CR reports the breakdown. What is interesting is that the downward revision is due in part to a greater than previously estimated decline in the state and local government spending contribution. Something useful to keep in mind as state and local governments move to rely solely upon spending cuts instead of revenue increases as means to reduce budget deficits (e.g., as in Wisconsin).
Exchange Rates: Two Stylized Facts and Yet Another (Consequent) Puzzle
My colleague, Charles Engel, has a new paper entitled The Real Exchange Rate, Real Interest Rates, and the Risk Premium, in which he tries to identify what characteristics an exchange rate model must possess in order to explain two stylized facts.
...The well-known interest parity puzzle in foreign exchange markets finds ... the high interest rate country tends to have the higher expected return in the short run. The second stylized fact concerns evidence that when a country's relative real interest rate rises above its average, its currency tends to be stronger than average in real terms.
February 23, 2011
Libya, oil prices, and the economic outlook
What will be the economic effects of this week's developments in Libya? We have a fair amount of historical experience from which to try to answer that question.
February 22, 2011
Lots of action in oil prices today, as the unrest has spread from Tunisia and Egypt-- which produce relatively modest amounts of crude oil-- to Libya, the country sandwiched between them, and producer of over 2% of the world's crude oil supply. Rather than try to guess where those developments are going to lead, I wanted today to try to make sense of another equally striking development in oil markets over the last 6 weeks-- the disparity between the price of oil in the Midwest United States and that elsewhere in the world.
Dispatches (IV): Wisconsin National Guard Makes Routine Visits to Correctional Institutions
Madison -- As large labor protests continue at the Capitol, the Wisconsin National Guard has toured more than one prison in the state, a spokeswoman said Tuesday.
The Journal Sentinel reported Monday that National Guard members last week had toured Redgranite Correctional Institution with its security director. On Tuesday, Lt. Col. Jackie Guthrie, spokeswoman for the National Guard, confirmed that other prisons had been visited as well.
February 21, 2011
On the Underfunded Liabilities Problem (Or Lack Thereof in Wisconsin)
Econbrowser reader Bob_in_MA has argued that
Governor Walker's [the] (edit 7:50am 2/22) desire to strip collective bargaining rights from Wisconsin public employees is derived in part from the high labor costs, hidden in part by large unfunded liabilities (e.g. pensions) in the state. This might be an apt characterization for Massachusetts. It is not for Wisconsin. From the Pew Center for the States:
Some states are doing a far better job than others of managing this bill coming due. States such as Florida, Idaho, New York, North Carolina and Wisconsin all entered the current recession with fully funded pensions.
February 20, 2011
Dispatches (III): I Regret...
[Executive board president of the Wisconsin Law Enforcement Association] Tracy Fuller writes, "I am going to make an effort to speak for myself, and every member of the Wisconsin State Patrol when I say this ... I specifically regret the endorsement of the Wisconsin Trooper's Association for Gov. Scott Walker. I regret the governor's decision to 'endorse' the troopers and inspectors of the Wisconsin State Patrol. I regret being the recipient of any of the perceived benefits provided by the governor's anointing. ...
New indications of inflation
Where are the inflationary pressures?
February 19, 2011
Dispatches (II): Walker rejects union offer to accept concessions
...The Walker statement was in response to a statement earlier Saturday from [State senator] Erpenbach, who said he had been informed that all state and local public employee unions had agreed to the financial aspects of Walker's budget-repair bill. Erpenbach added in his statement that the groups wanted, in turn, for Walker to agree to let labor groups bargain collectively, as they do now.
February 18, 2011
CBO on HR2, repealing the Patient Protection and Affordable Care Act
From Congressional Budget Office, in a letter dated today:
...CBO and JCT [Joint Committee on Taxation] estimate that, on balance, the direct spending and revenue effects of enacting H.R. 2 would cause a net increase in federal budget deficits of $210 billion over the 2012-2021 period ....
February 17, 2011
The Fiscal Implications of Recent Wisconsin Policy Measures
From the Legislative Fiscal Bureau, roughly analogous to the Congressional Budget Office, an assessment (p.11) that notes the tax revenue implications of three bills implemented under the current Administration:
Analogy Watch: "Cairo has come to Wisconsin"?
Day 3 in the Wisconsin State capitol rotunda. Source: Milwaukee Sentinel Journal
From National Journal:
In an interview on MSNBC's Morning Joe today, Rep. Paul Ryan, R-Wis., said the cuts were necessary to get Wisconsin back in the black.
"State workers who have extremely generous benefits packages, [Walker’s] asking that they contribute 12 percent to their health care packages. It’s not a lot, it’s about half of what private-sector employees pay, and he’s getting riots. It’s like Cairo has come to Wisconsin,” Ryan said. “People should be able to express their way, but we’ve got to get this deficit and debt under control in Madison."
Speaker Boehner's Math
Recently, Speaker of the House John Boehner asserted: "...the federal government has added 200,000 new federal jobs since President Obama took office." Other analysts have tried to find the source for this figure, but I thought of interest to see exactly how bad his math was.
February 16, 2011
Money and reserves
I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of "money." And your definition of "printing."
February 15, 2011
Intermediate Macro Exercise: How to Construct a Maximally Contractionary Budget Deficit Reduction
Consider an economy called Käseland, with gross output equal to approximately $475 billion, and unemployment rate of 7.5%, so considerable underemployment of factors of production exists; consistent with this interpretation, the general nonfarm wage rate has been relatively constant, growing at only 1.2% on a 12 month basis through 2010, and the price level has risen by about 1.5% from the second half of 2009 to second half of 2010.
Suppose there is a budget deficit, that you wish to close. How do you maximize the negative impact on output?
February 13, 2011
Progress report on QE2
We're now 3 months into the Fed's new asset purchase program that has been popularly described as a second round of quantitative easing, or QE2. I thought it would be useful to take a look at what has actually changed during the first 3 months of QE2.
February 11, 2011
The December Trade Release
The December trade figures were released today. The trade deficit widened a bit, largely in line with the Bloomberg consensus, but a little less than assumed by BEA statisticians. This outcome meant a likely revision upward to 2010Q4 GDP. From Lahart/WSJ RTE.
This caught my eye. From Chicago Tribune:
Walker says National Guard is prepared
MADISON, Wis. — Gov. Scott Walker says the Wisconsin National Guard is prepared to respond wherever is necessary in the wake of his announcement that he wants to take away nearly all collective bargaining rights from state employees.
February 10, 2011
Core, and More, Near Zero
February 09, 2011
Saudi oil reserves may be overstated by 40%
The U.S. fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels-- nearly 40%.
Stuart also notes that in his own independent forensic analysis conducted in May 2007 (to which we called the attention of Econbrowser readers at the time), he estimated that remaining reserves in Ghawar (by far the Saudis' biggest and most important oil field) were overstated by 40%.
February 08, 2011
An Alternative Look at the Employment Situation
The employment situation report has been well analyzed by a variety of researchers , including Jim. Given the noise introduced by weather and new seasonal factors, I thought it would be of interest to see what the experimental series, based on the household survey, indicates.
February 07, 2011
Two Competing Views on America's Economic Future
Or, Palin and Eichengreen on Infrastructure Investment
In a recent speech, Sarah Palin, stated that:
... "The federal government is spending too much, borrowing too much, growing and controlling too much," she said.
February 05, 2011
The employment news is good (I think)
The Bureau of Labor Statistics reported yesterday that the unemployment rate has fallen from 9.8% in November to 9.0% in January, as big a two-month drop as we've seen in the last 50 years (hooray!). But in the same report, BLS indicated that their seasonally adjusted estimate of the number of Americans employed on nonfarm payrolls increased in January by an anemic 36,000 (oh dear!). Reconciling the very contradictory claims is even harder than usual, but I'll give it a try.
February 03, 2011
Joe Lawler Does Economic Analysis, Again
The Financial Crisis: Foreseeable and Preventable
The Real Value of the Yuan and Inflation
A recent NYT article highlighted the fact that international competitiveness (as defined by macroeconomists) depends on not just the nominal exchange rate, but also relative price levels. From Inflation in China May Limit U.S. Trade Deficit by Keith Bradsher:
Inflation is starting to slow China's mighty export machine, as buyers from Western multinational companies balk at higher prices and have cut back their planned spring shipments across the Pacific.
February 02, 2011
An improving economic outlook
Looking a little better each day.
February 01, 2011
Thoughts on Rebalancing, Capital Flows, Commodities
Those were some of the topics of a recent Asia-Europe Economic Forum conference that took place at the French Ministry of Economy, Finance and Industry, entitled "G20: Completing the Agenda", organized by Agnès Bénassy-Quéré and co-sponsored by CEPII, DG-ECFIN, and the Ministry of Economy, Finance and Industry.