KnowNOW!

Global Economic Watch

Syndication

Recent Posts

Tags

View more

Other Useful Blogs

Archives

  • Economist Mom: National Debt As A Symptom, Rather Than THE Problem

    Diane Lim Rogers , Chief Economist for the Concord Coalition, was interviewed for this very interesting Planet Money piece on US citizens donating money to reduce the federal deficit. In the interview, she said that it would be "economically stupid," for all taxpayers to rally together and pay off the debt. She also said it would be "unwise," as current citizens would be taking on a huge, unfair burden. Rogers explains her comments at her Economist Mom column: But let’s assume we could do it without destroying our nation; let’s assume we could go “poof” and wipe the debt slate clean. What would paying off the debt entirely today accomplish in terms of fiscal sustainability? Not nearly as much as it would seem. Unfortunately, reaching even zero debt does not eliminate what’s “unsustainable” about our fiscal outlook. We would start with a clean slate, but right away our debt would start accumulating again–because the dynamics of the fiscal outlook would still be all wrong: promised entitlement benefits would still be growing too fast for the economy and revenues to keep up. While without any debt we’d eliminate about $200 billion in net interest this year, the rest of mandatory spending alone–without counting any discretionary spending–would still use up nearly all of our revenue. So even having “zeroed out the debt clock” we would still have a large deficit right away this year, immediately starting the debt clock back up again, and that new debt would be immediately projected to keep growing faster than GDP–the definition of an “unsustainable” fiscal outlook. So even a magical zero debt to GDP situation is not “sustainable” if the unsustainable paths in the fiscal outlook are not changed. Conversely, a high debt to GDP situation, while not ideal (because of the interest burden), might still be “sustainable” if the economy is on a growth path that manages to keep pace with the gap between spending (including interest) and revenues. That’s a big “if” though. Which is why when I said that there’s no such thing as an unsustainable level of debt to GDP (at any one particular point in time) I didn’t mean to imply that a high level of debt to GDP couldn’t be consistent with a completely unsustainable path of debt to GDP over time. What I’m trying to say is what defines that unsustainability isn’t where we are right now but what we’re doing (or not) to change where we’reheaded. Read Why eliminating the national debt alone would not fix America's fiscal woes here .

  • Peter Peterson on America's Debt Problem

    Peter Peterson is concerned about the future. He's decided to donate 1 billion dollars to the economic think tank that now bears his name--the Peterson Institute for Ineternational Economics --to battle what he sees as the nation's biggest challenge: debt. Here's what he wrote earlier this year in Newsweek to explain his decision: For the first time in my memory, the majority of the American people join me in believing that, on our current course, our children will not do as well as we have. For years, I have been saying that the American government, and America itself, has to change its spending and borrowing policies: the tens of trillions of dollars in unfunded entitlements and promises, the dangerous dependence on foreign capital, our pitiful level of savings, the metastasizing health-care costs, our energy gluttony. These structural deficits are unsustainable. Herb Stein, who served alongside me in the Nixon White House as chairman of the Council of Economic Advisers, once drily observed, "If your horse dies, I suggest you dismount." And yet, we keep trying to ride this horse. The 81-year-old businessman's list of accomplishments is long, and includes founder of The Blackstone Group; Secretary of Commerce; and head of the Council on Foreign Relations. He spoke with Charlie Rose about the economy and about the national debt. Here are some excerpts: You can watch the full interview here . And read Peterson's Newsweek essay, Why I'm Giving Away A Billion Dollars , here .

  • Visual Economics: Debt to GDP

    Visual Economics is a good site for graphics and maps that neatly synthesize economic data. Here, for example, is their map showing national debt as a percentage of GDP. Just as with any household or business, red is bad, black is good. Take a look :