Plain Sense Economics

Jasen Hartford, a friend and past student, recently asked me,
As we all know, the European Union has recently been under the lime light with their budget deficit problem – causing a lot of anxiety for investors in the U.S. I’m curious if there’s a reason why the even greater deficit in [...]

At about the 6th or 7th week of my Principles of Macroeconomics class we have a kind of broad (though not deep) understanding of how the economy works, how we measure it, and some of the things government does to influence it. We’ve learned about fiscal policy and monetary policy; we have a rough idea [...]

In my University Seminar class we are looking at the arguments, pro and con, on Oregon Measures 66 & 67. For out of state readers these measures raise taxes slightly – for higher end income earners (families with incomes over $250,000 and individuals with incomes over $125,000) and corporations (raising the minimum corporate income tax [...]

Cornell’s Robert Frank wrote today in The New York Times,
[...]there are really only three basic truths that policy makers need to know about deficits: First, it’s actually good to run them during deep economic downturns. Second, whether deficits are bad in the long run depends on how borrowed money is spent. And third, eliminating deficits [...]

Hat tip to U of Oregon prof, Mark Thoma, for pointing to this piece by Jeffrey Sachs in the Financial Times.
Obama Has Lost His Way on Jobs
The Obama administration’s stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides are missing the key fact: the US economy needs structural change that requires [...]

State and local governments have a particularly hard time during economic downturns. The Wall Street Journal, in this article on June 3 reminds us how state tax revenues decline quickly and recover slowly during recessions. This graphic from the article shows that it can take as long as five years for revenues to reach pre-recession [...]

As David Leonhardt, of The New York Times, acknowledges, it is sometimes uncomfortable to draw comparisons with economic policies of the past. From his article on April 1.
Every so often, history serves up an analogy that’s uncomfortable, a little distracting and yet still very relevant.

In the summer of 1933, just as they will do on [...]

Robert Frank, Cornell economist and co-author of the principles textbook that we use in class, wrote in the New York Times this past Sunday:
The consensus is that short-run deficits help end recessions, and that whether long-run deficits matter depends entirely on how government spends the borrowed money. If failure to borrow meant forgoing productive investments, [...]

In our macro class last week we talked about the conflicts between a strategy of prudent saving during hard times, and the need for consumers to increase aggregate demand by spending.
This leads us to the fiscal (sometimes called the Keynesian) multiplier – where government stimulus funds (added spending or tax cuts) cascade through the economy [...]

These interesting times carry blessings and curses for economists. Suddenly fellow Rotary Club members, faculty colleagues, and neighbors want to know my opinions. On the other hand, my opinions are based on pretty sketchy knowledge.
I’ve purposefully not dug into the specifics of the various House and Senate bills that are now headed for a collision [...]