Archive for the ‘Recession’ Category

Why State and Local Governments are Hurting the Recovery

Until the Great Recession, state and local governments played a remarkably constant role through down business cycles. For four decades, when the economy turned sour, state and local governments boosted their spending—mitigating the depths of recessions and adding to growth when the economy revived. (Of course, this growth was partially offset by the negative effect […]

Five reasons Why the Sequester’s Automatic Spending Cuts are Bad Policy

In two weeks, about $1 trillion in automatic spending cuts will begin to kick in, a testament to the inability of policymakers to reach a grand fiscal bargain. Allowing these cuts to happen would be terrible policy. Here’s the background: In August 2011, Congress passed the Budget Control Act (BCA) as a last-minute solution to […]

The government and short-run economic growth

Economic growth estimates released yesterday were not good news: the economy contracted in the fourth quarter for the first time since 2009, albeit by just 0.1 percent. Commentators have mostly attributed the mild contraction to a steep drop in federal defense spending and reduced inventories—each factor cut the quarter’s growth by about 1.25 percent on […]

Payroll Tax Cuts May Boost the Economy More than You Think

Just as Congress allowed the 2011-12 payroll tax cut to expire, new research by the Federal Reserve Bank of New York suggests that such tax breaks may significantly boost consumer spending. As a result, raising workers’ take-home pay this way might play a bigger role than many thought in reversing economic slumps. The study by […]

Japan (Re)Tries Fiscal Stimulus

Last week Japan announced a massive stimulus package designed to jumpstart its slumping economy, which is in the midst of its fifth recession in 15 years. The stimulus initiative, heavy on infrastructure spending and disaster preparedness, includes $117 billion in central government spending. Add in local government and private-sector support and spending could top $200 […]

Should Muni Bonds Pay To Demolish Buildings?

Two Ohio Members of Congress have introduced a bill to allow states to issue tax-exempt bonds to demolish buildings. Not to build them, but to destroy them. Score this one as a bad solution to a real problem. The lawmakers, Republican Steve LaTourette and Democrat Marcia Fudge, want to allow state governments to issue up to $4 […]

A Federal Umbrella for State Rainy Days?

As state legislatures return for what promises to be yet another difficult budget year, they ought to be starting to refill their rainy day funds–those accounts that set aside money for future hard times. That’s a tough decision. After all, for the past three years, states have been raising taxes and cutting spending just to […]

Unfinished Business after the Debt Deal

Congress headed off for its summer vacation yesterday, exhausted after the protracted wrangling over the debt limit that ended with a whimper when President Obama signed the bill that lets the government continue to pay its bills. Few people were happy with the result—the best you can say for it is that we won’t have […]

Two Bad Tax Ideas for Creating Jobs

In Washington, bad ideas never go away. Now two old tax breaks have resurfaced with the ostensible goal of creating jobs, despite plenty of evidence that neither actually works. One would create a payroll tax break (aimed at employers instead of workers this time). The other would grant a temporary tax holiday to multinational corporations that […]

Between a Fiscal Rock and a Hard Place

The Congressional Budget Office’s annual mid-session update provides some striking evidence of just how challenging today’s fiscal environment is. Because deficits were so high going into the economic slump, and because the financial crash was so steep, Washington must now navigate between two unacceptable outcomes: tight fiscal policy and slower growth now, or bigger deficits and slower growth later.