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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Deficit
September 27, 2013 at 10:31 AM

Vote: The debt ceiling and the economy

Jonathan Chait offers an insightful look at the politics behind the debt-ceiling fight, including this quote from House Majority Leader Eric Cantor: “The reason this debt limit fight is different is, we don’t have an election around the corner where we feel we are going to win and fix it ourselves. We are stuck with this government another three years.” The consequences for the economy are less examined in the press but serious.

The truth is that the deficit is falling. As University of Oregon economics professor Mark Thoma writes, the real reason the debt ceiling is not being routinely raised, as was done in the past, “is not, of course, a fight about how much government debt we should have.” Rather, it is a battle about “the size and role of government.” But if the dispute isn’t resolved, the Bipartisan Policy Center predicts that sometime between October 18th and November 15th, the Treasury will exhaust its borrowing power. The consequences for the economy, already growing only slowly, will be dire. A default would have world-wide repercussions, as the stock market is already sensing.

What do you think?

Read on for some of the best economic and business stories of the week, and the haiku…


Comments | More in Debt ceiling debate, Deficit

May 17, 2013 at 10:28 AM

Poll: Your big economic worries

The Dow is over 15,000, corporations are sitting on record amounts of cash, M&A activity is picking up, the deficit problem is on track to being solvedinflation is nearly non-existent and the U.S. economy is performing better than that of almost all other industrialized nations. Metropolitan Seattle, with 5.5 percent unemployment, is getting close to what economists would consider full employment. On the other hand, millions remain unemployed, wages are stagnant and inequality is the highest we’ve seen since the 1920s and perhaps even at a historic record. It’s a recovery, but one very different from those seen in the post World War II era.

Consider that a recession comes along around every seven years or so. Also, the banking industry is as dangerous as ever, and so politically powerful that it was most recently able to push back meaningful regulation of derivatives. Federal austerity is holding back a more robust recovery. Recession in the eurozone, a slowdown in China and political tensions in east Asia are among many concerns. What has you most worried?

Read on for the best links of the week and the haiku:


Comments | More in Aerospace/Boeing,, Banking, Boeing, Deficit, Eurozone, Global economy, Great reset, Jobs/Unemployment

February 25, 2013 at 10:36 AM

Making peace with the sequester

It looks as if the sequester will happen. The public doesn’t actually want to cut any government programs. There’s no economic reason to do so: Borrowing costs remain at historic lows, we borrow in our own currency, and cutting government spending in the midst of a slow recovery marked by continued high joblessness will only make things worse. The deficit is almost entirely a product of the collapsed economy, along with the Bush tax cuts and two long wars; it’s coming down. Nevertheless, the D.C. elites, from President Obama to Republicans controlling the House have bought into the idea that the deficit is our most pressing challenge.

So we’re going to embark on an experiment not seen in this country since 1937, when FDR throttled back spending on the New Deal and promptly sent the economy, which had been recovering smartly, into a new recession. Austerity in Europe has proven to be a disaster, too. Still, some good might emerge. Ever since Ronald Reagan, politicians have gotten ahead by claiming that “government is the problem.” Nevermind that the federal government grew under every president, including Reagan, who also added government jobs to help come out of the 1981-82 recession (unlike Obama, who has been cutting jobs).

The initial American austerity is relatively small, amounting to about 2 percent of the federal budget. That’s just for starters. So let’s find out if we really need the federal government.


Comments | More in Debt, Deficit, Federal debt/deficit

February 22, 2013 at 10:07 AM

Sequester and the economy

Where to begin on the sequester? The $85 billion in automatic, across-the-board federal budget cuts set to kick in on March 1 are an entirely artificial crisis manufactured by the Congress, specifically the Tea Party-dominated House of Representatives. The deficit and debt are not the biggest economic problem facing the country. Not by a long shot: There’s persistent high unemployment, slow growth, lack of investment in 21st century infrastructure, bad trade deals, inadequate tax revenues and the hollowing out of the middle-class by an oligarchy that has gamed the system to its advantage. Inflation remains tame. Interest rates are at historic lows. So there’s no evidence — none — that the deficit and debt (which are coming down, by the way) are hurting the economy.

The sequester, on the other hand, has the potential to shock a slow economy back into recession. The slow recovery is already partly the result of federal austerity. These cuts will do even more damage. Austerity is not working in Europe. It won’t work here. To be sure, we need to make the transition from Military Keynesianism to a peacetime economy and invest in America rather than in blowing things up and making more enemies overseas. We need to get control of health costs, which are the long-term threat to the budget. But the House, whose red-state members are in districts that are almost entirely net takers from the taxpayer, seems disinclined to back away from the brink. What do you think? You can make multiple answers.

Read on for the best links of the week and the haiku:


Comments | More in Debt, Defense, Deficit, Federal debt/deficit

October 15, 2012 at 10:30 AM

In Afghanistan, the things we didn’t carry

Compelling new reporting on the Afghanistan war by the Seattle Times’ Hal Bernton raises many issues and questions. On the economic front, we must wrestle with the opportunity costs.

The Oxford Dictionary of Economics defines this as “the cost of something in terms of an opportunity foregone. Opportunity cost is given by the benefits that could have been obtained by choosing the best alternative opportunity.” Remember that the George W. Bush toppled the Taliban on the cheap, with Special Forces riding horses and funding war lords. This regime change was forced after Afghanistan was used as a training camp for al-Queda. But then the administration inserted combat troops (and started a totally unnecessary war with Iraq) and we’ve been on this imperial misadventure ever since. It has been continued under President Obama.

According to the Cost of War site, the two conflicts currently have drained us to the tune of $1.4 trillion, including $575 billion in Afghanistan. Nobel Prize-winning economist Joseph Stiglitz and Harvard’s Linda Blimes have estimated that the conflicts will end up costing $3 trillion or more. Waste and fraud have been rampant. Veterans costs will soar into the far future. The land forces have been stretched to the breaking point. In exchange, we will end up with even less stable states than when we began. We are no more safe; we are arguably less so.


Comments | More in Defense, Deficit

August 30, 2012 at 10:00 AM

Five things to watch for this fall

Europe is back from vacation, American economic growth remains weak and the presidential campaign will suck all the oxygen from the room. Here are five things to watch for in the economy in the weeks ahead:

1. The European recession and political crisis will get worse. It begins with the need for the Greek parliament to approve another 11.5 billion euros in spending cuts or risk losing its lifeline from the European Central Bank and International Monetary Fund. As I’ve written before, the only real answer is an “orderly” exit mechanism for the euro or a complete write-down of the debt.

2. Europe’s recession will spread. The EU accounts for 20 percent of U.S. trade and is a huge trading partner with Asia. The slowdown there is already affecting global commerce. The big unknown: The danger to “counterparty” U.S. banks (Mr. Dimon, call your office).

2. The danger of a new bubble popping. Will it be student loans or food futures?


Comments | More in China economy and business, Debt, Debt ceiling debate, Deficit, Eurozone, Income/living standards, International Monetary Fund, Jobs/Unemployment, Trade

August 6, 2012 at 10:00 AM

Racing toward the fiscal cliff

I haven’t written about the so-called fiscal cliff because, against increasing evidence, I hold to Abba Eban’s quote, “When all else fails, men turn to reason.” But maybe not in today’s America.

The fiscal cliff is the set of budget cuts and tax increases that would automatically kick in next year. That is, unless Republicans and Democrats, the Congress and the White House, can agree to new tax and budget provisions, especially the shape of extending the Bush tax cuts. If we fall off the cliff, according to the Congressional Budget Office, the total effect could mean a 3.9 percent contraction in the growth rate of gross domestic product next year.

The fiscal cliff is replacing the eurozone crisis as the big deal facing the U.S. economy. As the New York Times reports, businesses are reducing their investments for fear that reason won’t prevail. “Executives at companies making everything from electrical components and power systems to automotive parts say the fiscal stalemate is prompting them to pull back now, rather than wait for a possible resolution to the deadlock on Capitol Hill.”


Comments | More in Debt, Debt ceiling debate, Deficit, Lindsay Lohan, Politics and the economy

June 8, 2012 at 10:00 AM

Vote: Fix the economy now

The economy is near stall speed, no matter what Ben Bernanke says. The Obama stimulus was too small to fill the demand hole left by the Great Recession. It was poorly aimed and now is running out, and the reality is that Obama has presided over one of the lowest-spending terms over the past 60 years. Government cutbacks are a further headwind to recovery (something Reagan didn’t face in 1982).

Unemployment remains high and growth is slowing. Most people think we’re still in a recession. Europe is in a recession and threatening to bring the world into a deep downturn. The GOP House and minority in the Senate will resist any measures to move the economy forward — at least until President Romney is sworn in. So welcome to the next few months.

What would you do to fix it?

The most important need now:

Read on for the best links of the week and the haiku:


Comments | More in Campaign 2012, Debt, Deficit, Eurozone, Federal Reserve, Great Recession, Great reset, Income/living standards, Infrastructure, Jobs/Unemployment

March 29, 2012 at 10:00 AM

Our growth problem

It is definitely more profound after the Great Recession, but it’s not new. Real growth of gross domestic product was 51 percent in the 1950s, 53 percent in the 1960s, 38 percent in the ’70s, 35 percent in the ’80s, 39 percent in the 1990s — and just 16 percent in the 2000s (and thanks to Steve Randy Waldman for the research via the St. Louis Fed).

The reasons behind much of the the deceleration aren’t difficult to pinpoint: The economies of Japan and Germany were rebuilt and became world competitors; much of American manufacturing was complacent to threats and didn’t invest enough to meet them, and America hit its national oil peak in the early 1970s and was much more vulnerable to OPEC. The Morning in America decade actually performed worse than the decade of malaise, and the trend was somewhat reversed in the 1990s.

As for the 2000s, my suspects are the rise of China and our unwillingness to protect American jobs and industries; two recessions brought on by corporate wrongdoing; inequality that left more Americans unable to improve their economic conditions and hence productivity; unproductive finance, and the opportunity costs of two wars.


Comments | More in Debt, Deficit, Federal debt/deficit, Great Recession, Income/living standards, Inequality

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