December 3, 2013
Managing Government Debt and Deficits
Econ 236a
Professor Browne
Class dates: Tuesdays and Thursdays 3:30 to 4:40 p.m.
Office Hours: Before or after class; e-mail to arrange
E-mail: lebrowne@brandeis.edu
Course Overview
One consequence of the financial crisis of 2007-2009 and the subsequent recession
has been a sharp increase in government deficits in advanced countries and in
projections of government debt-to-GDP. In many cases, debt-to-GDP was already
projected to rise because of the health care and pension needs of aging populations.
With the increases caused by the crisis and its aftermath, projected debt ratios reach
levels rarely seen in the past.
These high debt levels and the associated interest costs provoke concerns on several
grounds. Will valued government services be squeezed out by rising interest
expense? Will private investment be displaced by government borrowing, with
adverse consequences for future economic growth and standards of living? Will
financial markets turn against heavily indebted countries, driving up interest rates
and creating a vicious cycle of higher interest rates, larger deficits and still higher
debt? Will central banks feel compelled to monetize government debt, leading to
high rates of inflation?
Policy prescriptions have diverged widely. Some economists and public leaders
have advocated tackling government deficits immediately with spending cuts and
tax increases. Others have stressed the importance of economic growth in lowering
the ratio of debt-to-GDP and have called for increased government spending as a
stimulus, even if it means higher deficits. Still others have recommended developing
plans that will restrain government spending in the long term, but cautioned against
any action that might slow economic activity in the near term.
This course will explore why so many countries find themselves in this difficult
predicament. It will also provide a background for understanding the rationales
behind the conflicting responses advocated. Students will develop their own
recommendations.
Learning goals and outcomes
Among the topics we will cover are
Why do we need governments?
Where does the money come from and where does it go?
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December 3, 2013
How does the age of the population affect spending?
What are the characteristics of a good tax system?
Why borrow?
What is countercyclical fiscal policy?
How does it compare with monetary policy?
How stimulative are spending increases and tax cuts?
What caused debt levels to increase so much?
What is a sustainable debt level?
What are the differences and similarities in the debt problems of the United
States, Europe and Japan?
What are the differences between the advanced and developing countries?
Course description
The course is a combination of seminar and lecture. The instructor will
generally begin the class by providing an overview of key issues and points of
debate. However, students will contribute actively to the group learning experience
through discussion of what they learned from the assigned readings.
Readings will be assigned for each class. Students are expected (a) to have
read these materials in advance and (b) to be ready talk about what they learned.
Pre-requisites
Students should have taken intermediate micro and macroeconomics.
Equivalent of undergraduate Econ 80a and 82a or graduate Econ 202a and 207a.
Evaluation
Final grades will be based on five components: (1) a paper on the debt
situation in a country to be specified; (2) a shorter paper providing background for
the longer paper; (3) a final exam; (4) a mid-term exam; and (5) class participation.
Grading weights:
Paper evaluating debt situation in a country to be specified and proposing
recommendations (15-20 pages) Due Apr 10
30 percent
Final exam (on entire semester’s material)
20 percent
Mid- term exam
On Feb 11
15 percent
Short essay (5 – 8 pages) Due Mar 6
15 percent
Background to longer essay – spending, revenue and debt patterns
Class participation
20 percent
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December 3, 2013
Class dates (Tuesdays and Thursdays):
January
14
16
21
23
28
February
4
6
11
13
March
4
6
11
13
18
April
1
3
8
10
May
Final exam
30
20
25
25
24
27
27
29
Things you should do
Attend all classes.
Actively participate in class by asking questions and sharing your own insights and
observations. Participation is noted and counted.
Complete papers on time.
Cite others work in your papers.
The papers are NOT team projects. You may discuss the general issues with your
colleagues, but you must write your own papers.
Things you should not do.
Quote others without attribution.
Disability: If you are a student with a documented disability on record at Brandeis
University and wish to have a reasonable accommodation made for you in this class,
please see me at your earliest opportunity.
Academic Integrity is central to the mission of educational excellence at Brandeis.
You are expected to be familiar with and to follow the University’s policies on
academic integrity (see http://www.brandeis.edu/studentlife/sdec/ai). Instances of
alleged dishonesty will be forwarded to the Office of Campus Life for possible
referral to the Student Judicial System. Potential sanctions include failure in the
course and suspense from the University.
Course Materials and Readings
Almost all the readings are available on the web.
One inexpensive book has been assigned:
Joseph E. Gagnon, with Marc Hinterschweiger, The Global Outlook for Government
Debt over the Next 25 years: Implications for the Economy and Public Policy, Peterson
Institute for International Economics, June 2011.
There are a lot of readings but many are short. You should skim them to extract the
main points
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December 3, 2013
Course Plan and Associated Readings
1) Course organization and overview of the government debt situation
(Jan 14 & 16)
Rebecca M. Nelson, Sovereign Debt in Advanced Economies: Overview and
Issues for Congress, Congressional Research Service, January 31, 2013,
especially pages 8 – 11 and appendix.
http://www.fas.org/sgp/crs/misc/R41838.pdf
Willem Buiter and Ebrahim Rahbari, Debt of Nations, November 2012. Skim
chapters 1 and 2.
http://gallery.mailchimp.com/828d68d00a72b1ccb86169728/files/584965
6_w_buiter_the_debt_crisis_1_.pdf
IMF, Fiscal Monitor: Fiscal Adjustment in an Uncertain World, Apr 2013,
http://www.imf.org/external/pubs/ft/fm/2013/01/pdf/fm1301.pdf
Executive summary, Tables 1,2 and 6 and Statistical Tables 1-4.
Stephen Cecchetti, MS Mohanty and Fabrizio Zampoli, The future of public
debt: prospects and implications” BIS Working Papers, No 300, March 2010,
especially section after p.6 on the future
http://www.bis.org/publ/work300.pdf
2) Key functions of governments (Jan 21 & 23)
a. Improve efficiency (nature of market failure)
b. Re-distribution
i. Rich to poor
ii. Young to old
iii. Healthy to sick
c. Cyclical smoothing
Milton Friedman, Capitalism and Freedom (1962), Chapter 2: The Role of
Government in a Free Society
http://books.cat-v.org/economics/capitalism-and-freedom/chapter_02
Thomas Helbling, “Externalities: Prices Do Not Capture All Costs”
www.imf.org/external/pubs/ft/fandd/basics/external.htm
Tyler Cowen, “Public Goods,” The Concise Encyclopedia of Economics, Library
of Economics and Liberty
http://www.econlib.org/library/Enc/PublicGoods.html
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December 3, 2013
John Dutton, “Public and Private Goods/The Tragedy of the Commons”
https://www.e-education.psu.edu/geog432/node/277
Jeffrey A. Miron “Rethinking Redistribution,” National Affairs, Issue Number
6- Winter 2011, especially first section on rationales for redistribution
www.nationalaffairs.com/publications/detail/rethinking-redistribution
Douglas W. Elmendorf and Jason Furman, If, When, How: A Primer on Fiscal
Stimulus, The Hamilton Project, pp. 4 – 9.
http://www.brookings.edu/~/media/research/files/papers/2008/1/10%2
0fiscal%20stimulus%20elmendorf%20furman/0110_fiscal_stimulus_elmend
orf_furman.pdf
3) Government spending patterns (Jan 28 & 30)
a. National defense
b. Entitlements
c. Discretionary non-military
d. Capital spending versus operating costs
e. Tax expenditures
f. Who does what? (federal, state, local)
Robert Hicks, “Government Growth,” The Concise Encyclopedia of Economics,
Library of Economics and Liberty
http://www.econlib.org/library/Enc/GovernmentGrowth.html
Nate Silver, “What is Driving Growth in Government Spending?” NYTimes
FiveThirtyEight, January 16, 2013. The charts, which are revealing, only
show up online.
http://fivethirtyeight.blogs.nytimes.com/2013/01/16/what-is-drivinggrowth-in-government-spending/?_r=0
Sabina Dewan and Michael Ettlinger, Comparing Public Spending and
Priorities across OECD Countries, Center for American Progress, October
2009. Page 5 on.
www.americanprogress.org/wpcontent/uploads/issues/2009/10/pdf/oecd_spending.pdf
OECD, Social spending during the crisis, Social expenditure (SOCX) data
update 2012
http://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheCrisis8p
ages.pdf
4) Financing government – Taxes (Feb 4 & 6)
a. Characteristics of a good tax system
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December 3, 2013
b. Incidence
Jospeh J. Minarik, “Taxation,” The Concise Encyclopedia of Economics, Library
of Economics and Liberty.
http://www.econolib.org/library/Enc/Taxation.html
IMF, Guidelines for Fiscal Adjustment, Pamphlet No. 49. Sections on
Characteristics of a Desirable Tax System and Design of Major Taxes
http://www.imf.org/external/pubs/ft/pam/pam49/pam4904.htm
Mark Burton and Miranda Stewart, Promoting Budget Transparency through
Tax Expenditure Management, June 2011. Chapter 1, Section 2.4 of Chapter 2,
Table 3.2
http://internationalbudget.org/wp-content/uploads/Promoting-BudgetTransparency-Through-Tax-Expenditure-Management.pdf
James M. Bickley, Value-Added Tax (VAT) as a Revenue Option: A Primer,
March 22, 2011
http://assets.opencrs.com/rpts/R41708_20110322.pdf
Kurt Wise and Noah Berger, Understanding our Tax System: A Primer for
Active Citizens,” Massachusetts Budget and Policy Center. Chapter One on the
Five Criteria and the first couple of paragraphs in the chapters on major tax
categories.
http://massbudget.org/report_window.php?loc=Tax_Primer_83110.html
OPTIONAL
Jonathan Z. Ackerman and Rosanne Altshuler, “Constrained Tax Reform: How
Political and Economic Constraints Affect the Formation of Tax Policy
Proposals, National Tax Journal, March 2006. Skim. Highlights difficulties of
tax reform.
http://ntj.tax.org/wwtax/ntjrec.nsf/651BE8FD156C29A18525715E005A19
C2/$FILE/Article%2007-Ackerman%20(F).pdf
OPTIONAL
James Poterba, “The Challenge of Tax Reform and Expanding the Tax Base,
Geary Lecture – 2009,” The Economic and Social Review, Summer 2010.
www.esri.ie/UserFiles/publications/jacb201065/GLS38.pdf
MIDTERM EXAM ON FEB 11
5) Economic and financial stabilization (Feb 13 & 25)
a. What is fiscal policy?
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December 3, 2013
b. Automatic stabilizers
c. Discretionary fiscal policy
d. Fiscal vs. monetary policy
Alan J. Auerbach, William G. Gale and Benjamin Harris, “Activist Fiscal Policy,”
Journal of Economic Perspectives, Fall 2010. Pages 141-145 and 158-159.
http://www.urban.org/UploadedPDF/1001481-Activist-Fiscal-Policy.pdf
Douglas W. Elmendorf and Jason Furman, If, When, How: A Primer on Fiscal
Stimulus, The Hamilton Project. January 2008.
http://www.brookings.edu/~/media/research/files/papers/2008/1/10%2
0fiscal%20stimulus%20elmendorf%20furman/0110_fiscal_stimulus_elmend
orf_furman.pdf
Renee Courtois, “What we do and don’t know about discretionary fiscal
policy,” Economic Brief, April 2009.
http://www.richmondfed.org/publications/research/economic_brief/2009/
pdf/eb_09-04.pdf
Richard W. Kopcke, Geoffrey M.B. Tootell, and Robert K. Triest, “Introduction:
The Macroeconomics of Fiscal Policy,” Conference Series 49 (June 2004.)
Pages 3-10 and 20. Optional: skim balance.
http://www.bostonfed.org/economic/conf/conf49/introduction.pdf
CBO, “The effects of automatic stabilizers on the Federal Budget as of 2013,”
March 2013. You should look at the complete document as well.
http://www.cbo.gov/publication/43977
6) Debt financing (Feb 27, Mar 4)
a. Why resort to debt financing?
b. Does it matter?
c. Lessons from emerging countries
Rebecca M. Nelson, Sovereign Debt in Advanced Economies: Overview and
Issues for Congress, Congressional Research Service, January 31, 2013,
especially pages 8 – 11 and appendix.
http://www.fas.org/sgp/crs/misc/R41838.pdf
Stephen Cecchetti, MS Mohanty and Fabrizio Zampoli, The future of public
debt: prospects and implications” BIS Working Papers, No 300, March 2010,
especially section after p.6 on the future
http://www.bis.org/publ/work300.pdf
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December 3, 2013
Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jurgen von Hagen and
Charles Wyplosz, Public Debts: Nuts, Bolts and Worries. Geneva Reports on
the World Economy 13, September 2011. Summary and sections 2.1 and 2.2
of Chapter 2.
http://www.voxeu.org/sites/default/files/file/Geneva13.pdf
CBO, The 2012 Long-term Budget Outlook, June 2012. Summary and Chapter
1
http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-LongTerm_Budget_Outlook_2.pdf
Thomas Herndon, Michael Ash and Robert Pollin, “Does High Public Debt
consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff” April
2013
http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_paper
s_301-350/WP322.pdf
Response
http://blogs.wsj.com/economics/2013/04/16/reinhart-rogoff-response-tocritique/
SHORT ESSAY DUE MAR 6
7) Sources of current and projected high debt levels (Mar 6)
a. Impact of financial crisis
b. Long-term challenges
Joseph E. Gagnon with Marc Hinterschweiger, The Global Outlook for
Government Debt over the Next 25 Years: Implications for the Economy and
Public Policy, Peterson Institute for International Economics, June 2011
IMF, Fiscal Monitor: Addressing Fiscal Challenges to Reduce Economic Risks,
September 2011.
www.imf.org/external/pubs/ft/fm/2011/02/pdf/fm1102.pdf
Box 6, p. 26.
If time permits:
Glenn Hubbard and Tim Kane, “Regaining America’s Balance,” National
Affairs
http://www.nationalaffairs.com/publivations/detail/print/regainingamericas-balance
If you are interested in knowing more about the demographic changes that
pose difficult future challenges, see below.
Jane Sneddon Little and Robert Triest, Seismic Shifts: The Economic Impact of
Demographic Change, June 2001.
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December 3, 2013
The conference volume discusses fiscal (and other) implications of
population change. Most relevant to the effects of population aging in
advanced countries are the papers and comments below:
David Weil (especially Economic Lessons)
Joel Cohen (pages 96-104)
Paul Atkinson (pages 230-236)
http://www.bos.frb.org/economic/conf/conf46/index.htm
8) Sustainability (Mar 11 & 13)
a. What is a sustainable debt level?
b. Role of financial markets
c. Inflation as an answer
d. Default as an answer
e. Experience of developing countries
Note: Formulas for sustainability are slightly different in some of the articles,
but key points are the same and the numerical results are almost identical.
Some formulas assume the primary balance is a deficit and adds to debt;
some assume the balance is a surplus and debt-reducing.
Silvio Contessi, “An Application of Conventional Sovereign Debt
Sustainability Analysis to the Current Debt Crises” Federal Reserve Bank of St.
Louis Review, May/June 2012
http://research.stlouisfed.org/publications/review/12/05/197220Contessi.pdf
Focus on general discussion and circumstances of individual countries. For
derivation of formula for sustainability see p. 202 and equation 16 (p.212.)
Willem Buiter and Ebrahim Rahbari, Debt of Nations, November 2012.
http://gallery.mailchimp.com/828d68d00a72b1ccb86169728/files/584965
6_w_buiter_the_debt_crisis_1_.pdf
Chapter 4 and Chapter 7 (default.)
IMF, Fiscal Monitor: Fiscal Adjustment in an Uncertain World, Apr 2013,
http://www.imf.org/external/pubs/ft/fm/2013/01/pdf/fm1301.pdf
Pages 21 -34.
IMF, “The Good, the Bad, and the Ugly: 100 Years of dealing with public debt
overhangs,” World Economic Outlook: Coping with High Debt and Sluggish
Growth, October 2012.
http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c3.pdf
Optional:
European Commission, Fiscal Sustainability Report, 2012, European
Economy 8/2012. Read the Executive Summary and Chapter 2.
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December 3, 2013
http://ec.europa.eu/economy_finance/publications/european_economy/20
12/pdf/ee-2012-8_en.pdf
9) Reining in deficits and smoothing spending (Mar 18 &20)
a. Constitutional limitations
i. U.S. states
b. “paygo” laws and other fiscal rules
c. budget institutions
d. rainy day funds
C. Randall Henning and Martin Kessler, “Lessons for Europe’s fiscal union
from U.S. federalism,” VOX, January 25, 2012. Discusses whether U.S. states’
limits on deficits are relevant to Europe.
http://www.voxeu.org/article/europe-s-fiscal-union-lessons-us-federalism
The full article on which these comments are based is very interesting and
somewhat clearer than the blog: C. Randall Henning and Martin Kessler,
Fiscal Federalism: U.S. History for Architects of Europe’s Fiscal Union, January
2012.
www.petersoninstitute.org/publications/wp/wp12-1.pdf
Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jurgen von Hagen and
Charles Wyplosz, Public Debts: Nuts, Bolts and Worries, Geneva Reports on
the World Economy 13, September 2011. Skim Chapters 1 and 2.
http://www.voxeu.org/sites/default/files/file/Geneva13.pdf
IMF, Fiscal Monitor: Fiscal Adjustment in an Uncertain World, Apr 2013,
http://www.imf.org/external/pubs/ft/fm/2013/01/pdf//fm1301.pdf
Box 1, p.35
Andrea Schaechter, Tidiane Kinda, Nina Budina, and Anke Weber, “Fiscal
Rules in Response to the Crisis – Toward the ‘Next-Generation ‘ Rules. A new
Dataset.” IMF Working Paper WP/12/187. Look at pages 6 – 10.
http://www.imf.org/external/pubs/ft/wp/2012/wp12187.pdf
Bipartisan Policy Center, Save-as-you-Go (SAVEGO)
http://www.Bipartisanpolicy.org/projects/economic-policy-project/savego
Example of a set of policy rules.
ITEP, A Primer on State Rainy Day Funds, Policy Brief # 25, 2005
www.itep.org/pdf/pb25rdf.pdf
Optional:
Frank Marty and Martin Weder, “Debt brake: a mechanism for sustainable
success,” Dossierpolitik, September 10, 2012
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December 3, 2013
www.economiesuisse.ch/en/Documents/dp18_Schuldenbremse_e_web.pdf
Description of how the Swiss debt brakes work. Relatively short and
straightforward.
Optional:
Joseph Henchman, “Trend #8: Insufficient Rainy Day Funds,” Tax Foundation,
June 5, 2012
http://Taxfoundation.org.article/trend-8-insuficient-rainy-day-funds
Optional:
Erling Steigum, “Sovereign Wealth Funds for Macroeconomic Purposes,” BI
Norwegioan Business School, Working Paper Series 4/12, December 2012
www.bi.edu/cmefiels/Working%20paper%202012%2004%20combined%2
0v2.pdf
10)Austerity-stimulus debate and discussion of multipliers (Mar 25 & 27)
The Auerbach, Gale and Harris article is probably the most important. The
Box in the IMF’s October 2012 Global Prospects and Policies has gotten a lot of
attention. Alesina’s work, summarized in the voxeu piece, has also received
considerable attention.
Alan J. Auerbach, William G. Gale and Benjamin Harris, “Activist Fiscal Policy,”
Journal of Economic Perspectives, Fall 2010. Especially pages 141-145 and
158-159. If you are interested in how different models produce different
results, see pages 148 – 152.
http://www.urban.org/UploadedPDF/1001481-Activist-Fiscal-Policy.pdf
Jeffrey Frankel, “Monetary alchemy, fiscal science,” VOX, January 29, 2013
http://www.voxeu.org/article/monetary-alchemy-fiscal-science
Richard Hemming, Michael Kell, and Selma Mahfouz, “The Effectiveness of
Fiscal Policy in Stimulating Economic Activity – A Review of the Literature,”
IMF Working Paper, December 2002.
http://www.imf.org/external/pubs/ft/wp/2002/wp02208.pdf
Look at the theoretical section (pages 3 – 11) and skim the multiplier
estimates.
IMF, Global Prospects and Policies, October 2012, Box 1.1 “Are We
Underestimating Short-Term Fiscal Multipliers?” p.41
ww.imf.org/external/pubs/ft/weo/2012/02/pdf/c1.pdf
Olivier Blanchard and Daniel Leigh expand upon their analysis in the paper
below, but the box has the main points.
“ Growth Prospects and Fiscal Multipliers,” January 2013.
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December 3, 2013
www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf.
Alberto Alesina, “Cut deficits by cutting spending,” VOX, November 2012,
http://www.voxeu.org/article/cut-deficits-cutting-spending.
Optional:
Menzie Chinn, “Fiscal Multipliers,” February 23, 2012.
This is fairly academic but short and covers key issues.
Optional:
Valerie A. Ramey, “Can Government Purchases Stimulate the Economy,” June
14, 2011.
http://weber.ucsd.edu/~vramey/research/JEL_Fiscal_14June2011.pdf
This is quite academic. I included it because she highlights how different the
multiplier mechanisms are in different modeling approaches. Neoclassical
models assume very different effects from traditional Keynesian models;
http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Fact_Sheets/
Economic_Policy/drivers_federal_debt_since_2001.pdfNew Keynesian DSGE
models may have elements of both.
Optional:
Brad DeLong and Larry Summers, “Fiscal Policy in a Depressed Economy,”
2012
http://www.brookings.edu/~/media/files/programs/es/bpea/2012_spring
_bpea_papers/2012_spring_bpea_delongsummers.pdf
11)Focus on Japan (Apr 1 & 3)
Class discussion focused on recommendations
a) Sources of problem
b) Outlook
c) Recommendations
Make sure to read Jones and Urasawa.
Jones, Randall S. and Satoshi Urasawa, “Restoring Japan’s Fiscal
Sustainability,” (2013) OECD Economics Department Working Papers
No.1050
http://dx.doi.org/10.1787/5k46cvtkbf33-en
This is very informative. You can read this online but not download.
Econbrowser, How long can Japanese bond prices defy gravity? August 12,
2012
www.econbrowswer.com/archives/2012/08/how-long-can-ja.html
Summarizes key points in the following:
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December 3, 2013
Hoshi, Takeo and Takatoshi Ito, “Defying Gravity: Can Japanese sovereign
debt continue to increase without a crisis?” March 2013
https://cama.crawford.anu.edu.au/amw2013/doc/DefyingGravityEconomic
Policy2013o317.pdf
Posen, Adam, “Japan Should Re-think its Fiscal Stimulus,” Op-ed in Financial
Times, January 15, 2013
http://www.piie.com/publications/opeds/oped.cfm?ResearchID=2314
Rimkus, Ron, The Japanese Debt Crisis: Has Japan Passed the Point of No
Return?” Enterprising Investor, April 2012
http://blogs.cfainstitute.org/investor/2012/04/19/the-japanese-debt crisis-has-japan-passed-the-point-of-no-return/
IMF, World Economic Outlook: The Good, the Bad, and the Ugly: 100 Years of
Dealing with Public Debt Overhangs, October 2012.
Section on Japan, pp. 114- 115
http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c3.pdf
LONGER PAPER DUE APR 10
12) Focus on Europe (Apr 8 &10)
Class discussion focused on recommendations
a. Sources of problem
b. Implications of common currency
c. Outlook
d. Recommendations
OECD, Restoring Public Finances should be consulted to find out what
individual European countries have done. Skim the general discussion and
the cross country comparisons; then look at a few individual countries that
have been in the news..
OECD, Restoring Public Finances, 2011 and 2012 include information on what
individual countries have done to reduce deficits. The 2011 volume is
somewhat more clearly organized and can be downloaded; so I suggest
looking at it first and then looking at the 2012 update. The link below is for
the 2011 volume.
http://www.oecd.org/gov/budgeting/47558957.pdf
European Commission, Fiscal Sustainability Report, 2012, European
Economy 8/2012. Read the Executive Summary and several of the individual
country analyses, which include debt projections to 2030. Skim chapters 1
and 2 and some of the data tables in chapter 3. Look at section 4.2.8 of
Chapter 4.
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December 3, 2013
http://ec.europa.eu/economy_finance/publications/european_economy/20
12/pdf/ee-2012-8_en.pdf
Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jurgen von Hagen and
Charles Wyplosz, Public Debts: Nuts, Bolts and Worries. Geneva Reports on
the World Economy 13, September 2011. Chapter 4.
http://www.voxeu.org/sites/default/files/file/Geneva13.pdf
Daniel Gros, “Europe’s misguided search for growth,” May 7, 2012
http://www.project-syndicate.org/commentary/europe-s-misguidedsearch-for-growth
Daniel Gros, “Has Austerity Failed in Europe,” August 14, 2013
http://www.project-syndicate.org/commentary/how-austerity-has-helpedthe-eurozone-periphery-by-daniel-gros
Both pieces are short and interesting.
European Commission, 2013 Report on Public Finances in the EMU. Part 1,
Chapter 1, Chapter 2 sections 2.2.2.4 The Annex provides some general
information about individual countries.
http://ec.europa.eu/economy_finance/publications/european_economy/20
13/pdf/ee-2013-4-01.pdf
OECD, Restoring Public Finances, 2011. Includes information on what
individual countries have done to reduce deficits. There is also a 2012
update. However, the 2011 volume is somewhat more clearly organized and
can be downloaded; so I suggest looking at it first and then looking at the
update.
http://www.oecd.org/gov/budgeting/47558957.pdf
Frank Marty and Martin Weder, “Debt brake: a mechanism for sustainable
success,” Dossierpolitik, September 10, 2012
www.economiesuisse.ch/en/Documents/dp18_Schuldenbremse_e_web.pdf
Description of how the Swiss debt brakes work. Relatively short and
straightforward.
13)Focus on the United States (Apr 24 & 29)
Class discussion focused on recommendations
a. Sources of problem
b. Outlook
c. Recommendations
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December 3, 2013
Make sure you read “The Solutions Initiative,” at least through p. 21. Also
look at the CBO publications.
“The Solutions Initiative,” Sponsored by the Peter G. Peterson Foundation,
2011 Fiscal Summit. Read at least through p. 23.
http://www.pgpf.org/sites/default/files/sitecore/media%20library/PGPF/
Media/PDF/2011/FiscalSummit_2011/2011%20Fiscal%20Summit%20Boo
k.pdf
CBO, Options for Reducing the Deficit: 2014 to 2023, November 2013
www.cbo.gov/publication/44715.
Read pages 2- 8 and the introductions (“trends” sections) to chapters 2
through 5. Note how small most of the suggested options are compared to
the projected deficit.
CBO, The 2013 Long-Term Budget Outlook, September 2013.
www.cbo.gov/sites/default/files/cbofiles/attachments/44521LTBO2013_0.pdf
Read the Summary, pages 1-5, Chapter 1 pages 10 and 11 and the Box 1-1.
Also Chapter 6, Table 6-1.
Moment of Truth Project, A Bipartisan Path Forward to Securing America’s
Future, April 2013. Follow up to Simpson-Bowles Commission.
http://www.momentoftruthproject.org/sites/default/files/Full%20Plan%2
0of%20Securing%20America's%20Future.pdf
Original report is rather long and detailed:
The National Commission on Fiscal Responsibility and Reform, The Moment
of Truth, December 2010
Center for a Responsible Federal Budget, Our Debt problems are Far from
Solved, Updated February 11, 2013
http://crfb.org/document/report-our-debt-problems-are-far-solved
and update May, 2013
http://crfb.org/document/report-our-debt-problems-are-still-far-solved
Center for a Responsible Federal Budget, What we expect from upcoming
fiscal discussions, May 30, 2013
http://crfb.org/document/report-what-we-expect-upcoming-fiscaldiscussions
What contributed to the increase in debt and deficits since 2001:
Kathy A. Ruffing and Joel A. Friedman, Economic Downturn and Legacy of
Bush Policies Continue to Drive Large Deficits, Center on Budget and Policy
Priorities, Updated February 28, 2013
http://www.cbpp.org/files/10-10-12bud.pdf
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December 3, 2013
and
Pew Fiscal Analysis Initiative, The Great Debt Shift: Drivers of Federal Debt
Since 2001, The Pew Charitable Trusts.
http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Fact_Sheets/
Economic_Policy/drivers_federal_debt_since_2001.pdf
Optional: Marc Labonte and Andrew Hanna, The Impact of Major Legislation
on Budget Deficits: 2001 to 2009, March 23, 2010
www.fas.org/sgp/crs/misc/R41134.pdf
Contributions to recent increases in U.S. deficits. Look at tables 1, 2 and 3.
Skim the rest. (The CBPP and Pew references provide a shorter analysis of
this issue.)
Glenn Hubbard and Tim Kane, “Regaining America’s Balance,” National
Affairs, Winter 2013.
http://www.nationalaffairs.com/publications/detail/regaining-americasbalance
Alan J. Auerbach, Long-term fiscal sustainability in major economies, BIS
Working Papers, No 361, November 2011. Section on U.S. (pp. 2-5)
http://www.bis.org/publ/work361.htm
IMF, Fiscal Monitor: Fiscal Adjustment in an Uncertain World, Apr 2013,
http://www.imf.org/external/pubs/ft/fm/2013/01/pdf/fm1301.pdf
Box 5, p. 42
Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jurgen von Hagen and
Charles Wyplosz, Public Debts: Nuts, Bolts and Worries. Geneva Reports on
the World Economy 13, September 2011. Chapter 3 and Sections 6.4 and
6.6.1.
http://www.voxeu.org/sites/default/files/file/Geneva13.pdf
Testimony by Sen. Pete V. Domenici and Dr. Alice Rivlin to the Joint Select
Committee on Deficit Reduction, U.S. congress, November 1, 2011
http://www.brookings.edu/~/media/research/files/testimony/2011/11/0
1%20deficit%20committee%20domenici%20rivlin/1101_deficit_committee
_domenici_rivlin.pdf
Other Resources for Papers
For sources of the problem, look at
Nate Silver, “What is Driving Growth in Government Spending,” Five Thirty Eight,
January 16, 2013, for historic spending trends.
http://fivethirtyeight.blogs.nytimes.com/2013/01/16/what-is-driving-growth-ingovernment-spending/?_r=0
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December 3, 2013
Ruffing, Kathy A. and Joel A. Friedman, Economic Downturn and Legacy of Bush
Policies Continue to Drive Large Deficits, Center on Budget and Policy Priorities,
Updated February 28, 2013, for developments from 2001 to 2019.
http://www.cbpp.org/fiels/10-10-12bud.pdf
International Monetary Fund, “From Stimulus to Consolidation: Revenue and
Expenditure Policies in Advanced and Emerging Economies,” Prepared by Fiscal
Affairs Department, April 30 2010
http://www.imf.org/external/np/pp/eng/2010/043010a.pdf
Data for many different countries on current and projected expenditures and
current taxes.
OECD, Restoring Public Finances, 2011. Includes information on what individual
countries have done to reduce deficits. There is also a 2012 update.
http://www.oecd.org/gov/budgeting/47558957.pdf
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