Group items matching

in title, tags, annotations or url

MR. ALLEN: O.K., O.K., wait. You’re proposing that the debt ceiling be increased month by month? MR. NORQUIST: Monthly. Monthly. Monthly if he’s good, weekly if he’s not.

In short, the debt limit is a hostage that Republicans are willing to kill or maim in pursuit of their agenda. They have made this clear ever since the debt ceiling debate in 2011, in which the Treasury came very close to defaulting on the debt.

At some point, Treasury will lack the cash to pay the bills that are due and it will face nothing but unthinkable choices – don’t pay interest to bondholders and default on the debt, don’t pay Social Security benefits, don’t pay our soldiers in the field and so on.

At the risk of stating the obvious, the debt limit is nuts. It serves no useful purpose to allow members of Congress to vote for vast cuts in taxation and increases in spending and then tell the Treasury it is not permitted to sell bonds to cover the deficits Congress created. To my knowledge, no other nation has such a screwy system.

In a new book, “Is U.S. Government Debt Different?,” Howell Jackson, a law professor at Harvard, walks through options for prioritizing government spending in the event that Republicans insist on committing financial suicide. They are all illegal or unconstitutional to one degree or another. They would require the Treasury to either abrogate Congress’s taxing power, spending power or borrowing power.

the question of what a president should do when he must act and all his options are unconstitutional. They cite Abraham Lincoln’s July 4, 1861, message to Congress in support of the idea that some laws are more unconstitutional than others and the president is empowered to violate the one that is least unconstitutional when he has no other option. Said Lincoln, “To state the question more directly, are all the laws, but one, to go unexecuted, and the government itself go to pieces, lest that one be violated?”

In the present case, of course, the one law would be the debt limit, which Professors Buchanan and Dorf say is less binding on the president than unilaterally cutting spending or raising taxes without congressional approval. Hence, if Republicans are truly mad and absolutely refuse to raise the debt limit, thereby risking default or the nonpayment of essential government bills, Professors Buchanan and Dorf believe the president would have the authority to sell bonds over and above the limit.

There are a host of practical problems any time the president is forced into uncharted constitutional territory, as Lincoln so often was. But when faced with an extortion demand from a political party that no longer feels bound by the historical norms of conduct, the president must be willing to do what has to be done.

In the 1930s, the private economy stumbled and private financial arrangements failed in many ways – but, on the whole, government was perceived as stepping in to help.

The politician whose career better matches the long march of the American right is Newt Gingrich. Mr. Gingrich, elected to Congress in 1978, astutely saw the possibility of building a coalition that would turn the South into a Republican stronghold. Mr. Gingrich voted against the fiscal compromises between George H.W. Bush and the Democrats and, as speaker of the House, crafted the confrontations that led to the government shutdowns in late 1995 and early 1996.

According to the latest C.B.O. numbers, debt relative to gross domestic product remains below 120 percent through the 2030s. I regard this as manageable, with the major wild cards being the extent of additional foreign war follies or big financial system blowups.

This backlash against government has been a long time coming, but – perhaps in the final irony – America’s fiscal affairs were in relatively good shape until quite recently.

these developments have been backed by people with deep pockets and a great deal of patience.

The economic recovery, although weak, has improved the nation’s fiscal picture – as have the large spending cuts and more modest revenue increases in the last few years

it only indicated what was to come – increasing willingness to further undermine the government and to question the validity of its debts. Every time the United States comes to a line, the most extreme voices in the Republican Party want to go even further – this time calling for an actual default on government obligations in some form as a potentially good thing.

I recommend that the revenue base be strengthened as the economy recovers further over the coming decade, while keeping a lid on spending increases. There is no case for precipitous fiscal adjustment, let alone a political confrontation that generates great uncertainty and therefore deters both investment and the purchase of consumer durables (including housing).

But it’s too late for good short-term fiscal news or to insist that the problem the country faces over coming decades is the rising cost of health care (not the government-paid part of health care, but all health care costs). Too many people are convinced strongly that they know better than what is in the numbers.

the decline in legitimacy of the United States government is real and lasting; it cannot regain the prestige it had in the 1940s and 1950s. Reinforcing and accelerating this trend is perhaps the greatest damage caused by the financial crisis of 2007-8 and the “rescue” measures that ensued.

Sooner or later, the American public may elect a group of politicians determined to end the belief that the federal government can be trusted. Their initial steps in that direction will strengthen their showing in opinion polls – and they will be encouraged to go further. At that time, the United States will default on its debts and the world’s financial and fiscal systems will be plunged into chaos.

“This is an invitation. Show us how to balance the budget,” Mr. Ryan said. “If you don’t like the way we’re proposing to balance our budget, how do you propose to balance the budget?”

Jay Carney, the White House press secretary, said Tuesday. “It is important to bring our deficits down and to reduce our deficit-to-G.D.P. But they are part of — those goals are part of the broader purpose here, which is to grow the economy and strengthen the middle class.”

Economists offered more nuanced views. Closing the budget gap over the longer term could be vital to sustaining economic health, some stressed, by ensuring that the government did not crowd out private investment and by helping to keep interest rates low. But that does not make it an immediate necessity.

“The people who say the debt is irrelevant — that’s going too far,” said Mr. Rogoff, who along with Carmen Reinhart of Harvard produced a study of the interplay between debt and growth. “It’s a very rarefied air that we’re in already. And it could be a problem. You can’t turn your debt around in a year, and you cannot reduce debt quickly and easily.”

Other goals — including stabilizing debt as a proportion of economic output, rationalizing the tax code and tackling the long-term fiscal challenge posed by entitlement programs — might prove more important in the coming years, several experts said.

As sensible as a balanced budget might sound — much like a balanced checkbook for a family — countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth,

The Senate Democratic proposal does not balance the budget, but it does reduce deficits to below 3 percent of economic output — a level that would stabilize the debt, economists said. During the 10-year budget window, the debt would start to shrink as a proportion of the economy.

A broader question, economists said, is the long-term effect the country’s debt load might impose on the economy. In the past few years, a number of broad-based studies have suggested that having government debt equivalent to or greater than about 85 or 90 percent of economic output might eventually cut into growth. Currently, public debt in the United States is about 76 percent of the size of the economy. Including debts the government owes itself, like in the Social Security Trust Fund, the total load is in fact bigger than a whole year’s economic output.

you suffer some short-run pain, and you don’t want to inflict that when the unemployment rate is already high, the economy is still recovering from the legacy of the Great Recession, and the Federal Reserve has used up most of what’s in its quiver.”

Now, how and whether to get back to a balanced budget seems to be a new fight between Democrats and Republicans. “It will generate a debate over the appropriate goal of long-term fiscal policy,” wrote William A. Galston of the Brookings Institution in an analysis of Mr. Ryan’s budget plan. “Is it to eliminate the deficit and the debt, to ensure that the debt does not rise as a share of G.D.P., or something in between?”

The harder question is not whether fiscal policy is relatively tight — it is — but rather whether tight fiscal policy is appropriate.

These latest deficit numbers arrive while voters claim to be highly engaged by the federal budget. A recent Gallup poll shows that 73 percent of registered voters say that the federal budget deficit is either “very important” or “extremely important” to their vote for in next month’s midterm elections, and the share is even higher among Republican voters.

As the economic recovery continues, the deficit is expected to narrow even further next year. Based on current projections, the average deficit through President Obama’s second term will be smaller than it was through President Reagan’s second term.

In terms of political implications, the Democrats may try to use the shrinking budget deficit as an argument to try to win support from fiscally conservative Republicans. But the reality of recent budget numbers is unlikely to win them much, because it stands so starkly at odds with the broader public perception that the deficit remains much larger than it really is.

cuts to domestic programs resulted in a decline in spending on critically needed infrastructure from 0.22 percent of gross domestic product in 2010 to 0.14 percent in 2012, and it’s still falling.

Harder to quantify — but unquestionably occurring — is the effect of the uncertainty and government by crisis on both consumers and business. During the 2011 debt ceiling drama and again this fall, consumer confidence, as measured by surveys, plunged and is currently at a nine-month low.

One-half of the chief executives in the latest Business Roundtable CEO Economic Outlook survey “indicated that the ongoing disagreement in Washington over the 2014 budget and debt ceiling is having a negative impact on their plans for hiring additional employees over the next six months.”

Macroeconomic Advisers recently estimated that since the end of 2009, the uncertainty created by the series of crises has shaved 0.3 percentage points per year off economic growth and raised the unemployment rate in 2013 by 0.6 percentage points, the equivalent of 900,000 lost jobs.

the practice of making key fiscal decisions a few months at a time, under the repeated threat of draconian consequences, should come to an end. Both business and consumers are reasonably entitled to be able to plan.

Second, we need to bring some sanity to fiscal policy. No one can doubt the need for significant, long-term reform. The growth in spending for Medicare, Social Security and other “entitlement” programs brings the distasteful prospect of continuing cuts in all other programs, higher taxes, growing deficits or some combination of them all.

But more immediately, because of the influence of conservative groups like the Tea Party, spending by the federal government on these other critical domestic programs has fallen by 10 percent (before adjusting for inflation!) in just two years

Without Congressional action, the forced sequester cuts will have an even greater effect as they are fully implemented in this fiscal year. It’s time that policy makers recognize the damage they are doing to the economy with their short-term thinking and imprudent fiscal decisions.

The ratio of job openings to unemployed workers remains high and, outside the affected sectors, wage growth has not fallen much.

economic disruption appears concentrated in certain sectors, rather than spread widely.

If job creation were to return to the average pace achieved between June and November 2020, the pre-pandemic peak in employment would be reconquered in less than a year.

And stimulus has more than made up the disruption to incomes in 2020

total fiscal stimulus in 2020 amounted to almost $3trn (about 14% of GDP in 2019)

a government-backed housing-finance firm, by mid-December Americans had accumulated about $1.6trn in excess savings.

economists typically assume that households are much less likely to spend wealth windfalls (such as the gains from a rise in the stockmarket) than income.

But if people instead regard these excess savings as delayed income, then the cash hoard represents stimulus that has not yet gone to work, to be unleashed when the economy fully reopens.

Mr Biden’s proposed $1.9trn of stimulus, which includes another $1,400 in cheques, would make the total fiscal boost in 2021 roughly equal to that in 2020.

Typically, Keynesians argue that fiscal stimulus boosts the economy because of a sizeable “multiplier” effect. But the case for the stimulus to be as large as Mr Biden’s proposal “has to be that you think the multiplier in 2021 is really small”,

it seems destined to take total spending in the economy beyond what it can produce next year, resulting in a burst of inflation.

Indeed, since January 6th, when the Democrats won the crucial Senate seats in Georgia that might allow them to pass a big stimulus, the ten-year Treasury yield has risen from about 0.9% to around 1.1%.

bond investors have been expecting higher real interest rates, rather than just higher inflation.

Mr Powell says the Fed has learned the lessons of 2013, when its hints that it might taper asset purchases sent bond markets into a tizz.

It is unclear whether policymakers are committed to “average inflation targeting” as an end in itself, or simply as a means to stop inflation expectations from slipping too much during the downturn,

the assumption of cheap money that underpins today’s sky-high asset prices and the sustainability of rocketing public debt might begin to unravel.

The most likely outcome is that Congress agrees on a smaller stimulus than Mr Biden has proposed, and that overheating, if it occurs, proves temporary.

nobody really knows how fast the economy can grow without setting off inflation.

The United States entered its longest expansion on record in July and the jobless rate is at a 50-year low, yet the deficit has continued to widen.

The deficit is growing in large part because tax receipts are falling, as Mr. Trump’s 2017 tax cuts continue to siphon revenue from the Treasury. The numbers reflect the fact that Mr. Trump’s most significant legislative achievement is not paying for itself, as Republicans have said it would.

“The biggest factor was the tax cuts, which gave a short-term sugar high but now are just contributing to a larger deficit,”

Fears of trillion-dollar deficits could renew the desire of Republicans in Congress to propose cuts to social programs, like food stamps, Social Security and other safety net benefits. Republicans have long pointed to swelling deficits as a reason to pursue their long-held vision of smaller government, including undoing many of the programs ushered in during the New Deal and Great Society to help the most disadvantaged Americans.

Senator Mike Enzi, a retiring Republican from Wyoming who leads the budget committee, called the country’s fiscal path unsustainable and said spending must come down.

Republicans, who have shut down the government in their quest to cut spending, have enabled the increases that are exacerbating the deficit.

With the deficit growing, it remains unclear how Mr. Trump and the Democrats will address the issue during the election. Democratic candidates such as Senators Elizabeth Warren and Bernie Sanders have introduced broad expansions of social safety net programs and have proposed paying for them with big tax increases on the rich.

On Friday, before the deficit figures were released, Mr. Trump remained focused on recent increases in the stock market and the low jobless rate. “The economy is booming,” he said.

The result was an aggressive monetary expansion that effectively ended deflation.

The economy responded strongly. From 1933 to 1937, real gross domestic product grew at an annual rate of almost 10 percent, and unemployment fell from 25 percent to 14. To put that in perspective, G.D.P. growth has averaged just 2.5 percent in the current recovery, and unemployment has barely budged.

The lesson here is that fiscal stimulus can help a depressed economy recover — an idea supported by new studies of the 2009 stimulus package. Additional short-run tax cuts or increases in government investment would help deal with our unemployment crisis.

What of the idea that monetary and fiscal policy can do little if unemployment is caused by structural factors, like a mismatch between workers’ skills and available jobs

businesses and workers found a way to get the job done. Factories simplified production methods and housewives learned to rivet.

Here the lesson is that demand is crucial — and that jobs don’t go unfilled for long. If jobs were widely available today, unemployed workers would quickly find a way to acquire needed skills or move to where the jobs were located.

at the end of World War II, that ratio hit 109 percent — one and a half times as high as it is now. Yet this had no obvious adverse consequences for growth or our ability to borrow.

what about the national debt? Given the recent debt downgrade, it might seem impossible for the United States to embark on fiscal stimulus that would increase its ratio of debt to G.D.P.

Everyone understood then why the nation was racking up so much debt: we were fighting for survival, and for the survival of our allies. No one doubted that we would repay our debts. We had done it after every other war, and raising taxes even before the attack on Pearl Harbor showed our leaders’ fiscal resolve.

someone needs to explain to the nation and to world markets just why we must increase the debt in the short run. Unemployment of roughly 9 percent for 28 months and counting is a national emergency. We must fight it with the same passion and commitment we have brought to military emergencies in our past.

With respect to crime, poverty and homelessness, Brown argued,One thing that may occur is that disinvestment in city downtowns will alter the spatial distribution of these elements in cities — i.e. in which neighborhoods or areas of a city is crime more likely, and homelessness more visible. Urban downtowns are often policed such that these visible elements of poverty are pushed to other parts of the city where they will not interfere with commercial activities. But absent these activities, there may be less political pressure to maintain these areas. This is not to say that the overall crime rate or homelessness levels will necessarily increase, but their spatial redistribution may further alter the trajectory of commercial downtowns — and the perception of city crime in the broader public.

“The more dramatic effects on urban geography,” Brown continued,may be how this changes cities in terms of economic and racial segregation. One urban trend from the last couple of decades is young white middle- and upper-class people living in cities at higher rates than previous generations. But if these groups become less likely to live in cities, leaving a poorer, more disproportionately minority population, this will make metropolitan regions more polarized by race/class.

the damage that even the perception of rising crime can inflict on Democrats in a Nov. 27 article, “Meet the Voters Who Fueled New York’s Seismic Tilt Toward the G.O.P.”: “From Long Island to the Lower Hudson Valley, Republicans running predominantly on crime swept five of six suburban congressional seats, including three that President Biden won handily that encompass some of the nation’s most affluent, well-educated commuter towns.

In big cities like New York and San Francisco we estimate large drops in retail spending because office workers are now coming into city centers typically 2.5 rather than 5 days a week. This is reducing business activity by billions of dollars — less lunches, drinks, dinners and shopping by office workers. This will reduce city hall tax revenues.

Public transit systems are facing massive permanent shortfalls as the surge in working from home cuts their revenues but has little impact on costs (as subway systems are mostly a fixed cost. This is leading to a permanent 30 percent drop in transit revenues on the New York Subway, San Francisco Bart, etc.

Insofar as fear of urban crime grows, as the number of homeless people increases, and as the fiscal ability of government to address these problems shrinks, the amenities of city life are very likely to diminish.

First, “Saved commute time working from home averages about 70 minutes a day, of which about 40 percent (30 minutes) goes into extra work.” Second, “Research finds hybrid working from home increases average productivity around 5 percent and this is growing.” And third, “Employees also really value hybrid working from home, at about the same as an 8 percent pay increase on average.

three other experts in real estate economics, Arpit Gupta, of N.Y.U.’s Stern School of Business, Vrinda Mittal, both of the Columbia Business School, and Van Nieuwerburgh. They anticipate disaster in their September 2022 paper, “Work From Home and the Office Real Estate Apocalypse.”

“Our research,” Gupta wrote by email,emphasizes the possibility of an ‘urban doom loop’ by which decline of work in the center business district results in less foot traffic and consumption, which adversely affects the urban core in a variety of ways (less eyes on the street, so more crime; less consumption; less commuting) thereby lowering municipal revenues, and also making it more challenging to provide public goods and services absent tax increases. These challenges will predominantly hit blue cities in the coming years.

the three authors “revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 45 percent decline in office values in 2020 and 39 percent in the longer run, the latter representing a $453 billion value destruction.”

Extrapolating to all properties in the United States, Gupta, Mittal and Van Nieuwerburgh write, the “total decline in commercial office valuation might be around $518.71 billion in the short-run and $453.64 billion in the long-run.”

the share of real estate taxes in N.Y.C.’s budget was 53 percent in 2020, 24 percent of which comes from office and retail property taxes. Given budget balance requirements, the fiscal hole left by declining central business district office and retail tax revenues would need to be plugged by raising tax rates or cutting government spending.

Prior to the pandemic, these ecosystems were designed to function based on huge surges in their daytime population from commuters and tourists. The shock of the sudden loss of a big chunk of this population caused a big disruption in the ecosystem.

Since March 2020, Manhattan has lost 200,000 households, the most of any county in the U.S. Brooklyn (-88,000) and Queens (-51,000) also appear in the bottom 10. The cities of Chicago (-75,000), San Francisco (-67,000), Los Angeles (-64,000 for the city and -136,000 for the county), Washington DC (-33,000), Seattle (-31,500), Houston (-31,000), and Boston (-25,000) make up the rest of the bottom 10.

Just as the pandemic has caused a surge in telework, Loh wrote, “it also caused a huge surge in unsheltered homelessness because of existing flaws in America’s housing system, the end of federally-funded relief measures, a mental health care crisis, and the failure of policies of isolation and confinement to solve the pre-existing homelessness crisis.”

The upshot, Loh continued,is that both the visibility and ratio of people in crisis relative to those engaged in commerce (whether working or shopping) has changed in a lot of U.S. downtowns, which has a big impact on how being downtown ‘feels’ and thus perceptions of downtown.

The nation, Glaeser continued, isat an unusual confluence of trends which poses dangers for cities similar to those experienced in the 1970s. Event#1 is the rise of Zoom, which makes relocation easier even if it doesn’t mean that face-to-face is going away. Event#2 is a hunger to deal with past injustices, including police brutality, mass incarceration, high housing costs and limited upward mobility for the children of the poor.

Progressive mayors, according to Glaeser,have a natural hunger to deal with these problems at the local level, but if they try to right injustices by imposing costs on businesses and the rich, then those taxpayers will just leave. I certainly remember New York and Detroit in the 1960s and 1970s, where the dreams of progressive mayors like John Lindsay and Jerome Patrick Cavanagh ran into fiscal realities.

Richard Florida, a professor of economic analysis and policy at the University of Toronto, stands out as one of the most resolutely optimistic urban scholars. In his August 2022 Bloomberg column, “Why Downtown Won’t Die,”

His answer:

Great downtowns are not reducible to offices. Even if the office were to go the way of the horse-drawn carriage, the neighborhoods we refer to today as downtowns would endure. Downtowns and the cities they anchor are the most adaptive and resilient of human creations; they have survived far worse. Continual works in progress, they have been rebuilt and remade in the aftermaths of all manner of crises and catastrophes — epidemics and plagues; great fires, floods and natural disasters; wars and terrorist attacks. They’ve also adapted to great economic transformations like deindustrialization a half century ago.

Florida wrote that many urban central business districts are “relics of the past, the last gasp of the industrial age organization of knowledge work the veritable packing and stacking of knowledge workers in giant office towers, made obsolete and unnecessary by new technologies.”

“Downtowns are evolving away from centers for work to actual neighborhoods. Jane Jacobs titled her seminal 1957 essay, which led in fact to ‘The Death and Life of Great American Cities,’ ‘Downtown Is for People’ — sounds about right to me.”

Despite his optimism, Florida acknowledged in his email thatAmerican cities are uniquely vulnerable to social disorder — a consequence of our policies toward guns and lack of a social safety net. Compounding this is our longstanding educational dilemma, where urban schools generally lack the quality of suburban schools. American cities are simply much less family-friendly than cities in most other parts of the advanced world. So when people have kids they are more or less forced to move out of America’s cities.

What worries me in all of this, in addition to the impact on cities, is the impact on the American economy — on innovation. and competitiveness. Our great cities are home to the great clusters of talent and innovation that power our economy. Remote work has many advantages and even leads to improvements in some kinds of knowledge work productivity. But America’s huge lead in innovation, finances, entertainment and culture industries comes largely from its great cities. Innovation and advance in. these industries come from the clustering of talent, ideas and knowledge. If that gives out, I worry about our longer-run economic future and living standards.

The risk that comes with fiscal distress is clear: If city governments face budget shortfalls and begin to cut back on funding for public transit, policing, and street outreach, for the maintenance of parks, playgrounds, community centers, and schools, and for services for homelessness, addiction, and mental illness, then conditions in central cities will begin to deteriorate.

There is reason for both apprehension and hope. Cities across time have proven remarkably resilient and have survived infectious diseases from bubonic plague to cholera to smallpox to polio. The world population, which stands today at eight billion people, is 57 percent urban, and because of the productivity, innovation and inventiveness that stems from the creativity of human beings in groups, the urbanization process is quite likely to continue into the foreseeable future. There appears to be no alternative, so we will have to make it work.

So we cannot and will not persuade these people to reconsider their views in the light of the evidence. All we can do is stop paying attention. It’s going to be difficult, because many members of the deficit cult seem highly respectable. But they’ve been hugely, absurdly wrong for years on end

the euro zone is about to repeat history. In the absence of sufficient resources for the new federal model, the new rules about budgets (and bank capital) are going to lead to pro-cyclical fiscal and monetary policies, deepening rather than alleviating the economic contraction we are witnessing.

if David Cameron can succeed in isolating Britain from the disaster that is unfolding on the continent, he deserves only our praise.

Last month I warned that the disintegration of the European Union was more likely than the death of the euro. You now see what I meant. The course on which the continent has now embarked means not just the creation of a federal Europe, but a chronically depressed federal Europe. The Eurocrats have exchanged a Stability and Growth Pact—which was honored only in the breach—for an Austerity and Contraction Pact they intend to stick to. The United Kingdom has no option but to dissociate itself from this collective suicide pact, even if it strongly increases the probability that we shall end up outside the EU altogether.

Democrats, who have been the party of robust, active government are surely the winners here. Having tossed aside fiscal virtue, the GOP is now left only to haggle over the price and the distribution of taxpayers’ money

A few months back, Larry Summers and other center-left economists made the case that we need more revenue for the foreseeable future.

Bizarre as it may seem, a fiscally irresponsible tax cut begat a huge spending bill, which eventually will require tax hikes. Democrats calling for taxes to pay for the spending Republicans demand now can rightly claim to be more fiscally serious than Republicans.

Combined with the gargantuan gap between rich and poor and the wealth accumulation by the rich, the politically popular solution that Democrats might offer (albeit with some questionable math) is their own balanced budget (or more-balanced budget) with increased taxes on the rich.

At least it has the virtue of intellectual honesty: If we want big government, we have to pay for it.

It resisted the idea. But with Australia’s two most populous states pulling inexorably in the direction of lockdowns, with employers screaming for help, and job losses mounting everyday, wage subsidies is where the centre of gravity ultimately rested.

If people can remain connected to their jobs, and if businesses can hibernate and return in the spring with as few accumulated liabilities as possible, then the economic damage associated with this event is more likely transient than permanent.

How deep is this fiscal hole and how do we begin to recover in a budgetary sense after this shock? Honestly, who knows, and right now that is the least of our problems.

the inexorable arithmetic of dollars times demography has taken us past the point of no return. It’s no longer possible to say that, by starting now, we can avert massive, and massively unfair, changes in the promises we have made, or that current beneficiaries have nothing to worry about.

There are parallels with other long-term, nation-threatening challenges of our time

there is zero chance of delivering on the promises already in place, let alone the fresh, astonishing proposals in Washington to make these commitments even larger.

If the climate change computer models prove accurate, it is already too late to prevent the world’s thermometer from rising to levels deemed unacceptable.

While calling on us to take what preventive measures we can, the more serious leaders on these topics are hard at work on the goals of mitigation and adaptation.

owever likely the climate problem or next pandemic is, the unraveling of the safety net is far more so.

We should have seen the pandemic coming and prepared for it.

A start on mitigation would be for the Social Security Administration to begin including in beneficiary bulletins a disclosure that, starting soon, the system cannot fulfill all of its commitments

Something similar could be done for doctors and medical students, projecting the deep cuts in reimbursement rates to which Medicare will resort.

Allowing the fiction of full-payment-for-all to persist will only add the rage of betrayal to the hardships imposed by the now-inevitable sudden cuts in benefits and huge tax increases.

“Many cities without Omicron outbreaks also suffered, as their economies are linked to those currently under lockdown,” Zhang said in an email in mid-May. “The economic costs are not limited to a small number of cities, it is a national problem.”

Excluding tax cuts and refunds, the Ministry of Finance said local fiscal revenue grew by 5.4% during the first four months of the year from a year ago. Eight of China’s 31 province-level regions saw a drop in fiscal revenue during that time, the ministry said, without naming them.Incomplete data for the period from Wind Information showed the regions of Qinghai, Shandong, Liaoning, Hebei, Guizhou, Hubei, Hunan and Tianjin posted year-on-year declines in fiscal revenue for the first four months of the year. Tianjin was the worst with a 27% decline.

Even before the latest Covid outbreak, land sales, a significant source of local government revenue, have plunged following Beijing’s crackdown on real estate developers’ high reliance on debt. Local governments are also responsible for implementing tax cuts and refunds that Beijing has announced to support growth.

Although financial data isn’t readily available for many Chinese cities, the southern tech hub of Shenzhen released figures showing a 44% year-on-year drop in fiscal revenue in April to 25.53 billion yuan. That followed a 7% year-on-year decline in March to 22.95 billion yuan.

Beijing in March already announced an increase in transfer of funds from the central to local governments. When asked in May whether that would be expanded, the Ministry of Finance noted some funding for next year would be transferred ahead of time to help local governments with tax refunds and cuts this year.

In late April, Chinese President Xi Jinping called for a nationwide push to develop infrastructure ranging from waterways to cloud computing infrastructure. It was not clear at what scale or timeframe the projects would be constructed.

“We expect the debt to continue to climb this year as a result of these economic pressures,” Yuan said, noting it remains to be seen how Beijing decides to balance economic growth with debt levels this year.

The picture in the eurozone is worse: its economy expanded by 2 percent between 2009 and 2010. It is now forecast to expand by a mere 0.4 percent between 2010 and 2013. Austerity has put the crisis-hit countries through a wringer, with huge and ongoing recessions. Rates of unemployment are more than a quarter of the labor force in Greece and Spain (see figure 2).

it did not have to be this way.1. The creditor countries, particularly Germany, could have recognized that they were enjoying incredibly low interest rates on their own public debt partly because of the crises in the vulnerable countries. They could have shared some of this windfall they enjoyed with those under pressure. 2. The needed adjustment could have been made far more symmetrical, with strong action in creditor countries to expand demand. 3. The European Central Bank could have offered two years earlier the kind of open-ended support for debt of hard-pressed countries that it made available in the summer of 2012. 4. The funds made available to cushion the crisis could have been substantially larger. 5. The emphasis could then have been more on structural reforms, such as easing labor regulations and union protections that restrain hiring and firing and raise labor costs, and less on fiscal retrenchment in the form of reduced spending. Reduced labor costs could have made these nations’ export industries more competitive and encouraged domestic hiring.

The shutdown has already led to the biggest plunge in consumer confidence since the collapse of Lehman Brothers in 2008. And it has had ripple effects on many industries that rely on the federal government in one way or another. Import inspections, export financing and oil and gas permitting have come to a halt, in some cases.

Residential real estate, which has been one of the brightest points of the recovery, appears to be taking a hit.

The impasse over the debt ceiling has already raised the United States’ short-term borrowing costs, with investors demanding triple the interest payments they demanded just a few weeks ago,

The World Bank has estimated that a similar standoff in 2011 raised borrowing costs in poor countries by about 0.75 percentage point, and that those costs remained elevated for months.

“Regardless of whether we get a deal, there will be efforts to diversify away from the United States in terms of assets.”

continuing fiscal gridlock in Washington would take a toll on growth not just in the short term but in the long term as well. In the absence of a broad deal that addresses entitlement spending as well as the budget deficit, “you will have perpetual uncertainty,” he said. “And that will undermine the U.S. role in the world much more than a default.”

Why can’t Europeans enjoy the conveniences of a common currency?Two reasons. First, unlike Europe, the United States has a fiscal union in which prosperous regions of the country subsidize less prosperous ones. Second, the United States has fewer barriers to labor mobility than Europe. In the United States, when an economic downturn affects one region, residents can pack up and find jobs elsewhere. In Europe, differences in language and culture make that response less likely.

As a result, Mr. Friedman and Mr. Feldstein contended that the nations of Europe needed a policy tool to deal with national recessions. That tool was a national monetary policy coupled with flexible exchange rates. Rather than heed their counsel, however, Europe adopted a common currency for much of the Continent and threw national monetary policy into the trash bin of history.

The motive was more political than economic. Europeans believed that their continent, once united with a common market and currency, would provide a better counterweight to American hegemony in world affairs. They also hoped that a united Europe in the 21st century would damp down the nationalist sentiments that led to two world wars in the 20th.

Flash-forward to today. Greece finds itself overwhelmed by its accumulated debts. To be sure, it bears primary responsibility. The Greek government borrowed too much, and for years it hid its fiscal problems from its creditors. Once the truth came to light, a large dose of austerity was the only course left. The result was an economic downturn with a quarter of the Greek labor force now unemployed. Continue reading the main story 136 Comments Making matters worse, however, was the common currency. In an earlier era, Greece could have devalued the drachma, making its exports more competitive on world markets. Easy monetary policy would have offset some of the pain from tight fiscal policy. Mr. Friedman and Mr. Feldstein were right: The euro has turned into an economic liability that has exacerbated political tensions. For this, the European elites who pushed for the currency union bear some responsibility