The Sequester Is Not The Only Budget Problem In The US

Dean Baker is not happy with the sequester.  It will have an impact on the US economy.  The focus on the sequester by Obama, however, obscures the impact of his own budgets which propose large cuts in discretionary spending and entitlements.  The Democratic Party seems to have bought into the GOP strategy of focusing on deficit reduction.  They can't blame the Obama budgets on the GOP.

George Will Deny's Global Waming Again

George Will has been global warming denier for some time.  He, along with David Brooks are the most frequently appearing conservative pundits on TV talk shows.  This article describes the latest version of global warming denial by George Will.  It also tears apart his theory with some nasty facts which destroy his argument. 

OECD Economist Defends Austerity Strategy

According to OECD fiscal consolidation ( AKA austerity) is working in Europe.  The problem in Europe is poor communications with the public.  Leaders have to do a better job of describing the successes of fiscal consolidation.  The beatings will continue until morale improves.

Fiscal consolidation worked in Germany because it has an export based economy.  Its not possible for every nation in the eurozone to export its way out of trouble by reducing wages and prices to become more competitive.  Current account surpluses must be balanced by negative current accounts.  Moreover, it is a good idea for some nations to spend less and save more.  On the other hand, its a bad idea for every nation to do the same thing.  That strategy reduced aggregate demand in the eurozone and has led to a eurozone wide recession.

France Cuts Defense Spending In Response To Budget Crisis

This article outlines the reductions in defense spending in France.  The government has to choose between spending cuts which affect its sovereignty over foreign policy and financial constraints dictated by slow economic growth.

Austerity:The History Of A Dangerous Idea

Mark Blyth wrote a book with the title of this post.  He traces the idea of austerity back to the development of liberal economics in England.  There was a tension within the movement from the beginning about the role of the state in the economy.  It was understood that the state played a critical role in the economy, but that if the state were allowed to become too powerful it could overwhelm the economy.  The latest version of that tension was developed by Austrian economists who believed that booms and busts in the credit cycle were responsible for the business cycle.  They believed that the state should not attempt to mitigate the recessions that followed credit booms.  It should step aside and allow the creditors to who made bad investments to be liquidated.  This review of Blyth's book provides a commentary on this history.  The comments that follow the review are very interesting.  The debate is between those who believe that economists, and their ideas, are responsible for the austerity policies that have been adopted in many western nations, and those who argue that powerful interest groups choose the ideas that they want to pursue for their own self interest.

Will Japan Fix Its Number One Problem?

Noah Smith praises Japan's new premier for doing what he said that he would do with monetary policy.  He wonders what he will now do with the problem that lowers Japanese productivity and keeps its population from growing.  Gender inequality is cited as Japan's biggest economic problem.

Paul Krugman Defends Himself Against The Ignoramus Strategy

This article by Krugman was inspired by a rant on TV by a venture capitalist about him.  The VC argued that his theories about the economy were too complicated.  In response, Krugman boiled down his theory about our current economic problems into five simple points.  You can decide whether Krugman's ideas are too complicated for VC to understand.