Daily Archives: June 3, 2010 @ 8:23 pm (Thursday)

Our govt molding our children’s minds

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See below what our govt. is directing at our children.

Truly depressing.

All donations to my campaign are added to what I’m spending anyway to try to get the word out.

Many thanks to all of you who have already donated, no matter how small!!!
It all goes into the pot to sustain the effort.

Also many thanks to all of you who continue to try to organize meetings and speaking events for me- much appreciated!

CBO’s Director’s Blog: Letter to a Seventh Grader

A short time ago, I received an interesting letter from a young man in Michigan asking about federal budget deficits. I thought that perhaps other students would be interested in the kinds of questions he asked and how I answered him, so I’ve decided to share my letter to him with all of you. Here’s what I wrote:

1. What are the primary causes of the current federal budget deficits?

The current large deficits are the result of a combination of factors. These include an imbalance between tax revenues and the government’s spending that began before the recent economic recession and turmoil in the financial markets, sharply lower revenues and higher spending related to current economic conditions, and the budgetary costs of policies put in place by the government to respond to those conditions.

2. How will budget deficits affect people under the age of 18?

The government runs a budget deficit when it spends more on its programs and activities than it collects in taxes and other revenues. The government needs to borrow to make up the difference. When the federal government borrows large amounts of money, it pushes interest rates higher, and people and businesses generally need to pay more to borrow money for themselves. As a result, they invest less in factories, office buildings, and equipment, and people in the future—including your generation—will have less income than they otherwise would.

Also, the government needs to pay interest on the money it borrows, which means there will be less money available for other things that the government will spend money on in the future. Squeezing other spending affects different people in different ways, depending on their individual situations. For example, many young people benefit from government programs that provide money to families in need of food or medical care or to people who have lost their job, or from the financial support the federal government provides to local schools, or from the grants or loans the government offers to help pay for college education.

3. How is the U.S. government working to reduce budget deficits?

The President created a National Commission on Fiscal Responsibility and Reform to draw up plans to address the deficit problem. Most of the people on the commission are Members of Congress.

The commission will consider ways to reduce the budget deficit by 2015 as well as ways to improve the long-term budget outlook. Under current government policies, the gap between the government’s spending and revenues in coming years will be large. Therefore, balancing the budget would require significant changes in spending, taxes, or both. On CBO’s Web site, you can find information about the budget outlook during the next 10 years and over the long term.

More information about the commission can be found on its Web site: http://www.fiscalcommission.gov.

Congress also has enacted a new law (called “Pay-As-You-Go”) that typically requires legislation that increases spending or lowers tax revenues to include other measures to offset the costs of those changes.

4. What can people, and especially school-aged children, do to help curb budget deficits? The most important thing that school-aged children can do to help reduce future deficits is to study hard and acquire the best possible education. This will help you and your classmates get better jobs when you grow up, which will help the economy grow. In turn, a stronger economy will produce higher tax receipts for the government, which will lower the deficit.

When young people get jobs, they should be sure to save some of the money they earn. Through a fun and important bit of math called compounding, savings of small amounts can grow over time into significant amounts. For the economy as a whole, the more people save, the more money is available for businesses to invest in factories, office buildings, and equipment. For individuals and families, more savings provide a financial cushion in times of economic difficulty. In particular, more savings can help people pay large medical expenses or save their home in case they lose their job or become ill, thus helping them avoid needing government assistance.

People of all ages can also help to reduce the deficit by learning how the government spends money and from whom the government collects money. Understanding the current budget is essential for choosing intelligently among different ways to change programs and policies in order to reduce deficits.

5. If I am to convey one key message to my school regarding the federal budget deficit, what would it be?

The prospect of budget deficits for many years in the future is a serious problem for our country. Ultimately, people in the United States will have to bring into balance the amount of services they expect the government to provide, particularly in the form of benefits for older Americans, and the amount of taxes they are willing to send to the government to finance those services. Because it takes a long time to implement major policy changes, deciding what those changes will be is an urgent task for our citizens and for our policymakers.

Thank you for taking the time to write to us about these difficult issues.

Best wishes,

Doug Elmendorf

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Service Sector ISM//NFP

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Karim writes:

Similar to manufacturing, service sector ISM stabilizing at high levels; Large increase in backlogs also bodes well for future activity.

With employment index now also crossing the 50 level, adds to upside potential in NFP tomorrow; look for headline NFP up ~600k; with ex-census up ~225k.



May April
PMI 55.4 55.4
Activity 61.1 60.3
Prices Paid 60.6 64.7
New Orders 57.1 58.2
Backlogs 56.0 49.5
Employment 50.4 49.5
Export Orders 53.5 57.0
Imports 56.5 56.5

Anecdotes below seem to bode well for corporate profits: demand improving and costs controlled.

  • “Our business continues to grow. We are significantly above last year’s pace.” (Information)
  • “Business is steady right now — not the normal spring for construction, but improving.” (Construction)
  • “Outlook is still generally flat for the remainder of this year, with signs that orders and activity will be picking up.” (Professional, Scientific & Technical Services)
  • “Continuing our pattern of cautious optimism. Consumers appear to be coming out of hibernation and willing to spend. We expect that if this trend can remain solid, we’ll in turn spend additional dollars to support and drive sales activities.” (Retail Trade)
  • “Customers’ activity is improving in some parts of the country.” (Wholesale Trade)
  • “We continue to ‘staff to volume’ in order to control labor and supply costs.”(Health Care & Social Assistance)

Yes, looking like we’re modestly improving domestically with the risks mainly external including spillover weakness form China and the euro zone.

Export growth down a touch but not serious to this point.

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latest Senatorial release

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The JOBS candidate Warren Mosler announces his
Million Dollar Challenge to Senate CANDIDATES

Middletown, Conn. (June 2, 2010) – Warren Mosler, Independent candidate for US Senate, knows for a fact that, operationally, there is no such thing as the US government running out of dollars, being dependent on foreign borrowing, or potentially facing a solvency crisis like Greece, and he has pledged $1 million of his own money to any of his Senate opponents on the ballot who can prove him wrong.

“Those concerns are due to pure fear mongering from supposed experts. They have no factual basis, and they have become the true obstacles to the return of full employment and prosperity” said Mosler, who added “and there is absolutely no financial reason to cut Social Security or Medicare benefits.”

Many have also argued that the nation’s growing debt rules out further tax reductions, but Mosler says those assertions are blatantly untrue, proposing a full payroll tax (FICA) holiday for employees and employers that will add over $300/mo to the take home pay of someone earning $50,000 a year. This plan and similar initiatives will reintroduce the capital the economy needs to prosper and grow.

“We lost over 8 million private sector jobs primarily for one reason- sales collapsed,” said Mosler. “My full payroll tax (FICA) holiday for employees and employers boosts take home pay and helps lower prices to quickly restore those lost sales which brings back the lost jobs, fixing the economy the right way, the American way, from the bottom up.”

In the midst of our social and economic calamity, with the Republican and Democratic candidates offering no viable plans to restore full employment, Mosler, an expert in monetary operations, is uniquely qualified to quickly move America back to full employment and prosperity. He knows the American economy works best when people working for a living have enough take home pay to buy the goods and services they produce, with business competing for those consumer dollars.

Mosler congratulated candidates McMahon and Blumenthal on their convention victories, and looks forward to public debate on the urgent economic issues facing our nation and the world.

“We have seen Republicans and Democrats overseeing the devastatingly tragic loss of over 8 million jobs. And while lower income people working for a living struggle to survive, elites who contributed to our problems rake in billions from bailouts,” said Mosler. “It’s time the government focuses on getting its hand out of the pocket of the hard working Americans who make this country great.”

See www.moslerforsenate.com for details of Mosler’s ‘Right on the Money’ proposals and his $1 Million Challenge.

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Taylor

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This means we can have far lower taxes for any given amount of govt spending.

Hope they all see it that way!

Friday, May 21, 2010

The Administration and the IMF on the Multiplier
In a soon to be published paper, several economists at the International Monetary Fund report estimates of government spending multipliers which are much smaller than those previously reported by the U.S.

Administration. In order to obtain the estimates the IMF economists use a very large complex model called the Global Integrated Monetary and Fiscal (GIMF) Model developed by Douglas Laxton and his colleagues at the IMF . The paper is quite technical, but the bottom line summary is that a one percent increase in government purchases (as a share of GDP) increases GDP by a maximum of 0.7 percent and then fades out rapidly. This means that government spending crowds out other components of GDP (investment, consumption, net exports) immediately and by a large amount.

The IMF estimate is much less than the multiplier reported in a paper released last year by Christina Romer of the President’s Council of Economic Advisers and Jared Bernstein of the Vice President’s Office. The attached graph shows how huge the difference is. It shows the impact on GDP of a one percentage point permanent increase in government purchases as a share of GDP reported in the IMF paper (labeled GIMF) and in the Administration paper (labeled Romer-Bernstein).

John Cogan, Volker Wieland, Tobias Cwik and I raised questions about Romer-Bernstein paper soon after it was released last year because the estimates seemed to be much different from comparable estimates based on more modern new Keynesian models. We classified the Romer-Bernstein estimates as old Keynesian. Since then many technical papers have been written on this subject, of which a recent paper by Michael Woodford is the most comprehensive in my view. The IMF model is of the new Keynesian variety and adds more evidence of the huge policy differences between new Keynesian and old Keynesian models.

Posted by John B. Taylor at 12:48 AM

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