Every country faces an intertemporal budget constraint, which requires that its government’s future expenditures, including servicing its outstanding official debt, be covered by its government’s future receipts when measured in present value. The present value difference between a country’s future expenditures and its future receipts is its fiscal gap. The US fiscal gap now stands at $205 trillion. This is 10.3 percent of the estimated present value of all future US GDP. The United States needs to raise taxes, cut spending, or engage in a combination of these policies by an amount equal to 10.3 percent of annual GDP to close its fiscal gap. Closing the gap via raising taxes would require an immediate and permanent 57 percent increase in all federal taxes. Closing the gap via spending cuts (apart from servicing official (debt) would require an immediate and permanent 37 percent reduction in spending. This grave picture of America’s fiscal position effectively constitutes a declaration of bankruptcy.
This paper provides an overview of the intent of the Medicaid program and its budgetary implications. In 1965, when Medicaid was created under Title XIX of the Social Security Act to provide health insurance for low-income individuals, the program was considered an afterthought to Medicare. Today, however, more Americans receive coverage from Medicaid than any other health insurance program, including Medicare. Today Medicaid costs nearly $500 billion annually, funded by taxpayer dollars at the state and federal levels. This paper explains the budgetary implications of Medicaid for federal and state budgets and how these obligations will grow under the Patient Protection and Affordable Care Act.
With autumn leaves falling and leftover Halloween jack-o-lanterns still grinning, first estimates for 3Q2013 GDP growth and news of October’s employment went bump in the night and rattled the spirits of Washington’s chatterbox. GDP growth came in with a “lofty” 2.8 percent real growth, which was much more than most soothsayers expected. Tapering is on the way! Or so it seemed. The stock marked tanked. Then the Bureau of Labor Statistics announced that 204,000 jobs had been added to the economy in October; this also exceeded analysts’ expectations. The market recovered; the economy can handle tapering!
In a new study published by the Mercatus Center at George Mason University, Charles P. Blahous, a Mercatus senior research fellow and public trustee for Medicare and Social Security, examines the causes of federal deficits by systematically examining the federal budget itself, quantifying all contributions to the deficit regardless of when they were enacted.
The Consumer Financial Protection Bureau (CFPB) released its initial analysis of bank overdraft programs in a June 2013 white paper. We review the report and provide commentary on its methodology, its preliminary conclusions, and gaps in its analysis. We provide a synopsis of findings from previous third-party analyses to lay the foundation for our response, and then we follow the paper’s organizational structure as we discuss specific points it makes. We also identify the larger policy questions of access to credit, alternative sources of credit, and the economic benefit attained by the use of overdrafts. These questions must be addressed before the bureau can make any findings of consumer harm that would justify new regulation and the resultant unintended consequences of limiting options to the consumers the CFPB is structured to protect.
This paper examines common arguments for and against the minimum wage, results of studies on the employment effects of the minimum wage, and data comparing changes in the minimum wage to changes in unemployment rates for workers with varying educational attainments. It also examines data comparing changes in the minimum wage to changes in income inequality at both the national and state levels. Applying the results to New Jersey’s likely upcoming minimum wage increase, I estimate that the unemployment rate for young workers without high school educations will rise by almost two percentage points while the unemployment rate for older workers without high school educations will rise by almost one percentage point.
The economy right now is like traveling on a three-lane GDP expressway with one lane closed. Even
worse, we are locked in slow moving traffic, and our gas gauge is pointing to empty. Worse than that, we are borrowing gas from other places and people just to keep our engine running. One might say that we are part of a two-lane deficit economy without a filling station in sight. Have you ever faced this problem? Orange construction barrels everywhere. Little prospect of reaching an exit any time soon. A knot in the pit of your stomach? Worried about running out of gas and wondering if some kind soul will assist you?
As the world’s first decentralized digital currency, Bitcoin has the potential to revolutionize online payments systems in a way that benefits individuals and businesses. Instead of using an intermediary such as PayPal or submitting credit card information to a third party for verification—both of which often include transaction fees and other restrictions—Bitcoin allows individuals to pay each other directly for goods or services.
Central banks have recently done a dreadful job of stabilizing the path of nominal
expenditures. The adverse demand shock of 2008–9 led to a severe recession
in the United States and Europe. Monetary policy could be greatly improved with
a regime of “targeting the forecast,” or setting policy so that the expected growth
in nominal GDP is equal to the central bank’s target growth rate. This goal could
be accomplished by setting up a nominal GDP futures market and then adjusting
the monetary base to stabilize nominal GDP futures prices. The market, not central
banks, would set the level of the monetary base and short-term interest rates under
this sort of policy regime. Modest adjustments in such a regime could address many
previous criticisms of futures targeting.
For nearly four decades, presidential administrations have required executive branch regulatory agencies to identify the problem they are trying to address and assess its significance, examine a wide range of alternative solutions, estimate the costs and benefits of the alternatives, and regulate only when the benefits justify the costs. In 1993, President Clinton’s Executive Order 12866 laid out the fundamental requirements that have governed regulatory analysis and review ever since. In January 2011, President Obama’s Executive Order 13563 reaffirmed the principles and processes articulated in the Clinton executive order:…
Dr. Virgil Storr argues that every market is animated by economic spirits that affect economic outcomes, and that these spirits are cultural phenomena, giving the example of St. Bernard's Parish's recovery following Hurricane Katrina in 2005.
For an exploration of the economic situation and more, the Mercatus Center at George Mason University invites you to join Dr. Bruce Yandle as he presents a year end, quarterly economic commentary and discusses the outlook for the year ahead.
Mercatus Senior Research Fellow Keith Hall explains the economics behind the jobs numbers and how to read between the lines to get a better understanding of what they mean for our economy and different groups of Americans.
In this book, Paul Dragos Aligica discusses some of the most challenging ideas emerging out of the research program on institutional diversity associated with Elinor Ostrom and her associates, while outlining a set of new research directions and an original interpretation of the significance and future of this program.