by André Casajus[*] and Andreas Hoffmann Estonia was the first European country to introduce a flat tax on income in 1994. Many others followed. For example, Hungary successfully introduced a flat tax in 2012. In the U.S., some of the States (e.g. Pennsylvania) have introduced a flat tax on income. As in Germany, however, the … Continue reading An Axiomatic Case for the Flat Tax
by Andreas Hoffmann A growing number of economists suggest that governments in highly indebted countries should consider liquidating debt via financial repression. In other words, they want governments to intervene in financial markets and push government borrowing costs below the rate of inflation to erode the real value of debt. In a previous post, I … Continue reading Are we all Debt Liquidationists now? … No!
by Andreas Hoffmann Ever since the beginning of the EMU crisis, politicians, journalists and economists have blamed Germany’s "fiscal austerity" for the prolonged troubles in Europe’s periphery. If only the Germans spent more on goods and services, so the idea, the people in the periphery countries of Europe could sell more stuff. Exports would help … Continue reading The Germans Have Learned Nothing
by Mario Rizzo The expansion of food stamp eligibility in response to the Great Recession was part of the so-called stimulus package. There were several aspects. First, there was a simple increase in the maximum amount allowed to beneficiaries of about 14%. There was also a tremendous drive to get people who are eligible, but … Continue reading The Macroeconomics of Food Stamps
By Richard M. Ebeling Nobel Prizing-winning Keynesian economist, Lawrence Klein died on October 20, 2013, at the age of 93. A long-time professor of economics at the University of Pennsylvania, he was awarded the Nobel Prize in 1980 for his development of econometric (or statistical) models of the United States “macro” economy for purposes of … Continue reading Lawrence Klein: Keynesian Economist Who Wanted to Sidestep the Constitution
by Andreas Hoffmann (University of Leipzig) In a recent piece Jesus Huerta de Soto (2012) argues that the euro is a proxy for the gold standard. He draws several analogies between the euro and the classical gold standard (1880-1912). Like when "going on gold" European governments gave up monetary sovereignty by introducing the euro. Like … Continue reading The Euro: a Step Toward the Gold Standard?
by Mario Rizzo I am not sure which is worse: superstitions based on science or superstitions pure and simple. Many people would react to across the board cuts in government spending by saying something like: “This is crazy; some things are more important than others. We should cut the less important things first.” And, indeed, … Continue reading In Favor of Across-the-Board Cuts in Government Spending
by Mario Rizzo I now favor expiration of the Bush era tax rates for everyone. Why? Because the only way to curb spending in the long run is to make as large a number of Americans as possible truly feel the consequences of the expenditures they appear to desire. If Americans saw the cost of the gigantic welfare … Continue reading Raise Middle Class Taxes Now!
by Andreas Hoffmann and Holger Zemanek* Over the last two years Carmen Reinhart and Belen Sbrancia have published a series of papers on financial repression and its historical role in financing government debt. They show that throughout the Bretton Woods period governments in many advanced economies repressed financial markets to liquidate the high levels of debt that … Continue reading Government Revenues from Low-Interest Rate Policies
by Mario Rizzo Let us suppose that not only the immediate fiscal cliff problem is solved but also the long-run fiscal imbalance is corrected. What then? Presumably federal spending will then be on a sustainable trajectory which is able to cope with cost-of-living increases. Ordinary trend economic growth will already have been figured into the … Continue reading After the Fiscal Imbalance is Resolved: What Then?
by Mario Rizzo There is an interesting interview with Ed Feulner, the outgoing president of the Heritage Foundation, in the weekend (Dec. 8-9) Wall Street Journal. The interview got me thinking about the progress made in the pro-economic-liberty cause, not only over the years of Heritage, but since, say, 1960. I choose this year deliberately … Continue reading Interests are More Powerful than Ideas?
by Mario Rizzo The above table is from the November 8th issue of the Wall Street Journal. The figures for the fiscal cliff consequences are usefully stated for next year and not for the next nine years as those who want to suggest that the numbers are truly impressive (or want to scare children) typically use. Consider … Continue reading Fiscal Cliff: Sense and Nonsense
by Chidem Kurdas At the current economic juncture two camps offer diametrically opposed macro policy prescriptions. Economists on the Keynesian side such as Joseph Stiglitz and Paul Krugman advocate further monetary easing by the Federal Reserve and massive new federal deficit spending. The opposing camp includes Austrians and monetarists. Among its distinguished members is Allan Meltzer, who in … Continue reading Uncertainty and the Keynesians
by Chidem Kurdas A nice thing about Paul Krugman, he does not mince his words. Thus his new book, End This Depression Now!, repeats as boldly as possible the central point he’s repeatedly made in his New York Times columns and blogs for years. Namely, governments have to spend a lot more. They have to … Continue reading Krugman Redistribution or Ponzi Scheme
by Chidem Kurdas The case made for minimal government by Milton and Rose Friedman in their 1979 book, Free to Choose, has been debunked, according to Berkeley professor Brad DeLong. Basically, he avers that the Friedman program has been tried and failed. As a commentary on Friedman, this is outrageously misleading. But Mr. DeLong provides … Continue reading DeLong, Friedman and Maximal Government
by Chidem Kurdas Attempts to rein in government spending necessarily have unpleasant side effects. Thus the Dutch government collapsed amid budget talks to control the deficit. And British national output appears to be shrinking. Keynesians and advocates of the Obama administration’s colossal budget see this as vindication for unrestrained government spending. But in fact … Continue reading European Austerity in Perspective
by Chidem Kurdas Wisconsin governor Scott Walker is in the extremely unusual position of facing a recall vote less than two years after he was elected in 2010. The recall is orchestrated by unions that have gone all out to reverse his valiant effort to contain the growth in state and local spending. This vote … Continue reading Taxpayers’ Future in Wisconsin Vote
by Chidem Kurdas In 1930, John Maynard Keynes dashed off an amazing prophecy. Extrapolating from the productivity gains of the past centuries, he came to the bold conclusion that the fundamental economic problem of scarcity would fade away in 100 years or so. Thanks to technological innovation and the accumulation of capital, the ancient condition … Continue reading Keynes, the Future and Present Austerity
by Mario Rizzo I wish people would perform the following intellectual experiment. Find out how much in federal taxes you have paid in the past year. Don’t worry about making any distinctions between the various payroll taxes and the income tax. It all goes into the same pot in the final analysis. Now assume that this … Continue reading How’s Your Compulsory Holiday Giving Coming Along?
by Jerry O’Driscoll I addressed the Greek situation and the wider EU debt crisis in an op ed in The Wall Street Journal on Wednesday, November 2nd (“Why We Can’t Escape the Eurocrisis”). It is also posted today on the Cato homepage. I explain the linkages between the US and the EU, particularly among financial … Continue reading The Crisis in the EU
by Jerry O’Driscoll In Wednesday’s Wall Street Journal, Kevin Hassett explains the economic logic against fiscal stimulus (“Stimulus Optimists vs. Economic Reality”). It’s a superb piece. The more powerful one believes fiscal stimulus to be, the more adept the Keynesian policymaker must be. If the stimulus has powerful positive effects when added, it will have … Continue reading “Keynesian Death Spiral”
by Chidem Kurdas I just read The Politics of Bureaucracy by Gordon Tullock, one of the best books written on the behavior of bureaucrats. Although originally published in 1965, it remains very much relevant today, especially as the debt deal currently in Congress could bring spending caps on programs administered by numerous bureaucracies. These entities … Continue reading Spending Cuts and Politics of Bureaucracy
by Mario Rizzo The difference between a conservative and a classical liberal/libertarian once again is manifest. The conservative wants to get the debt crisis over with even at the cost of some tax increases and not so reliable budget cuts. He thinks that, in the end, there will be some budget cuts, the deficit will … Continue reading A Moment of Truth in the Debt-Ceiling Impasse?
by Chidem Kurdas Neither House Republican Speaker John Boehner nor Senate Democratic Majority Leader Harry Reid propose tax increases in their competing deficit and debt-ceiling plans. Indeed, the Reid plan’s omission of tax hikes is described by Democrats as a major concession to Republicans. But even if there are no new obligations, taxes are primed … Continue reading Tax Baseline Key to Debt Fight
by Mario Rizzo In today's Wall Street Journal frequent contributor to ThinkMarkets, Jerry O'Driscoll, has an important opinion piece, "Why the Fed Is Not Independent." There has been much discussion recently of the importance of "preserving" Fed independence. But is the Fed independent? Independent of what? Jerry concentrates on the link between the Fed's monetary … Continue reading Is the Fed Independent?