Russell Roberts - 3 Questions

This morning, NPR interviewed Russell Roberts (well worth listening to) and the interview ended with 3 questions that Roberts suggested 3 for both parties in the upcoming election.

August 26, 2012

Weekend Edition Sunday guest host Linda Wertheimer talks with Russell Roberts of George Mason University and the Hoover Institution for the final installment of her series of interviews with top economists.

1. Role of government

Ask of the right, you say that government should be smaller, what functions of the government do you argue could be "better" conducted by the private sector.

Ask of the left, you say government should be larger, what functions of the private sector do you argue could be better conducted by the public sector.

2. Deal with demographic challenge.

How do we deal with the challenge of entitlement spending.

3. Fiscal cliff - deal with the ongoing budget deficit.

How would your economic plan close the ongoing 1 trillion dollar budget deficit?

If you click below you can both listen to the 5 minute interview as well as scroll down to read comments by listeners, very revealing about the perspective of NPR listeners.

http://www.npr.org/2012/08/26/160063499/looking-at-the-economy-on-the-campaign-trail

The Federal Budget Outlook and Aid to States

The Federal Budget Outlook and Aid to States

View more presentations from Congressional Budget Office

Spanish bonds

Might this be a preview for the US to consider?

Following Wednesday’s auction the yield of a composite of Spanish 10-year bonds jumped 24 basis points to 5.69 per cent, the highest since early January, while the premium demanded by investors to hold Spanish debt over that of Germany rose to 388 basis points, the highest since November.
Spain’s borrowing costs initially tumbled from more than 6 per cent after the European Central Bank late in December, and then again in February, offered unlimited cheap three-year loans to continental banks.

However, the scale of the government budget deficit and Spain’s economic malaise has spooked investors and pushed up bond yields. Spanish 10-year bonds have now traded at a higher yield than Italy’s since early February, after trading at a lower yield during the second half of last year

Europe’s Disaster Is Headed Our Way

Niall Ferguson writes:

But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.

Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.

Federal Budget, by John F. Cogan: The Concise Encyclopedia of Economics | Library of Economics and Liberty

Federal Budget, by John F. Cogan: The Concise Encyclopedia of Economics | Library of Economics and Liberty

Budgetary Issues

The scene in Wisconsin is truly troubling. Adults in Amerca, the wealthiest nation in history, acting like destitute people in the Mideast struggling for freedom, for what? They are entitled to more pay and better benefits by working for government than they would get in the private sector. Teachers are entitled to their salaries and generous benefits and pensions even though they have not improved edcuation one whit. I wonder if when Social Security and Medicare are cut, if seniors will be manning the lines with signs about Hitler. I hope not, but this is an entitled world. The government has created a society that is less independent, less innovative, less free by providing virtually everthing the public wants. Thomas Jefferson said, "A government big enough to give you everything you want is strong enough to take everything you have."

I was discussing the university situation with a senior administrator last week. I was asking why the university does not simply cut programs that are not worthwhile or have insufficient student demand. I suggested the first to go should be the Education School. It produces poorly educated graduates who know little more than how to prepare lesson plans. I was immediately told that that school will never be cut because it brings in lots of grant money. That made me wonder how much the federal government provides universities in terms of grants. A quick Google search suggested that the federal government, through the NSF, NIH, Dept of Energy, Dept of Agriculture, and on and on, provide anywhere from 50% to 80% of university grants. The budget is not going to be an easy thing to cut substantially. Every federal bureaucracy has extended its reach to many many constituents. I had one environmental economist tell me that the EPA is his full employment act. He raises millions of dollars in grants to work on public goods and externalities. He wouldn't be supportive of a reduction in EPA funding. The educators are not going to support reductions in the Department of Education.

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