Issue Brief posted November 14, 2013
America’s Austerity: It’s the Tax Increases
U.S. policymakers pursued deficit reduction (also called “fiscal consolidation” or “austerity”) twice in 2013. As economists have shown in dozens of papers, how a country goes about reducing deficits matters a lot in determining the economic impact of the deficit reduction. As Alberto Alesina of Harvard, Daniel Leigh of the International Monetary Fund, and Kevin Hassett…
Issue Brief posted November 8, 2013
Heritage Employment Report: What U.S. Can Learn from Canada’s Recession and Recovery
The economy created 204,000 jobs in October, although labor force participation dropped to its lowest level in 35 years and unemployment ticked up to 7.3 percent. The labor market remained mediocre despite a monthly payroll survey that showed “no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings.”
Backgrounder posted November 7, 2013
Supply and Demand: Why Job Growth Remains Sluggish
According to the National Bureau of Economic Research, the “Great Recession” officially ended four years ago. Nonetheless, job growth remains anemic. Many economists have struggled to explain its prolonged weakness. Neither weak demand nor mismatches between workers’ skills and job requirements can fully account for it. An overlooked cause may contribute to the…
Working Paper posted October 24, 2013
Europe’s Fiscal Crisis Revealed: In-Depth Analysis of Spending, Austerity, and Growth
Edited by Salim Furth
Why would your time be well spent reading this special report on detailed economic data from Europe over the past half-dozen years? It is very simple: Washington must learn from Europe’s mistakes, or be doomed to repeat them.
Those who favor ever-increasing spending and loathe smaller government prefer to call any measures to…
Issue Brief posted September 6, 2013
Heritage Employment Report: Chilly Summer for Jobs
The labor market remains one of the weakest aspects of the broadly mediocre economic recovery. Although the headline unemployment rate has gradually fallen to 7.3 percent, job creation has merely kept up with population growth, not regaining the ground it lost in the Great Recession.
The unemployment rate has fallen because fewer Americans are looking for work. The…
Issue Brief posted August 13, 2013
CBO Should Measure Long-Term Obligations and Policy Impact
Senators John Thune (R–SD) and Tim Kaine (D–VA) have introduced legislation to require the Congressional Budget Office (CBO) to conduct long-term fiscal scoring and annual measurement of the fiscal gap. Their effort is timely.
Today, the largest fiscal questions facing Congress concern policies that will determine the health of America’s finances decades in the…
Issue Brief posted August 8, 2013
Research Review: What Can Be Learned from Local Multiplier Estimates?
With a large economic downturn underway, the Administrations of George W. Bush and Barack Obama pushed for “stimulative” deficit spending in 2008 and 2009. According to Keynesian theories of economics, a dollar of deficit spending or tax rebates during a recession can increase gross domestic product (GDP) by more than a dollar. The results of those policies, and similar…
Issue Brief posted August 2, 2013
Heritage Employment Report: Labor Market Recovery Is Still on Vacation
The Bureau of Labor Statistics employment report found steady but disappointing growth in the labor market in July. Employers added 162,000 net jobs, and the unemployment rate fell slightly to 7.4 percent. While this would be considered decent growth in normal economic times, it falls short of expectations for a recovery from a deep recession. However, part-time workers…
Testimony posted June 19, 2013
The Fiscal and Economic Effects of Austerity
Statement of Salim Furth, Ph.D.
Senior Policy Analyst in Macroeconomics
Before the Committee on the Budget of the United States Senate
Delivered June 4, 2013
“The Fiscal and Economic Effects of Austerity”
My name is Salim Furth. I am Senior Policy Analyst in Macroeconomics in the Center for Data Analysis at The Heritage Foundation. I thank Chairman Patty…
Issue Brief posted June 12, 2013
Did Tax Increases or Spending Cuts Preface the 1990s Boom?
Following Senate Budget Committee testimony, Senator Sheldon Whitehouse (D–RI) asked me seven “questions for the record.” The entire exchange will be publicly available, but a question about the U.S. economic boom of the 1990s deserves more attention.
Senator Whitehouse asked, “Are you familiar with the U.S. experience in the 1990s, during which tax rate increases in 1993…
Testimony posted June 12, 2013
Questions for the Record Submitted by Senator Sheldon Whitehouse
I am pleased to have the opportunity to respond to Senator Whitehouse’s extensive written and oral questions. In order to provide an overall summary of the data used and choices made in my testimony, I explain my sources, calculations, and choices in Appendix B.
Regarding tax increases and…
Issue Brief posted May 8, 2013
Research Review: Zero Lower Bound Interest Rates
In monetary policy, zero is an important number. Nominal interbank interest rates cannot normally sink below zero—that would mean one bank was paying the other to borrow its money. This is known as “the zero lower bound.” For central banks such as the Fed, the zero lower bound is a constraint on their ability to affect markets by moving key interest rates. In addition,…
Issue Brief posted May 3, 2013
Heritage Employment Report: Sequester Does Not Shower on Economy in April
The Bureau of Labor Statistics’ April employment report found healthy growth in the labor market in April. Employers added 165,000 net jobs, and the unemployment rate fell slightly to 7.5 percent. While falling short of expectations for a recovery from a deep recession, this would be considered decent growth in normal economic times. However, the improvement in…
Issue Brief posted May 1, 2013
Debt and Growth in a Time of Controversy
The weight of the evidence indicates that high debt slows growth, but there is no magic threshold above which any country at any time will experience slower growth. This truth has been illustrated in the recent controversy around “Growth in a Time of Debt,” an academic paper by Carmen Reinhart and Kenneth Rogoff.
Reinhart, Rogoff, and Rebuttals
“Growth in a Time of…