Gov. Jerry Brown discusses the cuts he has already made to help reduce the state's budget deficit. For the state to get its financial house in order, it will need to cut workers, reversing a hiring trend that has taken place in previous recoveries.
At the New York Times' Economix blog, Ben Polak and Peter K. Schott, both of Yale, have written a "Duh, so that's the problem!" post about what they're calling America's "hidden austerity" program. In case you've been on an extended vacation, "austerity" is shorthand for cutbacks in government spending, versus throwing money at various debt and banking crises. Greece, for example, has been suffering through austerity as a condition of the bailouts it's received from the European financial authorities.
In the U.S., we're theoretically not yet engaged in official austerity. We're in more of an in-between phase, with the stimulus packages of 2009 in the rear-view mirror and the potential for deficit-cutting and tax cuts on the horizon.
Polak and Schott argue that austerity has already arrived, however, in the form of reductions in workers at the state and local level. Neither has recovered at a pace that resembles previous bounce-backs from recessions. This trend is particularly evident in California, where a state-level hiring freeze has been in effect since last year (there have been some workarounds, but there you have it).
It's Monday, and that means that I post the audio of my weekly joust with Andy Dean on his radio show — a show that's now seven months young! So congrats to Andy on that. He's trying to bring me out of the darkness and into the light, so on Friday we spent some discussing the sins of Paul Krugman, op-ed columnist for the New York Times and sworn foe of conservative viewpoints. Krugman hasn't given up on his position that we need more government spending rather than less right now. Andy is horrified by this prospect. I actually think that Krugman, in a recent blog post, actually did something unusual and glossed over a rather significant piece of spending under Reagan — defense spending.
I think we could use more of that right now, for two reasons: We need to refurbish aspects of our military, especially Navy ships, which guard the world's sea lanes; increased defense spending could also function as a kind of non-partisan stimulus is a political environment that far too divided to pass the kind of stimulus was saw early in the Obama administration.
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People stand next to a stand as newspaper bearing headlines on the greek crisis, are on display on November 7, 2011 in Athens. Greece's top politicians put the finishing touches to a unity government and begin talks on a new prime minister as markets react cautiously to a historic power-sharing deal to stave off bankruptcy and keep the country in the euro. AFP PHOTO / LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
Martin Wolf is, according to many, the best finance and economics journalist in the world. From his perch at the Financial Times, he dispenses regular wisdom and concise opinion. And it's wisdom and opinion that's backed up by having done time on both sides of the major economic divide of the age: free markets versus central governments.
The ongoing eurozone crisis has involved all sorts of deep-dish coverage, ranging from sovereign debt bond-yield spreads to debates about tax policies and budget cutbacks, with gobs of court-intrigue political analysis and EU-ology thrown in. It's frankly dizzying. Also, the debate has gone exactly nowhere. The eurozone remains in crisis. Whatever political will is being deployed has been, it seems, devoted to perpetuating rather than resolving the problem.
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German Chancellor Angela Merkel (L) and French President Nicolas Sarkozy (R) give a press conference after a working lunch at the Elysee palace on December 05, 2011 in Paris. France and Germany want summits of leaders of eurozone states to be held 'every month, as long as the crisis lasts,' Sarkozy said.
UPDATE: Well, that was brief! Reuters is reporting that S&P is back in sovereign-credit-downgrade mode. The agency has threatened to pull an America on the six eurozone countries currently in possession of an AAA rating — including France and Germany. We'll see how long this rally holds.
The latest surge in hope the Europe will be able to manage its debt crisis has caused the markets to rally over the past few trading sessions. However, the latest kinda sorta deal also reveals the schizophrenic situation that Germany keeps backing itself into.
On the one hand, Germany doesn't want to throw its weight behind a plan to make the eurozone work more like the U.S., where the Federal Reserve can function as the (nearly) undisputed central authority on matters monetary. On the other hand, Germany wants to call the shots of fiscal issues, compelling everyone else to act more like...Germany!
Here's a quick primer on the difference between "Keynesians," who want to spend money to get the economy going, and "austerians" (a little play of words of "Austrians," an anti-Keynesian school of economics), who insist that we need to cut back, belt-tighten, and stop racking up debt. In the video, Henry Blodget of Business Insider sits down with Niall Ferguson, a Harvard professor and historian who hasn't just taken up a strongly anti-Keynesian stance since the financial crisis but has also argued that America's about to go down the imperial drain, and fast.
Ferguson's performance is masterful in its bet-hedging. For example, he wants to find a ceiling for U.S. borrowing — but the debate we had earlier this year about...the ceiling for U.S. borrowing displeased him.
Anyway, you get the idea. He's not in agreement with New York Times columnist and Nobel-winning economist Paul Krugman. Krugman and Ferguson have actually knocked heads at the same event, with Ferguson repeating his argument that markers for U.S. debt are OK "until they aren't," maintaining that the big risk for the USA is a loss of investor confidence. Krugman, for his part, insists that the multi-billion post-financial-crisis stimulus bill wasn't big enough.