Opinion

The Great Debate

Take advantage of today’s low costs

By Robert H. Frank
The opinions expressed are his own.

Reuters invited leading economists to reply to Lawrence Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Franks’s reply. Here are responses from Laura Tyson, Benn Steil, Russ Roberts, Donald Boudreaux and James Pethokoukis as well.

I’m in general agreement with Larry Summers’ piece. If it had been my column to write, I’d have been more emphatic about how much more important the unemployment problem is than the deficit problem. Deficits need to be reduced, yes, but not in the midst of a deep downturn. If we could put just half of the people who are either unemployed or underemployed back to work, for example, national income would be larger by more than ten times the interest we’re paying on the 2011 deficit. The extra income tax revenue alone would be enough to cover the interest on last year’s debt.

I’d also have hit harder on the claim by ostensible deficit hawks that extra spending right now would impoverish our grandchildren. Some of the most vivid and easily understood counterexamples involve infrastructure maintenance. According to the Nevada Department of Transportation, repairing a damaged 10-mile stretch of Interstate 80 would cost $6 million if we did the work today. But if we postpone repairs, weather and traffic will continue to damage the roadbed. If we wait just two years, the cost of bringing that same stretch of road up to par rises to $30 million. There are thousands of similar projects crying out to be done.

The Nevada cost inflation estimates, by the way, take no account of the special circumstances associated with the current downturn. There are idle machines and workers who could do the work today, for example, but if we wait a few years, we’ll have to bid them away from other useful tasks. Materials are cheap in world markets now, but if we wait, their prices will rise as the global economy recovers. Interest rates on 10-year T-bills are near record lows. They’ll be higher if we wait. No one proposes to allow the interstate highways to deteriorate back to gravel. We either fix them now or we fix them later. Fixing them now is MUCH cheaper, AND it will put unemployed workers back on the job. If we REALLY wanted to impoverish our grandchildren, it would be hard to come up with a better strategy than failing to undertake these projects right away.

Entitlement reform would indicate maturity

By Russ Roberts
The opinions expressed are his own.

Reuters invited leading economists and writers to reply to Larry Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Roberts’ reply.  Laura Tyson, James HamiltonDonald BoudreauxRobert Frank, Benn Steil and James Pethokoukis as well.

Summers begins with a refreshing instance of honesty about the effect of the debt deal:

Despite claims of spending reductions in the $1 trillion range, the actual agreements reached so far likely will have little impact on actual spending over the next decade.

Regretting raising the debt-ceiling

By Donald Boudreaux
The opinions expressed are his own.

Reuters invited leading economists and writers to reply to Larry Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Donald Boudreaux’s reply. Here are responses from Laura Tyson, James Hamilton, Robert Frank, Russ Roberts, Benn Steil and James Pethokoukis as well.

Larry Summers’ cynicism about the new debt deal is justified. What, indeed, is the baseline from which $1.5 trillion is to be subtracted?

That there’s no clear answer to this question — and that there’s no serious effort to avoid the coming explosion of entitlement spending — drives home the truth that this deal really is nothing more than, as The Economist describes it, “a mishmash of expedient stop gaps and promises.”

Washington’s next challenge

By James Pethokoukis
The opinions expressed are his own.

Reuters invited leading economists to reply to Larry Summers’ ope-d on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Reuters Breakingviews columnist James Pethokoukis’ reply. Here are responses from Laura Tyson, James Hamilton, Robert Frank, Russ Roberts, Benn Steil and Donald Boudreaux as well.

Like Larry Summers, I have a “multifaceted reaction” to Washington’s debt ceiling and budget deal. In fact, I have the exact same multifaceted reaction, except driven by completely different rationales.

1. Like Summers, I feel relief — but not because the agreement averted default and avoided harsh austerity. While the package doesn’t fundamentally change America’s fatal fiscal trajectory, it keeps the legislative momentum headed in the right direction with a focus on reducing debt via spending cuts rather than tax increases.

from Ian Bremmer:

The coming Palestinian statehood

By Ian Bremmer
The opinons expressed are his own.

 

As violent protests rock the Arab world, Prime Minister Benjamin Netanyahu’s Israeli government has tried to keep a low profile. It has largely succeeded. That’s about to change.

This year’s upheaval in North Africa and the Middle East is not quite finished. As President Saleh recovers from injuries suffered during an attack on Yemen’s presidential palace, the country remains plagued with protests and crackdowns. Libya’s Qaddafi clings to power, Syria’s Assad copes with surges of public anger, and Egypt’s zigzag path toward democracy reminds us how hard it is to fill the hole left behind by a castoff autocrat.

Israelis have watched closely from the sidelines to better understand what all this turmoil means for their future. As the dust begins to settle, it has become clear that they have plenty to worry about. Populism is taking root in the Middle East, a region where ordinary people have been forced for years to scream in unison to make themselves heard. Now they find that they have the power to bring about change. In response, Arab leaders—the newly elevated, those clinging to power, and even those simply facing a more uncertain future—are now listening to public opinion much more closely.

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