James Pethokoukis

Politics and policy from inside Washington

The economics of small classroom size

Mar 28, 2011 18:11 UTC

A charter school boss runs the numbers (via the WaPo):

At Harlem Success Academy Charter School, where we’ve gotten some of the best results in New York City, some classes are comparatively large because we believe our money is better spent elsewhere. In fifth grade, for example, every student gets a laptop and a Kindle with immediate access to an essentially unlimited supply of e-books. Every classroom has a Smart Board, a modern blackboard that is a touch-screen computer with high-speed Internet access. Every teacher has a laptop, video camera, access to a catalogue of lesson plans and videotaped lessons.

Outfitting a classroom this way costs about $40,000, or $13,500 amortized over three years. That’s how much New York charter schools receive per pupil annually, so we can afford this by just increasing class size by a single student. .. In other words, a 19th-century school can be transformed into a well-managed 21st-century school by adding just two students per classroom. Reducing class size is expensive because most costs vary with class size. Decrease a class from 25 to 24 students and you need to hire 4 percent more teachers as well as build and maintain 4 percent more buildings.

Obsession with class size is causing many public schools to look like relics. We spend so much to employ lots of teachers that there isn’t enough left to help these teachers be effective. According to the city’s education department, New York public schools spend on average less than 3 percent of their budgets on instructional supplies and equipment (1 percent), textbooks (0.6 percent), library books and librarians (0.5 percent), and computer support (0.5 percent). Basic supplies are rationed in absurd ways: A school will pay $5 million in salaries to teachers who end up wasting time writing on blackboards because the school has run out of paper that costs a penny a page. (Don’t believe me? Ask a teacher.)

Also, class sizes would not need to be as small if teachers were better trained in classroom management skills. Here is a bit from a must-read NYTimes magazine piece on the topic:

By figuring out what makes the great teachers great, and passing that on to the mass of teachers in the middle, he said, “we could ensure that the average classroom tomorrow was seeing the types of gains that the top quarter of our classrooms see today.” He has made a guess about the effect that change would have. “We could close the gap between the United States and Japan on these international tests within two years.”


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Extra Fed transparency might keep Congress at bay

Mar 24, 2011 21:14 UTC

By James Pethokoukis
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

WASHINGTON — Federal Reserve Chairman Ben Bernanke must know the unprecedented quarterly media briefings he is starting won’t hurt the central bank’s effectiveness. After all, Jean-Claude Trichet, president of the European Central Bank, gives one after each of his group’s monthly meetings. A bit more openness by the U.S. central bank might even help dissuade Congress from trying to exert more influence over monetary policy.

Whatever Bernanke’s ability to read economic tea leaves, he certainly has a grasp on political ones. The bank’s historic interventions into the U.S. economy have put its independence at risk as never before. A recent Bloomberg poll found that only 37 percent of Americans favored leaving the Fed alone compared to 39 percent who think it should be more accountable to Congress — and 16 percent who want the central bank abolished.

Perhaps reflecting public unease — while also seeking to boost its own power — Congress has been trying to chip away at Fed independence. Democrats have suggested removing regional Fed bank presidents from the policymaking Federal Open Market Committee, considering them too hawkish on inflation. And some Republicans want to give Congress vast new discretion to audit Fed activities.

Other members of the GOP want to alter the central bank’s dual mandate to maximize employment and restrain prices and have it focus exclusively on inflation. And just this week the U.S. Supreme Court ruled that the Fed must disclose details about its 2008 emergency lending program.

The court loss may have been a blessing in disguise. Combining great power and secrecy fosters the sort of public distrust that can inspire further meddling. As it is, Bernanke had already moved to open up the Fed a little by having it issue forecasts and publish meeting minutes more frequently.

Regular Q&A sessions with Fed beat reporters were a logical next step. A recent internal study at the central bank found that while more sunlight doesn’t necessarily help central banks in advanced economies, it doesn’t hurt them, either.

The Fed’s next big task will be to withdraw monetary stimulus despite a U.S. economy where unemployment is likely to be high and growth sluggish. Bernanke will need all the public forums he can to explain just how that will work.

Walking on the supply-side

Mar 23, 2011 20:09 UTC

One of my favorite blogs, The Supply Side, has a great round-up of an NY conference supply-side economics:

Regarding substance, here are a few notes:

Lindsey predicted the end of fiat money by the end of the decade. He also observed that congressional Democrats lost the House because they lost seniors. He believes Nancy Pelosi plans to win them back in 2012 by aggressively attacking GOP proposals to cut entitlement costs.

Kudlow disputed that the budget deficit represents a “red menace” (Indiana Gov. Mitch Daniels’ description), arguing slow growth was the bigger threat. He noted that one can almost plot the rise of American power in recent decades with gold coming down, and its decline with gold’s rise.

Lehrman explained that the U.S. will never get fiscal deficits under control without monetary reform through a convertible dollar, because the world sells us its goods, then uses the dollars buy up our debt.

Laffer was typically optimistic, saying supply-siders are still winning the tax cut argument and that the rate of growth over the next three decades will exceed the 1980s and ‘90s.

Prof. Mundell argued the route to stronger U.S. growth is making the Bush tax cuts permanent and cutting the corporate tax rate to 15 percent. Explaining his view that exchange rates – set by the U.S. Treasury not the Federal Reserve – transmit inflation and deflation to the domestic economy, he suggested the biggest threat to recovery isn’t inflation but a significant rise in the dollar against the euro later this year. Such a rise would cut off the already-weak expansion and magnify America’s debt crisis.

White House confusion on corporate tax holiday

Mar 23, 2011 19:18 UTC

The White House perhaps rightly worries, via a Treasury blog posting, that a tax amnesty for U.S. companies repatriating profit might distract from broader reform. (House GOP Majority Leader Eric Cantor recently came out for the idea.)  But its economic objection to the idea is confused.

As things stand, there’s an incentive for companies to stash cash overseas, because bringing it back triggers a U.S. tax rate of up to 35 percent, depending on the level of local taxes already paid. A big but temporary reduction could see a lot of cash returning to the domestic economy — especially in the technology and drugs sectors.

Treasury notes, though, that this might result in very little direct new investment or job creation. When such a holiday was last tried in 2004, tax data show that 843 companies brought back nearly $400 billion. But for every dollar returned, about 91 cents went toward share buybacks with another eight cents toward boosting dividends, according to research from economists at the University of Connecticut and the National Bureau of Economic Research.

Meanwhile, President Barack Obama and others want to reform corporate taxes more broadly. A reduction in America’s fairly high headline tax rate would most likely come with the elimination of some tax breaks beloved of companies. With limited political capital available — his own congressional Democrats don’t want to cut rates or provide a tax holiday — Obama may need to focus on this more lasting change. Moreover, if company bosses are given reason to believe they’ll get an amnesty every few years, they might lobby harder to keep their favorite tax breaks, thereby derailing reform.

If the political calculation is slightly negative, though, the economic one tips the other way. Treasury is stretching a point in assuming the government would somehow lose revenue by taxing repatriated income at a sharply lower rate. In reality, without the reduction most of the money will remain offshore.

And even if all the cash returning to the United States went to companies’ shareholders, that could still generate more consumption, growth and jobs, a knock-on effect Treasury ignores. Yet this so-called wealth effect is explicitly part of the rationale behind the Fed’s second round of quantitative easing. Some economists dispute the linkages, but not the ones that work for Obama. So despite some political risks, it might be time go on holiday — as long Washington also continues the work of reform.


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Rand Paul and the 2012 Republican presidential nomination

Mar 23, 2011 19:01 UTC

Steve Kornacki of Slate makes the case:

Rand Paul was in South Carolina on Monday and will soon make appearances in Iowa and New Hampshire. On Monday he told reporters that “the only decision I’ve made is I won’t run against my dad. I want the Tea Party to have an influence over who the nominee is in 2012.” An unnamed “Paul family advisor” also told CBS News that “there’s better than a 50/50 chance that there will be a Paul in this race.”

While it’s hard to envision Paul actually winning the GOP nod, improving on his father’s performance in the 2008 primaries seems entirely possible. Ron Paul finished fifth in Iowa with 9 percent and fifth in New Hampshire with 8 percent, then became a media afterthought. Given that he began the campaign with no money, no name recognition and no expectations, this represented a remarkable showing; he ended up beating Rudy Giuliani — the early GOP front-runner — in nearly every state in which they both competed. But it was also something of a disappointment, given the tens of millions of dollars Paul was able to raise and the free media he attracted. The New Hampshire GOP electorate, with its fierce libertarian bent, seemed a particularly promising audience for his message, and his campaign had hoped to break through with a much stronger performance there.

The best-case scenario for Paul would probably be replicating what Pat Buchanan achieved in 1996: a surprisingly strong showing in Iowa (he nabbed 23 percent, good for second place), followed by a startling win (with just 29 percent of the vote) in New Hampshire — at which point a panicked GOP establishment rallied around the strongest non-Buchanan candidate (Bob Dole) and denied him the nomination.

And James Antle of the American Spectator gives his two cents:

The case against Paul running is obvious. The voters in Kentucky just elected him in November. Like Chris Christie, Bobby Jindal, and a host of other recently elected promising Republicans, he should wait until he has accomplished more. For those of us who think a successful Senator Paul could do better than the Buchanan ’96 campaign, a concern might also be that becoming a perennial candidate by running too early could undermine that. It could also hurt his support at home in Kentucky if voters there think he’s only using their Senate seat as a stepping stone to his own ambitions.

The case for Paul running is that he’s simply a better politician than his father and would move the ball farther than either Ron Paul or Gary Johnson could. As a senator, he’d have the luxury of four years to mend fences with Kentucky voters. Paul could bring the constitutionalist message to the forefront of the Republican primary debates without getting sidetracked into theoretical discussions of libertarianism. And a premature presidential campaign in 1968 ultimately didn’t hurt Ronald Reagan.

To me, the biggest thing Paul has going for him is that he is perfectly attuned to the Tea Party GOP. He is actually saying something with a degree of specificity that puts to shame the current crop of GOP presidential contenders. He has, for instance, put forward a 5-year balanced budget. Among its high points:


Brings spending near historical average in very first year

Reduces spending by nearly $4 trillion relative to the President’s budget

Achieves a $19 billion surplus in FY2016

Brings all non-military discretionary spending back to FY2008 levels

Requires the process of entitlement reform, including Social Security and Medicare, with final implementation by FY2016

Does not change Social Security or Medicare benefits

Block-grants Medicaid, SCHIP, foods stamps, and child nutrition

Provides the President’s request for war funding

Reduces military spending 6 percent in FY2012

Eliminates four departments:

Department of Commerce (transfers certain programs)

Department of Education (preserves Pell grants)

Department of Housing and Urban Development

Department of Energy (transfers nuclear research and weapons to Department of Defense)

Repeals Obamacare


Never exceeds $12 trillion in debt held by public

Creates $2.6 trillion less in deficit spending relative to the President’s Budget


Extends all the 2001 and 2003 tax relief

Permanently patches the Alternative minimum tax

Repeals Obamacare taxes


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Obama’s wildly dangerous budget

Mar 22, 2011 15:20 UTC

President Barack Obama’s 2012 budget plan is dead on arrival — and rightfully so, it turns out. U.S. fiscal scorekeepers calculate it taking federal debt levels into dangerous territory. Meanwhile, both parties in Congress are showing tentative new signs of embracing fiscal responsibility. But without some leadership from the White House, nothing will get done.

The headline number from the Congressional Budget Office finds the White House budget adding $9.5 trillion to the U.S. national debt over the next decade against the administration’s estimate of $7.2 trillion. The two rarely agree, but the gap this time is particularly large. And both sets of predictions remain uncomfortably dependent on low and stable interest rates.

That’s a questionable assumption:

1) The CBO’s take suggests bond markets have reason to grow queasy about rising U.S. borrowing. Public debt as a share of the economy would hit 87 percent by 2021 — uncomfortably close to the 90 percent level economists Carmen Reinhart and Kenneth Rogoff have found crimps economic growth. And slower growth makes it harder to pay down debt. Recall that Obama had been promoting his budget as stabilizing the debt-GDP ratio at around 77 percent.

2) The CBO also determined interest payments would absorb 18 percent of federal revenue in 2018. Moody’s Investors Service has previously identified such a threshold as triggering downward pressure on Uncle Sam’s credit rating. U.S. debt service hasn’t been so high since 1980. Then, though, interest rates were high, and when they declined servicing the debt became more affordable. This time, rates are already low and it’s the sheer quantity of debt that’s the problem.

3) Even a slight rise in rates above White House forecasts — say, a single percentage point — would add $1.3 trillion to the 10-year debt number. And as the great folks at e21 point out

In the Administration’s baseline estimate, the public debt will rise from 62.2% of GDP in 2010 ($9 trillion) to 77% of GDP in 2021 ($18.9 trillion). … Over this period, the effective interest rate implied by the ratio of net interest expense to public debt is 3.5%. (This happens to be the average for the 5-year constant maturity Treasury rate over the past 10 years.)

However, the average 5-year borrowing cost for the 10 years ending in January 2000 was 6.3%, while the average 5-year borrowing cost for the 10 years ending in 1990 was 10.4%. If the average effective interest rate on the debt were to climb to the 10.4% average of the 10 years ending in January 1990, the public debt would explode to nearly 150% of GDP by 2021. Under the more modest 6.3% assumption of the 1990s, the debt ratio would exceed 100% of GDP by the end of the decade. Rather than doubling, as assumed by OMB, the public debt would quadruple over ten years to more than $36 trillion.

Obama’s budget anyway didn’t begin to address long-term healthcare and Social Security spending commitments. The word is that his political advisers think he should stall. A bit better news from Capitol Hill, though. Bipartisan support seems to be growing for the deficit reduction measures proposed late last year by Obama’s debt commission. And more Republicans, including the ranking member of the Senate Budget Committee, are sounding willing to consider higher taxes in exchange for deep spending cuts.

But history suggests no major fiscal fixes will become law without presidential involvement. The White House was a full partner in restoring Social Security’s solvency in the 1980s and balancing the budget in the 1990s. No wonder 64 senators, 32 from each party, just sent Obama a letter urging he “engage” on the budget.

Obama should learn from his recent involvement with the U.N. Security Council and Libya. Nothing gets done there or in Congress without presidential leadership.  Of course, maybe  the U.S. can wait until after the next election before taking action on its debt woes. Bu that, like Obama’s budget, is a terribly risky proposition.


What is most interesting in Mr. Pethokoukis’ analysis & are his omissions of fact & CBO assumptions!

1. Compare – Obama Budget Expense Levels: 2010/$4.2 trillion, 2011/$3.69 trillion, 2012/$3.73 trillion with
Bush Budget Expense Levels: 2007/$3.25 trillion, 2008/$3.89 trillion, 2009/$3.74 trillion.

The big difference? 2007 & 2008 Federal Tax Revenues were $2.6 trillion, plunging to $2.1 trillion+ in 2009 & 2010 – - an almost $500 billion drop in Fed Tax Revenues, adding $1 trillion to Deficit

2. Obama’s “Wildly Dangerous 2011/2012 $3.69T/$3.73T Budgets” are slightly lower than Bush 2008/2009 $3.89T/$3.74T & he had estimated higher fed revenues for both, now diminshed by extending Bush Tax Cuts

3. Mr. P omitted CBO stated: “CBO’s baseline projections largely reflect the assumption that current tax and spending laws will remain unchanged” – hopefully not since Bush Tax Cuts added $2.7T to US Debt, plus heaps of interest/debt service cost.

Bush Tax Cuts:
2011 & 2012 Deficits will include $80 billion tax cuts for Top 2% Richest. Americans earning $200,000+ increased under Bush, and so those who pay ZERO tax…from 2,959 in 2002 to 22,256 in 2008! Top 0.01%, who earn between $3 million & $37 million annually got big tax breaks -How can anyone take Republican deficit-cutting seriously, especially when all $61 billion cuts punish the middle-class, poor, children, unemployed, public education, women & children’s health, national security, PBS, etc….whereas ending Bush Tax Cuts & tax avoidance loopholes for CEO’s, Hedge Fund, Richest Americans & Big Biz would save 10x as many billions & not hurt anyone or deprive poor children of food stamps?

Corporate Tax Gap:
Republicans whine about 35% US corp. tax rate – in 2010 despite record pre-tax profits of $1.67T US corps paid a total $1.7B tax! In 2009/2010 US Corp.Tax Gap totalled $700B (Bush gave Wall St xtra $140B tax break in Oct 2008). Bush expanded tax breaks also allowed 1/3rd of Top 275 US corps. to pay ZERO tax between 2001-2003. GOP/Bush tax gifts to corp. buddies reduced Fed Revenues by $2T.

Role of Estate Tax:
CBO claimed “President proposes, beg in January 2013, that estate and gift taxes return permanently to the rates and exemption levels that were in effect in CY09″ which “would reduce tax revenues and boost outlays for refundable tax credits more than $3.0 trillion over the next decade” – GOP are defenders of Estate Taxes, not Dems…is Obama pandering to Republicans? If so, Obama must not.

If Obama is allowed to implement individ/corp tax reforms/increases he campaigned on, Fed Revenues will increase from 2013 on – best deficit reduction strategy.

3.GOP Blockage of Revenue-boosting Obama Policy:
CBO has shown Obama Health Care Reform will reduce Deficit by $143 billion over first decade – GOP want to repeal! CBO claims repealing the SuperFund Energy Tax Rebate would save $200 billion – GOP refuses are blocking repeal. GOP have blocked 2 of Obama bills to close offshore tax haven loopholes & tax incentives for offshoring US jobs & close some Big Oil tax subsidies. These would increase federal revenue by over $160B a year or $1T over next decade.

Only a few examples above of GOP obstruction, adding to the Deficit & Debt every year & keeping federal tax revenues at lowest level in 60 years plus killing US economy & America’s middle-class!

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Time to scuttle the 30-year, fixed mortgage?

Mar 17, 2011 17:43 UTC

Cato’s Mark Calabria makes a powerful case for doing so:

First, we should recognize that the 30-year fixed isn’t going anywhere. The “jumbo” mortgage market offers a 30-year fixed without a government guarantee. In fact, fixed-rate mortgages have historically been around half of the jumbo market.

Of course it is more expensive — but more expensive to the borrower does not mean more expensive to society. After all, someone has to pay for a subsidy. In all likelihood, it is that same homeowner who will pay for the subsidy in their role as taxpayer.

The difference between 30-year jumbo and conforming loans has been about 30 to 40 basis points. There are lots of reasons for this spread; the existence of a federal guarantee is only one of them.

In the absence of a federal guarantee, rates would likely go up somewhere between 10 and 30 basis points. That smallish jump would not have any impact on homeownership rates and is hardly an amount worth putting our entire financial system at risk.


The best way to stimulate the housing market would be to make amortization of loans illegal.

Home buyers would gain equity much faster which would decrease the number of loan defaults.

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Japan shows why U.S. must slash debt

Mar 15, 2011 20:33 UTC

You never know when a black swan will float your way. And when your credit card is nearly maxed out, dealing with emergencies can be tricky. A massive rebuilding effort may stretch Japan to its financial limits. Politicians in Washington should take note of the warning for several reasons:

1) Trying to calculate a country’s available “fiscal space” — the additional amount they can borrow before markets demand a sharply higher premium — is guesswork. The global financial crisis took the public debt of advanced economies to 75 percent of GDP in 2009 from 60 percent in late 2007. And by 2015, the International Monetary Fund reckons, the average ratio may hit 85 percent. That’s perilously close to the 90 percent level where debt seems to really hamper growth, according to economists Carmen Reinhart and Kenneth Rogoff. (The White House is somewhat skeptical of this research, by the way.)

2) But all nations are not alike in their profligacy. They have different debt levels and different track records in dealing with debt. Based on those variables, new IMF research suggests that some nations — including Japan with its 200 percent debt-to-GDP ratio — have very little room to add new debt before markets balk. (CDS prices for Japanese debt, are closer to that of Mexico’s than America’s or Germany’s.)

The United States and the UK, by contrast, probably have a bit more capacity, the IMF says. But that extra space could easily be gobbled up by unforeseen events, such as the earthquake-triggered disasters that may cost Japan 3 percent to 5 percent of its GDP to address.

3) One unforeseen event that Team Obama might want to consider is a rise in interest rates. If  long-rates are just a single percentage point higher over the next decade than White House forecasts, it will add $1.3 trillion to the national debt.  Or consider these calculations from the e21 think tank:

In the Administration’s baseline estimate, the public debt will rise from 62.2% of GDP in 2010 ($9 trillion) to 77% of GDP in 2021 ($18.9 trillion). … Over this period, the effective interest rate implied by the ratio of net interest expense to public debt is 3.5%. (This happens to be the average for the 5-year constant maturity Treasury rate over the past 10 years.)

However, the average 5-year borrowing cost for the 10 years ending in January 2000 was 6.3%, while the average 5-year borrowing cost for the 10 years ending in 1990 was 10.4%.  If the average effective interest rate on the debt were to climb to the 10.4% average of the 10 years ending in January 1990, the public debt would explode to nearly 150% of GDP by 2021. Under the more modest 6.3% assumption of the 1990s, the debt ratio would exceed 100% of GDP by the end of the decade. Rather than doubling, as assumed by OMB, the public debt would quadruple over ten years to more than $36 trillion.


4) And the unexpected natural disaster isn’t so unusual. Reconstruction after America’s Hurricane Katrina in 2005 cost something of the order of 1 percent of U.S. GDP, while New Zealand’s recent earthquake could cost it more in relation to the country’s output than the current estimates for Japan. Then there’s the question of necessary-seeming activity abroad. President Barack Obama may be pondering the potential $300 million a week tab for enforcing a no-fly zone over Libya; if so, he won’t be alone among NATO members in wondering how to pay for it.

The United States and quite a few other developed nations would appear to have little headroom to deal with the costs of another bank crisis — much less, say, a new war. It’s something for those running cash-strapped governments to remember. If they don’t create breathing room, they not only have to make hard budget choices but also pray that Mother Nature will be kind.

Impact of earthquakes, natural disasters on economic growth in Japan

Mar 11, 2011 19:56 UTC

How will today’s terrible earthquake and tsunami affect Japan’s economy, not to mention those of other global economies? After spending all day reviewing a bunch of academic research, the verdict remains unclear. For instance,  simulations run by the Inter-American Development Bank find only the biggest disasters have an  impact. Take disasters in the 99th percentile:

The 99th percentile cutoff is equivalent to a natural disaster that kills more than 233 people per million inhabitants. Although the number is large, many recent large events have exceeded this rate. For example, the 2004 Indian Ocean Tsunami killed 772 people per million inhabitants in Indonesia, and almost 2,000 per million inhabitants in Sri Lanka. Moreover, by the latest accounts, the 2010 earthquake in Haiti killed over 20,000 people per million inhabitants (see Cavallo, Powell and Becerra (2010))

For these types of disaster, the economic drag is persistent:


But smaller, though still devastating disaster show little economic impact:


The study’s conclusion:

Contrary to previous work, we find that natural disasters, even when we
focus only on the effects of the largest events, do not have any significant effect on subsequent
economic growth. Indeed, the only two cases where we found that truly large natural disasters
were followed by an important decline in GDP per capita were cases where the natural disaster
was followed, though in one case not immediately, by radical political revolution, which severely
affected the institutional organization of society.

Contrary to previous work, we find that natural disasters, even when we focus only on the effects of the largest events, do not have any significant effect on subsequent economic growth. Indeed, the only two cases where we found that truly large natural disasters were followed by an important decline in GDP per capita were cases where the natural disaster was followed, though in one case not immediately, by radical political revolution, which severely affected the institutional organization of society.

But a highly regarded 2002 study that tracked disasters in 89 countries for 30 years came to a different conclusion, as summarized by the IADB:

Skidmore and Toya (2002) explain their somewhat counterintuitive finding by suggesting that disasters may be speeding up the Schumpeterian “creative destruction” process that is at the heart of the development of market economies. Cuaresma et al. (2008) attempt to investigate this creative destruction hypothesis empirically by closely examining the evolution of R&D from foreign origin and how it is affected by catastrophic risk. They conclude that the creative destruction dynamic most likely only occurs in countries with high per capita income.

This make some sense to me.  This is not the Broken Windows Fallacy where the repair of damage is thought to boost growth. That sort of thing is just redistributing economic activity and is at best is a wash. But if a disaster is a catalyst for better infrastructure or less regulation to promote rebuilding, S&T could be correct.  (Of course, it is worth noting that Japan already has great infrastructure after spending like crazy to boost economic output the past two decades. Plus there is the issue of taking on more debt by a highly indebted country.)


The hit Japan’s economy has surely taken will definitely affect the world. In the month’s ahead, we’ll have to watch and see what happens. I wonder how their insurance industry will pull through?

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Americans growing more worried about debt

Mar 10, 2011 20:51 UTC

They are still more concerned about jobs —  but debt fears are growing, Gallup says: