Tag Archives: government debt

The junk bond state

Source: Common Sense
by Paul Jacob

"What a pleasure — comparing notes with Nick Tomboulides, executive director of U.S. Term Limits, my old job. Speaking on a panel last week at the Young Americans for Liberty National Convention, Illinois came up. Nick agreed that if the Land of Lincoln had a term-limited legislature, we would never have heard the end of it: 'Term limits are a failure!' Illinois, you see, is a failed state, confessing the lowest credit rating in history." (08/02/17)


The United States has no fiscal space left

Source: Heartland Institute
by Barry Poulson & John Merrifield

"Some economists argue the current low interest rates have expanded the 'fiscal space' for countries to pursue expansionary fiscal policies, using long-term bonds to lock in interest rates. Deficits in the medium term are justified as a stimulus to economic recovery and to finance investments for long-term economic growth. That view is challenged by economists who argue that high debt-to-GDP ratios have reduced — and in some cases eliminated — fiscal space, and that expansionary fiscal policies have exposed at least some countries to the risk of default." (07/12/17)


Five ways to fix Puerto Rico's economic meltdown

Source: PanAm Post
by Cathy Reisenwitz

"Puerto Rico’s foreclosure rate has more than doubled in the last decade after the island faced a real-estate crash even worse than the one that sparked the mainland’s Great Recession. Last month Puerto Rico declared bankruptcy on its $73b debt, the largest in U.S. history. This is definitely about politics. 'This is not about politics,' Former Gov. Alejandro Garcia Padilla said of his refusal to negotiate in good faith with creditors. 'It’s about math.' But like every government-created catastrophe, it’s about both." (06/26/17)


IL: Pols' credit rating could be downgraded to "junk"

Source: ABC News

"Illinois is on track to become the first U.S. state to have its credit rating downgraded to 'junk' status, which would deepen its multibillion-dollar deficit and cost taxpayers more for years to come. S&P Global Ratings has warned the agency will likely lower Illinois' creditworthiness to below investment grade if feuding lawmakers fail to agree on a state budget for a third straight year, increasing the amount the state will have to pay to borrow money for things such as building roads or refinancing existing debt." (06/24/17)


Dare to dream of a world without endless debt ceiling hikes

Jesse Hathaway

Source: Heartland Institute
by Jesse Hathaway

"The debt limit was created by the Second Liberty Bond Act of 1917, a law partially freeing the executive branch from congressional oversight on debt policy. Between 1917 and today, the federal government’s credit limit has been extended — largely without question or care — at least 78 times. It’s time to start caring. Refusing to extend the government’s debt limit for once would not trigger Doomsday, but instead would force the federal government to actually think about what it’s spending instead of just continuing to light taxpayer money on fire." (06/21/17)


Puerto Rico bankruptcy storm heading for mainland America

Source: Heartland Institute
by Jesse Hathaway

"The Financial Oversight and Management Board for Puerto Rico, a federal board tasked with managing the island commonwealth’s course out of fiscal emergency, declared failure on May 3, filing paperwork to begin court proceedings restructuring the government debt. Territory government agencies, such as the Puerto Rico Electric Power Authority, are likely to follow the government into bankruptcy court, leaving investors to potentially lose as much as 65 percent of their original investments. In 2015, Puerto Rico Gov. García Padilla warned of an impending 'death spiral' if territory lawmakers did not make pro-growth reforms. They did not, and Padilla’s warning has come to pass. Puerto Rico is circling the drain, financially speaking, but it’s not too late for mainland lawmakers to learn from the island’s mistakes." (06/12/17)


Can a new Homestead Act solve the debt crisis?

Source: Heartland Institute
by Barry Poulson and John Merrifield

"Federal asset sales made to pay down the national debt was not part of Trump’s budget proposal, but during his presidential campaign, candidate Trump promised a ‘deal’ to sell mineral rights and use the proceeds to pay down the debt. He argued this ‘deal’ could make America energy independent. In our research, we find that this kind of sale of federal assets is a necessary to solve the debt crisis. We propose the sale of a broader range of federal assets that are now underutilized. For instance, Congress could pass a new Homestead Act, thereby selling federal land, real estate, and mineral rights." (06/09/17)


Democrats weigh using debt ceiling debate to thwart GOP tax cuts

Source: Bloomberg

"Congressional Democrats might abandon their calls for raising the nation’s debt limit without any conditions, with House and Senate party leaders now discussing whether to use their leverage to try to prevent Republicans from enacting tax cuts for wealthy Americans. House Minority Leader Nancy Pelosi signaled the shift Friday, telling reporters that 'we’re not there to raise the debt ceiling to throw a few crumbs to the middle class' and provide big cuts for the wealthy. It’s unclear how this would work in practice, but Democratic aides in both chambers said they are discussing possible strategies to tie the debt ceiling to blocking tax cuts. Such an approach would be a significant change for Democrats, who have spent the past eight years arguing that debt ceiling increases should be free from conditions, and could further complicate efforts to raise the government’s borrowing authority when the current limit is reached later this year." [editor's note: Whatever the motive, anything that gets in the way of a debt ceiling increase is good news – TLK] (06/03/17)


Trump's budget is a special kind of stupid

Source: Niskanen Center
by Karl Smith

That President Donald Trump’s budget is problematic is something that most economists agree with. There are, however, some prominent voices of dissent. George Mason University economist Tyler Cowen, for example, suggests that the budget is not as problematic as you might think. According to Cowen, 'the spending cuts are probably not needed. It would suffice to cut taxes only, and allow the economy to grow out of an even-greater budget deficit.' … To properly make the comparison between growth rates and borrowing rates, we need to adjust for inflation in the same way. Cowen’s argument arguably holds if we measure borrowing rates in nominal terms. Trump budget projections, however, are about real economic growth rates — which means that we should be comparing them to real borrowing rates." (05/30/17)


Fiscal conservatism is dead — on both sides of the pond

Source: Cato Institute
by Ryan Bourne

The launches of the Conservative manifesto and Donald Trump’s first budget could not have been more different in tone. Theresa May’s offering was cautious, with minor tweaks to policy to reflect concerns about intergenerational fairness. The Donald, on the other hand, is promising a revolution, slashing a host of government programmes to protect old-age entitlements and expand the military, while also cutting taxes. But one trend unites both the Republican President and the Tory leader: conservatives on both sides of the Atlantic seem much less concerned with budget deficits than they were seven years ago." [editor's note: Seven years ago? The last time American conservatives even PRETENDED to want to balance the federal budget was in the 1990s. And yes, they were just pretending even then – TLK] (05/29/17)