Monday, November 08, 2010

States face huge deficits; Now in Power, G.O.P. Vows Cuts in State Budgets

Now in Power, G.O.P. Vows Cuts in State Budgets
November 7, 2010
New York Times

States face huge deficits, even after several grueling years of them, and just as billions of dollars in stimulus money from Washington is drying up.

With some of these new Republican state leaders having taken the possibility of tax increases off the table in their campaigns, deep cuts in state spending will be needed...

Doing It Again

New York Times
November 7, 2010

“You’re right,” said Mr. Bernanke, “we did it. We’re very sorry. But thanks to you, we won’t do it again.”

Famous last words. For we are, in fact, doing it again.

It’s true that things aren’t as bad as they were during the worst of the Depression. But that’s not saying much. And as in the 1930s, every proposal to do something to improve the situation is met with a firestorm of opposition and criticism. As a result, by the time the actual policy emerges, it’s watered down to such an extent that it’s almost guaranteed to fail.

We’ve already seen this happen with fiscal policy: fearing opposition in Congress, the Obama administration offered an inadequate plan, only to see the plan weakened further in the Senate. In the end, the small rise in federal spending was effectively offset by cuts at the state and local level, so that there was no real stimulus to the economy.

Now the same thing is happening to monetary policy.

The case for a more expansionary policy by the Fed is overwhelming. Unemployment is disastrously high, while U.S. inflation data over the past few years almost perfectly match the early stages of Japan’s relentless slide into corrosive deflation...

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