Perceptions About Health Care Spending Are Wrong

• By Derek Thompson
• January 23, 2013
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This sentence is a pithy summary of the centrist conventional wisdom about taxes, spending, debt, and health care:

"The political impasse facing the U.S. arises from one simple reality: Americans want an increasing government contribution to health care, but don't want to pay for it."

That's James Hamilton, an economic professor at the University of California, San Diego, at his excellent Econbrowser blog. It's an utterly reasonable-sounding judgment that can lead you to the wrong conclusion. Health care isn't just a government spending problem. It's an everybody's-spending problem.

First, some basic facts about government spending on health care. Federal medical spending as a share of GDP has increased from about 1 percent of GDP in 1950 to almost 9 percent of the economy today.

 Meanwhile, tax revenues have clung stubbornly to their long-run 19 percent average...

Read more at The Atlantic.

Inflation Hawks Rage Against Their Own Hallucinations

• By Zachary Karabell
• January 22, 2013
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Earlier this week the Bureau of Labor Statistics released its monthly inflation report. The numbers came in at 1.7 percent a year for all items. Excluding the ever-volatile food and energy, it was 1.9 percent.

That's about as low as inflation has been in the last 50 years.  Only 1986 (1.1 percent), 1998 and 2001 (1.6 percent), 2008 (0.1 percent) and 2010 (1.5 percent) have come in lower, and a few years in the mid-2000s registered the same.

The disappearance of inflation over the past 20 years, however, has barely dented the pervasive belief that inflation remains one of the greatest threats to economic stability. These convictions persist in spite of all evidence to the contrary: Inflation is nowhere visible. For many, that is just proof that we are living in a lull -- a phony war soon to be disrupted when that age-old enemy reappears and wreaks havoc.

At the Federal Reserve -- legally mandated guardian of price stability and responsible for monitoring and containing inflation -- the president of the Richmond Fed, Jeffrey Lacker, has been warning that the current policy of very low interest rates and expansion of the balance sheet is almost ...

Can We Talk Calmly About Obama's 'Executive Orders'?

• By Garrett Epps
• January 18, 2013
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You may be perplexed about President Obama's recent actions aimed at promoting gun safety. One of the leading scholars of separation of powers, Peter M. Shane, has set out a calm analysis of Obama's actions here. The president signed three, not 23, executive orders, he notes. Shane's most important point is this:

What executive orders cannot do is impose obligations or restrictions on the public, unless Congress, through legislation, has expressly or implicitly conferred authority on the President to do so. It is worth noting that none of President Obama's executive orders on gun violence do any such things.

The opposition has many criticisms of the specifics of Obama's actions. Fair enough; that's part of the ongoing debate about the proper regulation of firearms. But some on the right like to claim that "executive orders" in themselves are lawless.

If so, that would have come as news to George Washington -- who issued, among dozens of proclamations, eight executive orders of the kind we recognize today -- and to every president since. 

What is the president's job? He is the holder of "the executive power" and has the duty to "take care that the laws ...

Is the Debt Limit Fight Over Already?

• By Elspeth Reeve
• January 17, 2013
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There are several signs House Republicans will agree to raise the debt ceiling without demanding huge concessions in spending cuts. "Several different people have emailed to say the House GOP in Williamsburg has agreed to raise the debt ceiling with no fight," RedState's Erick Erickson tweeted. (The House GOP is on its annual retreat in Williamsburg, Virginia; Erickson sometimes gets tipoffs on big conservative news, like Jim DeMint quitting the Senate to run the Heritage Foundation.) In  The Wall Street Journal Thursday, former GOP budget aide Keith Hennessey suggested Republicans agree to raise the debt limit a large amount -- enough to last five years or so -- only if President Obama agrees to spending cuts. Otherwise they should raise it only enough to last a few months. Rep. Paul Ryan echoed that Thursday, telling reporters, "We’re discussing the possible virtue of a short-term debt limit extension so that we have a better chance of getting the Senate and the White House involved in discussions in March." And the Tea Party Express conceded that the debt limit would have to be raised soon to avoid default, The Washington Post's Greg Sargent points out, even if the group thinks the ...

Economists Pan Debt Ceiling’s Very Existence

• By Catherine Hollander
• January 16, 2013
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Congressional Republicans may enjoy the leverage the debt ceiling gives them, but economists dislike its very existence. 

The University of Chicago Booth School of Business’s Initiative on Global Markets regularly polls economists on major public policy issues. This week’s statement, “Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes,” wasn’t very controversial. Just one out of 38 economists who were polled disagreed with it. A handful did not answer, were uncertain or had no opinion.

MIT’s David Autor commented, “The question contains its own answer.”

Others did not mince words at all. “The debt ceiling is a dumb idea with no benefits and potentially catastrophic costs if ever used,” said Richard Thaler of the University of Chicago Booth School of Business.

Thaler’s colleague, Luigi Zingales, was the lone dissenter. “It can also lead to potential better outcomes,” he said. 

Raising the debt ceiling allows the government to pay bills it has already racked up and does not authorize future spending. The Treasury Department has said ...