The Grumpy Economist: U.K Plotting Along a Familiar Course
Great quote to begin the article: “I thought European “austerity,” meaning mostly large increases in marginal tax rates on anyone daring to work, save, invest, start a company or hire people, while spending stays north of 50% of GDP, was a pretty bad idea.”
Despite clear lifetime expected earning premiums (44% for men), economists are hesitant to encourage marriage at the policy level according to Bryan Caplan. By comparison, the college premium is touted by economists and frequently explored in economic literature.
My guess, the reluctance to promote marriage comes from a combination of two sources. 1) People are hesitant to marginalize single mothers. 2) Supporting marriage is widely viewed as an outdated position in the modern world given the implications for women and traditional gender roles.
With national marriage rates falling, however, there is an opportunity for a greater emphasis of study on family economics and the role of marriage in society.
Econbrowser: Tipping Point Dynamics of Federal Debt
In response to Krugman’s recent assertions that the federal debt does not matter, James Hamilton discusses the dynamic of inflation expectations and nominal interest rates. As soon as investors believe the government will attempt to minimize their debt burden through inflation, nominal rates will rise precipitously.
“Krugman and O’Brien seem to assert with great confidence that these tipping-point dynamics could never matter for a country like the United States. I find no basis in either economic theory or historical experience to warrant such a conclusion. Their argument ultimately seems to boil down to, “it can’t happen, because it hasn’t happened yet.”
Marginal Revolution: Initial Analysis of the Cyprus Bank Deposit Levy
“..in the short run and probably in the medium run too, foreign money and foreign labor and tourists are now somewhat afraid to enter Cyprus, thus there will be a persistence of the deflation. The deflation should be strongest on the side of the non-tradeables. Exporters are likely to do better than workers in the service sectors. The ongoing negative income effects, from the secondary consequences of the levy, will muddy predictions.”
In order to raise 5.8 billion euros, European officials have turned to a tax on bank deposits in Cyprus. Outside of the deflationary impact within Cyprus, this policy may have far reaching negative consequences as depositors in Spain, Italy, and other troubled Eurozone economies have yet another reason to make withdrawals.
Politico: Senate Budget Details
The initial reporting for Democratic Senator Patty Murray’s budget is ~$1 trillion in tax increases matched with $1 trillion in cuts over the next 10 years. These numbers are likely in addition to the tax increases and cuts passed through the fiscal cliff negotiations and sequester over the last 3 months. Full details are not yet available as an official bill has not been produced.
DUVALL REPORT 