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Pragmatism in US public finance

In 1985, the Congress of the United States (US) passed the Gramm-Rudman-Hollings Law (GRH) establishing a process of gradually reducing the Federal government’s budget deficits to eventually balance by fiscal year 1991. Among other things, the law contains targeting the budget deficit to US $172 billion for 1986, US$144 billion for 1987, and henceforth reducing the deficit by US$36 billion per year. That is: $108 billion for 1988, $72 billion for 1989, $36 billion for 1990 and $0 or balanced budget in 1991. To make these reductions possible, the law states that Congress and the Executive branches would select and agree on specific spending cuts and tax increases every year that they formulate the national budget. If they did not agree, an automatic across-the-board reduction of expenditure on certain eligible categories would apply.

Looking at Economic Performance from a Skeptical Perspective

Economists agree that institutions are a deep determinant of long-term
economic growth. Some economists, William Easterly (2006) for example,
are more provocative by arguing that national policies are not a “sure
and principal determinant of growth.” What has to be avoided is
“extremely bad policies,” which is simple common sense. Well, it is
apparent that the Philippine government both past and present, is
capable of making “extremely bad policies.”

Nevertheless, good policies can lead to good institutions. Effective
tax administration and policy can curb tax evasion behavior. A
competitive exchange rate can change the behavior of investors and
workers.

The central question, however, is: Do we have now in place good
institutions that will create the conditions for long-term growth? Are
there institutional reforms being carried out that are responsive to
long-term growth?

Pondering Malacanang’s Priority

What do we call a priority bill that has to give way to other priority measures? Second priority? Third priority? Fourth priority? Gabby Claudio enumerates the other priority measures: the anti-terrorism bill, the General Appropriations Act of 2007, the bio-fuels bill and the restoration of perks to certain economic zones.

It is striking to note that one priority bill that intends to restore perks to some eco-zones is the opposite of the rationalization of fiscal incentives. Senator Recto’s bill calls for the repeal of numerous laws that grant overgenerous incentives to investors, resulting in huge foregone revenues for a cash-strapped government.

A Galbraithian Lens on Globalization

John Kenneth Galbraith died on April 29, 2006 at the age of 97, having led a life filled with honor and accomplishment. Unfortunately, his ideas are largely ignored by today’s economics profession. His death marks an occasion for spotlighting the continuing relevance of those ideas and the ideological narrowness of a profession that makes no space for them.

Old Democrats versus New Democrats

Jeff Faux and Gene Sperling are two titans of Democratic economic policy. Last week, at a forum sponsored by the Campaign for America’s Future, they debated the core economic policy differences that define and divide old Democrats from new Democrats.

Jeff Faux is the founder and former president of the progressive Washington think tank the Economic Policy Institute. Gene Sperling was the head of President Clinton’s National Economic Council from 1996 to 2000. Both have just published new books. Faux’s book is titled The Global Class War: How America’s Bipartisan Elite Lost Our Future—and What It Will Take to Win It Back. Sperling’s book is titled The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity.

What’s next after Mrs. Arroyo?

We condemn the illegal proclamation of a state of national emergency, which has led to the violent dispersal of peaceful assemblies, the arbitrary arrests, and the curtailment of press freedom. We expect Gloria Arroyo’s unconstitutional responses to even intensify, but by doing so, she is accelerating the destruction of her unwelcome rule.

The people’s defiance expressed in the huge demonstration of February 24 crystallizes the imperative of facing head-on Arroyo’s repressive response. As each day passes, many people are becoming more receptive to the idea that it is alright to use any means necessary to oust Mrs. Arroyo. More and more people now believe that extra-constitutional means is an acceptable way to remove an incorrigible, unrepentant Arroyo, who has increasingly relied on crypto-dictatorial rule to preserve her power.