Wednesday, May 27, 2009
Published: May 26 2009 20:48 | Last updated: May 26 2009 20:48
Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up.
Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.
“A government debt burden of that [100 per cent] level, if sustained, would in Standard & Poor’s view be incompatible with a triple A rating,” as the risk rating agency stated last week.
I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?
Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.
The fact that the Federal Reserve is now buying longer-term Treasuries in an effort to keep Treasury yields low adds credibility to this scary story, because it suggests that the debt will be monetised. That the Fed may have a difficult task reducing its own ballooning balance sheet to prevent inflation increases the risks considerably. And 100 per cent inflation would, of course, mean a 100 per cent depreciation of the dollar. Americans would have to pay $2.80 for a euro; the Japanese could buy a dollar for Y50; and gold would be $2,000 per ounce. This is not a forecast, because policy can change; rather it is an indication of how much systemic risk the government is now creating.
Why might Washington sleep through this wake-up call? You can already hear the excuses.
“We have an unprecedented financial crisis and we must run unprecedented deficits.” While there is debate about whether a large deficit today provides economic stimulus, there is no economic theory or evidence that shows that deficits in five or 10 years will help to get us out of this recession. Such thinking is irresponsible. If you believe deficits are good in bad times, then the responsible policy is to try to balance the budget in good times. The CBO projects that the economy will be back to delivering on its potential growth by 2014. A responsible budget would lay out proposals for balancing the budget by then rather than aim for trillion-dollar deficits.
“But we will cut the deficit in half.” CBO analysts project that the deficit will be the same in 2019 as the administration estimates for 2010, a zero per cent cut.
“We inherited this mess.” The debt was 41 per cent of GDP at the end of 1988, President Ronald Reagan’s last year in office, the same as at the end of 2008, President George W. Bush’s last year in office. If one thinks policies from Reagan to Bush were mistakes does it make any sense to double down on those mistakes, as with the 80 per cent debt-to-GDP level projected when Mr Obama leaves office?
The time for such excuses is over. They paint a picture of a government that is not working, one that creates risks rather than reduces them. Good government should be a nonpartisan issue. I have written that government actions and interventions in the past several years caused, prolonged and worsened the financial crisis. The problem is that policy is getting worse not better. Top government officials, including the heads of the US Treasury, the Fed, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission are calling for the creation of a powerful systemic risk regulator to reign in systemic risk in the private sector. But their government is now the most serious source of systemic risk.
The good news is that it is not too late. There is time to wake up, to make a mid-course correction, to get back on track. Many blame the rating agencies for not telling us about systemic risks in the private sector that lead to this crisis. Let us not ignore them when they try to tell us about the risks in the government sector that will lead to the next one.
The writer, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis
Monday, May 25, 2009
Saturday, May 23, 2009
Monday, May 18, 2009
Sunday, May 17, 2009
Saturday, May 16, 2009
see our work:
The Dead Photographers Society
May 12 - June 12, 2009
Reception: Saturday, May 16, 2009 (6-8 p.m.)
Enjoy a visual feast of black and white photography during the Dead Photographers Society exhibition at the Ice House Cultural Center. This collection of photographs includes landscape, portraiture and other subject matter by artists from the DFW region.
Friday, May 15, 2009
Wednesday, May 13, 2009
Sunday, May 10, 2009
US, Costa Rica swine flu deaths reported
SEATTLE – The number of swine flu-related deaths outside Mexico has inched up to five with the U.S. reporting its third fatality and Costa Rica its first, both involving men who also had underlying illnesses.
The number of confirmed cases of the infection in the U.S. has risen to 2,532 in 44 states, the Centers for Disease Control and Prevention reported Sunday.
Washington state health officials said the victim there was a man in his 30s who had underlying heart conditions and viral pneumonia when he died Thursday from what appeared to be complications from swine flu. The state Department of Health said in a statement Saturday that swine flu was considered a factor in his death.
"We're working with local and federal partners to track this outbreak," said Washington State Secretary of Health Mary Selecky.
The man was not further identified. He began showing symptoms on April 30, and was treated with anti-viral medication. Dr. Gary Goldbaum, Snohomish Health District medical director, said medical officials hadn't been able to isolate any "risk factors" for the man to identify where he might have been exposed.
The death of a 53-year-old man in Costa Rica on Saturday was the first involving swine flu outside North America. He also suffered from diabetes and chronic lung disease, the Health Ministry said.
Most of the victims in Mexico, the center of the outbreak where 48 people with swine flu have died, have been adults aged 20 to 49, and many had no reported complicating factors.
Previously, U.S. authorities reported swine flu deaths of a toddler with a heart defect and a woman with rheumatoid arthritis, and Canadian officials said the woman who died there also had other health problems but gave no details.
Mexico, which raised its count of confirmed cases to 1,626 based on tests of earlier patients, has been gradually lifting a nationwide shutdown of schools, businesses, churches and soccer stadiums.
But an upswing in suspected — though not confirmed — cases in parts of Mexico prompted authorities in at least six of the country's 31 states to delay plans to let primary school students return to class Monday after a two-week break.
"It has been very stable ... except for those states," Health Department spokesman Carlos Olmos said, referring to states in central and southern Mexico.
Mexican health authorities released a breakdown of the first 45 of the country's 48 flu deaths that showed that 84 percent of the victims were between the ages of 20 and 54. Only 2.2 percent were immune-depressed, and none had a history of respiratory disease.
Marshall reported from Seattle; Jimenez reported from San Jose, Costa Rica.
Saturday, May 09, 2009
George Fuller lost his bid to become McKinney's next mayor tonight, but made a strong showing with 40% of the vote!
The really sad thing here is that by some accounts the voter turnout was only 11%...proving once again that as long as people's personal comfort zone is not affected they are just not going to get in a big hurry to participate in the democratic process and exercise one of the most basic rights they have, which is to elect the candidate of their choice for political office...
Thursday, May 07, 2009
Tuesday, May 05, 2009
Monday, May 04, 2009
Mon May 4, 2009 10:58am BST
By Ben Harding and Laura MacInnis
MADRID/GENEVA (Reuters) - The World Health Organization is likely to raise its flu alert to the top of its six-point scale and declare a pandemic, its director-general indicated in an interview published on Monday.
In remarks setting the scene for another alert increase, but without saying when, WHO chief Margaret Chan warned against over-confidence following a stabilization in the number of new cases of the H1N1 strain that has proved deadly in Mexico.
"Level 6 does not mean, in any way, that we are facing the end of the world. It is important to make this clear because (otherwise) when we announce level 6 it will cause an unnecessary panic," she told Spanish newspaper El Pais.
"Flu viruses are very unpredictable, very deceptive ... We should not be over-confident. One must not give H1N1 the opportunity to mix with other viruses. That is why we are on alert."
The WHO's pandemic phases reflect views about how a virus is spreading, and not how severe its effects are.
Last week the United Nations agency raised the alert level twice, from 3 to the current 5, in response to the sustained transmission of H1N1 in Mexico and the United States.
Before issuing a level 6 alert, the WHO would need to see the virus spreading within communities in Europe or Asia.
A declaration of a full pandemic would send a signal to governments worldwide to institute their pandemic response plans, which may include measures affecting hospitals, schools or public events.
Phase 6 would also trigger increased support for developing countries which lack the drugs, diagnostic tests, and medical staff to respond appropriately to the flu that the WHO has said could be especially dangerous for people with HIV/AIDS.
While the top-level alert would not have an automatic effect on the world's flu vaccine production, the WHO is expected to make an announcement alongside any such declaration to specify whether manufacturers should switch from making seasonal to pandemic flu vaccines.
In her remarks to El Pais, Chan said that weather patterns could play an important role in how the flu continues to spread. The southern hemisphere is about to enter winter, when seasonal flu cases normally spike, the infectious disease expert said.
"We have to be very careful. No one can predict what is going to happen when countries in the south have flu peaks and this new one arrives -- which it is going to do, without a doubt," she said.
On Sunday, a WHO spokesman said the relatively large number of infections in Spain of what has been commonly known as swine flu -- at 40, according to the WHO's count -- seemed to be mainly "imported" cases involving people returning from Mexico, the epicenter of the disease outbreak.
Chan echoed this and said that so far, there were not many flu patients in Europe that have not been to Mexico or had direct contact with those who had.
"It is true that the number is small, but because of that I would say that we have not seen the full situation or the whole picture of what is happening. The situation is evolving and the virus is changing," she said.
Chan, who fought SARS and bird flu in her previous job as Hong Kong's health director, said it was too early to predict what proportion of the population would catch the new flu strain after the European Union predicted 40 percent of the population would become infected.
Friday, May 01, 2009
Added: May 1, 2009 - 2:22 p.m. - Parent & Staff Letters, AP Information
In cooperation with the Denton County Health Department and its assessment of the
increasing number of probable cases of H1N1 (swine flu), Type A and Influenza-like
illnesses within our district, the health department supports the district-wide closing of
school from Monday, May 4 through Friday, May 8. Students and staff will not have to
makeup days lost due to the swine flu school closures.
Symptoms of the swine flu are similar to the regular seasonal flu. Swine flu symptoms include: high fever of 100.5 or higher, severe headache, muscle and body aches, chills, fatigue, vomiting and diarrhea. If your child has any of these symptoms, please call your child's doctor immediately.
Our district’s top priority is the safety and welfare of our students and staff; and therefore we are taking the Denton County Heath Department’s directives seriously. We recognize that closing our schools will cause a hardship for our families; however, we want to ensure our schools are safe and conducive learning environments.
Continue to visit our district’s website at www.LISD.net for updates. If you have any
questions, please feel free to call the district’s Communications Office at 469.948.8152.