Policy Points

06.10.2011 Policy Points No Comments

How Big Is The National Debt?

In a post at The Baseline Scenario, James Kwak wonders just how big America’s long-term debt problem actually is. After running the numbers, Kwak concludes the following:

So the bottom line is: If we extend the Bush tax cuts, we have very big deficit problems over the next ten years and the next twenty-five years. If we let them expire, there is no ten-year problem. That’s the same as in my earlier post, and I don’t think that’s controversial to anyone who understands the numbers.
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What’s more controversial is my claim that if we let the tax cuts expire, there is a twenty-five year problem, but it’s not a huge one. Many other people argue that even if we let the tax cuts expire, we still have to cut Social Security and Medicare. On my reading, the problem is a national debt at 69% of GDP and growing steadily. If we have another financial crisis, or we start losing our status as the reserve currency, that could be a serious problem. My opinion is we should do something about it. But it’s not necessarily the end of the world.

05.10.2011 Policy Points No Comments

Around The Dial – October 5, 2011

Economic policy reports, blog postings, and media stories of interest:

05.10.2011 Policy Points No Comments

Rethinking Small Business Policies

Writing in Bloomberg Businessweek, Charles Kenny of the New America Foundation argues that “the notion that small business is the force behind prosperity is not true” and that “the longer the US and other countries cling to this myth, the harder it will be to carry out the kinds of economic policies that might actually stimulate job growth.” From the article …

In the U.S. in 2007 there were around 6 million companies with workers on the payroll. Ninety percent of those businesses employed fewer than 20 people, according to analysis of the latest census data by Erik Hurst and Ben Pugsley of the University of Chicago. Collectively, those companies accounted for 20 percent of all jobs. Most small employers are restaurateurs, skilled professionals or craftsmen (doctors, plumbers), professional and general service providers (clergy, travel agents, beauticians), and independent retailers. These aren’t sectors of the economy where product costs drop a lot as the firm grows, so most of these companies are going to remain small. And according to Hurst and Pugsley’s survey evidence, the majority of small business owners say that’s precisely their intent—they didn’t start a business for the money but for the flexibility and freedom. Most have no plans to grow.
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Some small companies do grow, of course. Think Apple (AAPL) or Hewlett-Packard (HPQ), which were initially run out of garages, or Google (GOOG), created by two guys in a dorm room. But the vast majority of small enterprises stay small. Eighty percent of U.S. small companies that remained in business from 2000 to 2003—the most recent period for which Hurst and Pugsley compiled data—didn’t add a single employee.