Archive for June, 2005
Last month I spent a few days in Argentina attending a conference celebrating the 70th Anniversary of the Central Bank (see here the program and papers). I gave there the final keynote speech on the topic of “Lessons Learnt from Crises in Emerging Economies”. The speech included some remarks on the current macroeconomic developments and challenges in Argentina on top of more general remarks on what we have learned from crises in emerging market economies. While I will soon flesh out in more detail in a blog my impressions of Argentina today and the economic challenges it faces in the near future, my remarks at the conference provide a sample of my thoughts about Argentina after the successful closing of its foreign debt exchange.
Setser and Roubini article in Foreign Affairs on the US Twin Deficits: The Risks of Imperial Financial Overstretch
Foreign Affairs has just published an article by Brad Setser and myself where we present a rebuttal of the David Levey and Stuart Brown’s article “The Overstretch Myth” where they argued that the US current account deficits should not be a matter of concern.
I was yesterday morning on CNBC debating Arthur Laffer on supply side economics and the Bush tax cuts. Laffer is the father of the “Laffer Curve”, the idea that tax cuts will not increase the budget deficit but would rather be self-financing given the strong suplly side response of labor, savings and investment to tax cuts. George Bush father referred to Supply Side Economics as “Voodoo Economics” when he was running for the Republican Presidential nomination against Ronald Reagan in 1980. Twenty five year later, supply side tax cuts are still Vooodo Economics!
The occasion for this renewed debate today was the news that in the first 8 months of the 2005 fiscal year, the US fiscal deficit has significantly shrunk relative to the first 8 months of the 2004 fiscal year; revenues are up relative to a year ago. For Laffer and other Voodoo economists this is the proof that tax cuts work. The reality is quite different when you consider the history of supply side economics for the last 25 years.