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21. The Role of China in the U.S. Debt Crisis

Author:
James A. Dorn
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In 2001, the U.S. gross public debt was about $6 trillion; a decade later it was $14 trillion; by the end of 2012 it exceeded $16 trillion. A large part of that increase was absorbed by foreign holders, especially central banks in China and Japan. With the U.S. government gross debt ratio now in excess of 100 percent of GDP, not including the trillions of dollars of unfunded liabilities in Social Security and Medicare, it is time to stop blaming China for the U.S. debt crisis.
Political Geography:
United States, Japan, and China

22. Diminishing Quality of Fiscal Institutions in the United States and European Union

Author:
Thomas Grennes
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The value of government debt relative to the size of the economy has become a serious problem, and the problem is likely to grow in the future. Total debt of the U.S. government relative to gross domestic product increased substantially since the financial crisis and the Great Recession that began in 2007, but the debt ratio has been increasing since 2001. Gross debt relative to GDP increased from 55 percent in 2001 to 67 percent in 2007 to 107 percent in 2012. Comparable figures for debt held by the public (net debt or gross debt minus debt held by various government agencies) were 80 percent in 2011 and 84 percent in May 2012 (IMF 2012). As a result, the debt ratio is now the highest in U.S. history, except for World War II, when it reached 125 percent of GDP (Bohn 2010). U.S. debt is also high relative to the debt of other high-income countries, and projections of future debt place the U.S. government among the world's largest debtors (IMF 2011, 2012; Evans et al. 2012). Gross debt consists of all the bonds issued by the U.S. Treasury, but a broader measure that includes contingent debt results in a much larger debt (Cochrane 2011). Contingent debt includes unfunded obligations related to Social Security, Medicare, Medicaid, and loan guarantees to agencies such as Fannie Mae and Freddie Mac, and these obligations are so large that they have been described as a “debt explosion” (Evans et al. 2012). The sovereign debt crisis of the European Union has similarities to the U.S. debt problem, but it also has significant differences, as will be shown below. Interestingly, the poorer countries of the world that have frequently experienced debt problems in the past, have avoided major debt problems so far.
Topic:
Financial Crisis
Political Geography:
United States and Europe

23. Introduction: Europe's Crisis and the Welfare State

Author:
Michael Tanner
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Margaret Thatcher once quipped about the problem facing modern social welfare states: "They always run out of other people's money." Today, in country after country, we are seeing that prophetic remark coming true. The headlines have been dominated by the problems of the so called PIIGS (Portugal, Ireland, Italy, Greece, and Spain), which face the most immediate economic crisis and have required economic support from the International Monetary Fund and other European countries. However, even countries with relatively robust economies, such as France and Germany, are facing unprecedented levels of debt. Unless the countries of Europe reform their welfare states, they will face some combination of huge tax increases or default on their obligations, both explicit and implicit. The result will be social upheaval and continued economic stagnation. The tough choices facing those countries are playing out today in parliaments and on the streets. The future remains highly uncertain. But how much better off is the United States? Our national debt exceeds $16.4 trillion and is increasing at a rate of more than $3 million per minute. And that only represents the debt that is actually "on the books." If the unfunded liabilities of Medicare and Social Security are included, then U.S. total indebtedness could top 800 percent of GDP.
Topic:
International Monetary Fund
Political Geography:
United States, Europe, Greece, France, Spain, Italy, Portugal, and Ireland

24. Europe and the United States: On the Fiscal Brink?

Author:
Jagadeesh Gokhale and Erin Partin
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
What are the implications of Europe's economic troubles for America? Several EU economies now face deep private and sovereign debt overhangs-a situation not unlike that in the United States, which also faces its own challenges with fiscal policy. How do the economic conditions in America and the EU compare in the short and longer terms? This article provides an overview of key indicators that summarize and help to project the two regions' economic prospects. It should be noted at the outset, however, that economic conditions and policies in the two regions differ in substantive ways. As in the United States, most European economies-members of the European Monetary Union (EMU)-now participate in a single currency (euro) system operated by the European Central Bank-the counterpart of the U.S. Federal Reserve System. However, the EU lacks a single central fiscal authority that operates a significant cross-nation transfer system. Having surrendered authority over monetary policy and, by the definition of a single currency, exchange rate policy, EMU member nations must depend on national fiscal policies to exert stewardship over their economies.
Political Geography:
United States, America, and Europe

25. Is America Becoming Greece?

Author:
Michael Tanner
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It does not take more than a glance at the headlines to see that European countries are in trouble. From Greece to Britain, from France to Portugal, it is becoming clear that the modern welfare state is unsustainable, facing fiscal catastrophe, stagnant economic growth, punishing taxes, and prolonged joblessness. European countries are being forced, kicking and screaming, to rethink their approach to social welfare. But how much better off is the United States?
Political Geography:
Britain, United States, America, Europe, Greece, France, and Portugal

26. American and European Welfare States: Similar Causes, Similar Effects

Author:
Pierre Lemieux
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The American welfare state is not as different from the European welfare state as conventional wisdom would have it. If we define the welfare state as that part of the state (the whole apparatus of government at all levels) devoted to taking charge of the welfare of the public, welfare-state functions cover social protection (which includes public pensions), health, and education. These functions make up 57 percent of total U.S. government expenditures compared to 63 percent for the typical euro zone country. In this sense, the American welfare state is only about 10 percent smaller than the European welfare state.
Political Geography:
United States, America, and Europe

27. Lessons from Europe's Debt Crisis for the United States

Author:
Desmond Lachman
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The European sovereign debt crisis offers a cautionary tale for the United States. This is the case since all too sadly the U.S. public finances appear to be on the same sort of unsustainable path that lies at the heart of the present European crisis. Whereas Europe, taken as a whole, currently has a budget deficit of around 3 percent of GDP And a gross public debt ratio of around 90 percent of GDP, the United States has a budget deficit of around 8 percent of GDP and a gross public debt ratio in excess of 105 percent of GDP.
Political Geography:
United States and Europe

28. Canada's Fiscal Reforms

Author:
Chris Edwards
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Two decades ago Canada suffered a deep recession and teetered on the brink of a debt crisis caused by rising government spending. The Wall Street Journal said that growing debt was making Canada an "honorary member of the third world" with the "northern peso" as its currency. However, Canada reversed course and cut government spending, balanced its budget, and enacted pro-market reforms. It reduced trade barriers, privatized businesses, and slashed its corporate tax rate. The economy boomed, unemployment plunged, and the formerly weak Canadian dollar soared to reach parity with the U.S. dollar. The Canadian reforms were hugely successful. Today, the United States is in as bad or worse fiscal shape than Canada was in. U.S. leaders need to make major fiscal and economic reforms, and they can learn many lessons from Canadian efforts to restrain government and create a more competitive economy.
Topic:
Reform
Political Geography:
United States and Canada

29. Editor's Note

Author:
James Dorn
Publication Date:
01-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Immigration has been instrumental in U.S. history in promoting economic development and increasing the range of options open to people. Millions of immigrants have come to America in search of opportunities to improve their lives and to raise their families. They have taken great risks and worked hard to ensure a better and freer future for themselves and their families.
Topic:
Immigration
Political Geography:
United States

30. Why Should We Restrict Immigration?

Author:
Bryan Caplan
Publication Date:
01-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Consider the following thought experiment: Moved by the plight of desperate earthquake victims, you volunteer to work as a relief worker in Haiti. After two weeks, you're ready to go home. Unfortunately, when you arrive at the airport, customs officials tell you that you're forbidden to enter the United States. You go to the American consulate to demand an explanation. But the official response is simply, “The United States does not have to explain itself to you.”
Political Geography:
United States