Policy - Debt.docx

Does the Debt Matter Public debt is a long standing concern It is now bigger than the economy itself US has yet to suffer economic or political catastrophe because of it Multiple advantages Dollar is international reserve currency Are concerns over deficits and debt overblown? Modern monetary...

Does the Debt Matter Public debt is a long standing concern It is now bigger than the economy itself US has yet to suffer economic or political catastrophe because of it Multiple advantages Dollar is international reserve currency Are concerns over deficits and debt overblown? Modern monetary theory says yes Governments that control their own currency can borrow indefinitely Other countries that do not have reserve currencies cant ‘create” more currency if they borrow too much Orthodox economists fear fiscal cliff when debt has slow-burn consequences Growing debt service payments, higher interest rates Increased risk of future financial crisis Authors make many of the same recommendations as Bittle and Johnson The wolf does eventually attack in Aseop’s fables How does New Hampshire Do it NE public Policy Center/Boston Fed New Hampshire stands out in New England as a low tax, low spending state No generatl sales tax or income tax Underlying economic advantages NH has highest median household income and lowest poverty rate in NE Policy choices differ Spends less Across most but not all areas such as public welfare New hampire has a more diverse revenue profile than other states Mostly property tax at local level Streams Only one leg of traditional three legged stool – property tax NH does tax income via business enterprise tax Tax incidence on employers not employees Tax business profits so its beneficial to have bigger profits Lower profits, NH is more attractive to shop State operated tax-free liquor stores Taxes on restaurant sales and hotels Low tax rates attract customers Budgeting and Window Dressing Bischoff and Blaeschke 2016 Legislative branch has the power to spend Incorporates measures of how well an agency or program is doing Outputs and outcomes Intended to make spending more efficient and effective Policymakers better informed Makes agencies accountable for how money is spent A tool for legislators to induce behavioral change in agencies Performance measures are imperfect, sometimes bad Full utilization requires deep understanding, interpretation of measures Window Dressing Efforts to boost highly visible measures or those most closely tied to funding Performance budgeting incentivizes real performance gains and window dressing Governments produce more of what is measured Gaming the system