Archive for the ‘Economics’ Category

By the Numbers

Sunday, June 21st, 2009

Unless you are Babe Ruth, it is risky to point to the fences to predict a homerun. Economic predictions are even more precarious then baseball ones. especially when made by politicians. Nonetheless, in the course of selling their stimulus plan early this year, Obama’s economic team confidently argued that without Obama’s Recovery Plan, unemployment would peak in 2010 at about 9%. If, however, the country adopted the Obama approach, unemployment would peak this year at less than 8%. Why would anyone oppose the Obama Recovery Plan? Congress, dominated by Democrats certainly did not stand in the way and the stimulus package passed.

The evidence is in. As of May 2009, the unemployment rate reached 9.4%, above what the Obama team claimed would be the case without the Recovery Plan at all. The economic predictions were way off even over the very short term. The blog Innocent Bystanders has been following the numbers carefully. The plot below is a reproduction from The Job Impact of the American Recovery and Reinvestment Plan, published January 9, 2009, by Christina Romer, Obama appointee to the Council of Economic Advisors, and Jared Bernstein, from Vice-President Joe Biden’s office. The two lines indicate the Obama team’s prediction of unemployment, earlier this year with and without the Recovery Plan. The points plotted in red are the actual number published recently by the Bureau of Labor Statistics.



Clearly, the Obama Team overestimated the positive impace of the stimulus plan. Despite this pathetic performance, the Obama Administration is still claiming that they are creating jobs. One wonders how one can make any assumptions about the effect of policy over a year a two when predictions for a few months ahead were so wrong.  Even a straight line prediction would have been more accurate than the considered modeling of the Obama economic team.

From an historic stand point, it is interesting to compare this recession with previous ones. The plot below shows the unemployment rate for the 48 months following the minimum unemployment point for the pass recessions back to 1960. The line for the current recession is plotted in bright yellow.



This recession has experienced a far sharper increase in a shorter period of time from previous recessions. Now, we can never know what would have happened had the Obama Recovery Plan not be implemented. It is not persuasive or even plausible, however, for the Administration to argue that in face of an unprecedentedly rapid rise in unemployment, that its policies are working. Maybe they will sometime in the future. Maybe, the economy will recover in spite of the Administration.  But given the recent evidence, the Administration’s economic crystal ball is opaque.

To even have drawn the first plot above, projecting unemployment rates for a few years, with its implied precision, required an overabundance of arrogance. Prediction is hard, yet Obama’s economic advisers cavalierly assumed that they could make such predictions, and that these predictions could guide them as they expertly steer the economy. As the government seems to be running an ever expanding portion of the economy, we hope that Obama’s adviser’s hubris has been alleviated in the face of evidence of just how complicated and hard it is to predict future of the economy. Somehow, we doubt it.

Middle Three Quintiles

Saturday, May 16th, 2009

Every time I hear  the mantra about the disappearing  middle class, I want to ask if percentage of households in the middle three quintiles has changed. I am sure, many on Left out of ideological reflex would assure me that it has. Of course, the middle three quintiles of any distribution of income, or grades, or heights, by definition, will always contain 60%  of the sample.

Mathematically literate people of any ideology quickly recognize this truth about the fraction of people in the middle quintile. Nonetheless, there many people who are genuinely concerned by the the observation that median household income seems to have stagnated. But this statistic is misleading, because it does not account for the changing nature of households. Households have shrunk in size. Steve Conover has shown that the income per worker has gone up. It is just that the  number of workers per household has decreased offsetting this increase. Household, rather than individuals incomes say less about the economy and more about the way people have chosen to live their lives. Perhaps as individual income increase, people are free to opt to live in smaller households.

If you look at the distribution of income per earner as a function of time as shown below:

it appears that the middle class has just been happily pushed into higher income brackets.

Despite these statistics, many people genuinely feel that the economy has changed negatively for the “middle class” over the last few decades. I suspect that the source of this anxiety is associated with two important factors as opposed to the actual income distribution.

(1) It is very difficult to maintain a “middle-class” lifestyle with a job that is low skill. A retail worker like a shoe salesman or a low-skill factory worker used to be middle class. Low skill workers now have to compete with automation or low skill workers of other countries. The fraction of the US economy that is manufacturing is the same that it used to be, but manufacturing is now being performed by fewer and fewer more productive workers. Much like agriculture that dominated the economy  in the 1800s’s, fewer and fewer people are required to produce more and more. This is as it should be. Our standard of living would be far lower if we as a country were so unproductive that low skill jobs were typical and people in them were middle income. The goal is arrange for as many people as possible to be prepared for high-skill jobs.

(2) Middle class is not what it used to be. Middle class Americans live in larger homes than their parents, have air conditioning when their parents did not, eat out more often than their parents did, and go on vacation more frequently. This does not even count the gadgets such as cell phones, computers, and large flat panel televisions that were not even available to the wealthy a generation ago. Our expectations are higher than those of our parents.

The real danger is that this anxiety will lead to government policies that reduce the dynamism of the economy in the name of security and make the progress we have already achieved less possible to sustain.

Krugman Needs Reagan to Make His Growth Argument

Sunday, March 8th, 2009

Science can advance more quickly when there is the ability to construct controlled experiments within which variables and their effects can be isolated. Observational sciences like astronomy or archeology cannot construct direct experiments, but try to create explanations consistent with the more traditional sciences like physics and chemistry and ongoing observation. Economics falls in this latter category without the advantage of some reliance on other sciences. Given the unprecedented nature of today’s economic circumstances, prudence should restrain the certainty of any prediction.

Nonetheless, in terms of our future prospects, the importance of economic growth is conceded by all. If the extremely large spending increases of the Obama plan result in very significant economic growth say 4-5% per year range, growth will generate sufficient government revenue that service on the debt will not strain the economy. The question reduces to  what level of growth will result after the implementation of the Obama stimulus package.

Nobel-prize laureate Paul Krugman argues that historical evidence suggest periods of strong economic growth quickly follow high unemployment to support Obama assumptions about growth. There is some plausibility to this view. After unemployment peaks, putting labor back to work should increase output or gross national product. Indeed, Krugman suggests that when Harvard economist Greg Mankiw (who specializes in macro economics as opposed to Krugman’s international trade specialty) arguments otherwise are “evil” wonkishness. Mankiw responded that if Krugman is so sure that he is willing to risk the economy on his prediction, perhaps he might be willing to wagee a small fraction of his Nobel prize. Frankly, aw we shall see the data are so murky, that I would not wager much on either prediction.

Krugmam cites data to support his assumption of growth from Brad Delong.



The above graph shows the  unemployment rate on the horizontal axis and future economic growth 2 years later on the vertical axis. The association is not particularly strong, The points on the far right of the regression line seem to drive even the weak association in the graph. After Mankiw’s response to Krugman,  Delong went back and looked at the data. He found that those points on the end of the regression curve, as guessed by Mankiw, were associated with the Reagan recovery in the early 1980’s — a recovery dominated by large reductions in the highest marginal tax rates. Refer to the graph from Delong below.


The pink points are the ones associated with the Reagan recovery. Thus, Krugman is relying on the Reagan recovery to support his confident assertion strong growth inevitably follows high unemployment rates. Although the deficit rose during the Reagan years, at least at first, it was associated with increased defense spending coupled with reducing marginal income tax rates. Obama stimulus relies on high levels of spending and increased marginal tax rates. The past evidence does not allow us to predict with even modest assurance that high rates of growth are to be expected. For Krugman to make this argument confidently without caveat suggests at least at best some ignorance of the past.

Whacking Nonlinear Systems: The Stimulus Package

Sunday, February 8th, 2009

It is easy to secure agreement that national and world economies are strongly nonlinear systems. We can probably make reasonable predictions about the net effect of small policy shifts. But when we whack the system with large perturbations like the current stimulus pack, there are undoubtedly effects that are essentially unpredictable. It is for this reason it is a prideful and unjustifiably arrogant to exhibit too much confidence in asserting what the cumulative effect of the current stimulus package. That’s is what why making policy is so difficult.

Should we emphasize tax cuts or spending increases to stimulate the economy?  The current stimulus package is weighted toward spending increases. Should we emphasize policies that will have an immediate effect or spread the stimulus over a long period of time? These are all good questions that have not yet received sufficient attention.

There are were many on Left who argued that we did not devote sufficient deliberation or time to consider the liberation of Iraq and that the president was fear mongering to force an ill-considered decision. However, the Iraq decision was spread over many months and included long debates in Congress supported hearings and has until this point cost about $630 billion over nearly six years.

We are now about to decide whether to spend over $800 billion over a shorter period of time with little Congressional deliberation and no hearings in less than a month with President Obama warning of economic “catastrophe” if we do not act immediately.

Let it be respectfully suggested that we are acting too hastily. There is no reason we cannot provide an immediate and more modest stimulus to the economy with tax cuts that can be implemented immediately coupled with increasing unemployment benefits to put money quickly in the economy. The remainder of the package can be considered deliberately with hearings over the next few months. Regardless of the particular stimulus we end up choosing, we should try to achieve the greatest effect for the cost.

One question of particular interest is should a stimulus focus more on tax decreases or spending increases. It is certainly the case the that the question is more complex that this. Surely all spending increases do not have equal stimulative impact and all tax decreases do not have an equal salutary effect on the economy. Nonetheless, can some relative weight of the effects between spending increases and tax decreases be estimated?

Economists often speak of the the “multiplier effect.” If the government spends an amount equal to x% of the Gross National Product (GDP) and net GDP increases y% then y/x is the multiplier. As Nobel Prize-winning economist Krugman explained:

“Consider an increase in government spending; assume that the interest rate is fixed (a good assumption right now, because interest rates are up against the zero lower bound). Then textbook analysis says that if the stimulus is dG, the increase in GDP is 1/(1 – c(1-t)) where c is the marginal propensity to consume out of income and t is the marginal tax rate. Suppose c is 0.5 and t is 1/3; then the multiplier is 1.5, which is more or less the conventional wisdom right now.”

So Krugman claims the conventional wisdom is that spending multiplier is 1.5. However, there is some suggestion that the multiplier for tax decreases is larger. Christina Romer, Garff B. Wilson Professor of Economics at the University of California Berkeley, was recently selected by Obama as  Chair of the Council of Economic Advisers. She and David Romer have recently published an analysis that suggests that the multiplier for taxes is from 2 to 3. This would argue strongly  in favor of tax cuts for stimulation.

This is not to argue that the above analysis is conclusive, but it does argue for more careful consideration because these are non-trivial differences. The Congressional Budget Office has scored the current stimulus package and found that in the long run it will reduced GDP. Decade-long predictions from any economic analysis have to be consider extremely provisional. But it does suggestion that we should do what is necessary in the short term and tread carefully in with such a large package.

Make Them Do Math Problems

Sunday, February 1st, 2009

Google has launched new application associated with its e-mail service called “Mail Goggles.” If you have a Gmail account, you can use the Mail Goggles application set it up e-mail so that between certain hours you can  only send an e-mail if you are able to solve four math problems within a specified period of time. The idea is prevent the user from mailing stupid or embarrassing e-mails when they are very tired, very intoxicated, or both. The difficulty of the math problems can be adjusted because frankly there are some people who find math hard even when they are stone sober. The basic idea of keeping people from acting hastily before they have the time and disposition to consider their actions. perhaps ought to be applied to Congress. We need slow them up just enough to think before they act.

In October 2008, the government acted quickly and in good faith to prop up the banking system with a $700 billion dollar intervention as part of the Emergency Economic Stabilization Act. There is certainly no consensus now, months later that the intervention was salutary and certainly a consensus that it could have been more thoughtfully considered, better written, and better implemented. That legislation was the product of passion rather than thought, fear rather than reason. It was an interesting alliance between Democrats in Congress and a Republican president.

We are now is a similar situation with regard to the present “stimulus” bill. At present, the House has passed a $800 billion plus bill supposedly directed to stimulus without securing a a single Republican vote and loosing several Democratic ones along the way. The bill is now under consideration by the Senate.

There are certainly some stimulus elements to the bill, but the majority of the spending will occur in future years. Immediate stimulus is very limited and inconsistent with the rhetoric of bill supporters. Moreover, there are elements of the bill that are clearly payoffs to Democratic constituencies with little or no  association with economic stimulus, yet included in this rush bill to avoid the scrutiny of fuller deliberation.

It is funny (or embarrassing) to hear Speaker of the House Nancy Pelosi argue that family planning is an economic stimulus. While one could argue that any government spending would add stimulus, a thoughtful person realizes that certain types of spending have a greater stimulus effect that others. It would seem self-evident that the government should prioritize spending in terms of stimulus for a “stimulus” bill.

Some elements of the bill may have their merits. Increased funding for climate research or additional infrastructure spending are important. They should be considered in due course upon their relative values, but they do not legitimately qualify as stimulus.

If the bill is being rushed because we need immediate action, it seems that we should consider primarily those actions that have immediate effects. Building a bridge in 2010 may provide valuable infrastructure or increased spending on schools may contribute long-term economic growth, but they are not immediate stimulus and need not be implemented in a rush without careful consideration.

The Great Depression of the 1930’s is the model of the worst economic period in US history and people often refer to it to determine what to do in our present crisis. Many follow the thinking of John Maynard Keynes  and suggest aggressive fiscal policy could alleviate the problem. The enormous spending associated with World War II  brought us out of the Great Depression. Nobel Prize winning economist Milton Friedman in the Monetary History of the United States argued that Depression could have been largely adverted if the Federal Reserve had not instituted tight monetary policy.

In our current situation, we have certainly exercised the option of loose monetary policy with interest rates at historic lows. Since, there is always a lag time between rate reductions and increased economic output, perhaps we all we need to do is wait.

However, prudence suggests that we apply some fiscal stimulus as well. Liberals need to remember that fiscal stimulus includes reduced taxes as well as increased government spending. If Congress instituted a tax (income and/or payroll) holiday for a short time we could give an immediate stimulus to the economy. The effects could be evaluated and the tax reductions extended or ended depending on the results. There would less chance of over stimulation inducing a bout of inflation. Such an approach would not mean that additional spending on important programs could not be implemented. However, we should do so in a measured, thoughtful, and deliberate way.

Perhaps if we made legislators solve math problems before voting we could slow them up enough to think through there actions. They certainly aren’t providing due diligence now.

Digital TV Conversion

Sunday, January 18th, 2009

One thing that everyone concedes the government should manage is broadcast bandwidth. Now there may be arguments about whether bandwidth should be put up for auction, but that the government should be the agency that allocates bandwidth is not seriously questioned.

There are rational reasons for switching to digital television broadcasts. It frees up lower frequency bandwidth for mobile applications while allowing broadcast stations greater flexibility in providing programming.

If you have purchased a television recently, it can receive the ATSC signals. Older televisions must be re-fitting with a conversion boxes. The cost of such boxes run around $60. The government provides two coupons for $40 each to every household that requests them. While it is easy to see the need to aid lower income Americans to make the change, why is the coupon available to everyone? I can afford the conversion boxes and new television, why should the government be in the business of subsidizing my television needs?

It would have been easy to send two coupons to every household that filed taxes indicating income below some threshold. There could be additional programs to take care of those who fell through the cracks of that program. The fact that affluent people get free conversion box coupons is a small example of what governments do wrong.

The Captain and His Ship: Bush Reduces Global Warming

Sunday, January 18th, 2009

For better or worse, fairly or unfairly, the captain of ship is saddled with the responsibility or lavished with credit for the failures or successes of his term at the helm. If  a ship is struck by a meteor, it’s the captain’s fault. If unexpected fair winds power the sails of a ship it reflects positively on the captain’s command. The same rules applies to a president. If calamity strikes, the president get the blame. If things go well, the president basks in the credit, deserved or not.

As we prepare for the media’s embarrassingly obsequious coronation of Barack Obama as president, it is not too busy to make sure that Bush’s legacy is portrayed as negatively as can be managed. Now that the Iraq is going so well after the application of the surge, it is necessary to focus on  the economy over the last eight years.

The Washington Post on January 12,  2009 ran the headline “Under Bush, Economy Weakest in Decades.” The article broke up time by the different presidential terms since Truman to evaluate whose economies had performed better. Of course, Bush did not look good in the comparison.

Although the principle that the captain is responsible is often applied and the rule of thumb in politics, the Washington Post should be expected to provide a more comprehensive analysis. It is instructive and probably no accident that the list of performance began with Truman. If Franklin Roosevelt’s presidency, the term of the iconic liberal hero, were included, the unemployment and growth statistics of the Great Depression would have pulled the average for Democratic presidencies way down. However, that would not have served the purpose of the article.

In reality, gross economic performance is far more complex, with good and bad economic policies interwoven with natural business cycles. We will have recessions in the future, no matter how wise our policies. We suspect that the Post knows this but found it convenient to not dwell to much on the complexity.

For example, when a president comes to office, for the first year, two, or even perhaps three, he is saddled with or buoyed by the economy he inherited. Hence, the proper measure of the effects of a president policy should began sometime after he comes to office. It will undoubtedly be true that unemployment after the first year of the Obama presidency will be far greater than the average of the Bush years. The headline, “Obama’s Unemployment Record Worse than Bush’s” appearing after the first year would be unfair and the Post would never print it. However, they allow a similar analysis to affect their measure of Bush’s presidency.

As we know now, Bush inherited a recession from his predecessor which was compounded by tragic events of 9/11. Bush’s economic record improves considerably if you start the clock  in 2003. Similarly, there was a recession that ended in the last year of the first President Bush’s (41) term. The recovery did not really start to improve the unemployment picture until late in 1992, too late to keep President Clinton from winning the Presidency. Yet, Clinton inherited an economy in recovery with a 4.5% growth rate in the last  quarter of 1992.

Moreover, in evaluating a presidency a thoughtful analysis must consider whether a president manages to get his policies enacted and what those policies are. For example, the Post points out that under President Kennedy, the economy grew at a robust 5.3% rate. Yet one of Kennedy’s key policies was decreasing the top marginal income tax rate from 90% to 70%. Does the Post want to concede that reducing tax rates increases economic growth. Even now, Obama has decided to postpone eliminating the Bush tax cuts in a tacit concession, unmentioned during his campaign, that lower tax rates contribute to economic growth.

If we are allowed to sacrifice thoughtful analysis at the altar of partisan goals and scoring political points, allow us to note the following.  NASA’s Institute for Space Studies, whose research is directed by Dr. James Hansen, a vocal critic of the Bush Administration, produces a time series of global temperatures. Measured from 1993 to 2000 (the Clinton Presidency) the global temperature anomaly increased by 0.19C. However, from 2001 to 2008, (the Bush Presidency) the temperature anomaly decreased by 0.04C. Of course, such an analysis is deliberately oversimplified much as the Washington Post’s was. The difference is that we are telling you so.

Determining the Limits of a Recession

Sunday, December 14th, 2008

It was recently announced that the National Bureau of Economic Research (NBER) has determined that we are currently suffering in an economic recession, which began in December of 2007. Given the long time between the beginning of the recession and the official annoucement of a recession, one is given to wonder why the NBER took so long to come to such a formal determination.

The conventional definition of a recession is two consecutive quarters of negative economic growth. Such a definition is convenient in that it is not ambiguous. Except for errors in estimating economic growth (say for example estimating economic growth to be 0.1% as opposed to -0.1%), there can be general agreement about when the economy is in recession.

For economic planning and reconstruction of economic history, it would be convenient to have a measure that would locate a recession in time with greater precision than two quarters.

The National Bureau of Economic Research is the official body for such determinations.According to the NEBR the defintion of a recession is based on:

“(1) personal income less transfer payments, in real terms and (2) employment. In addition, the committee refers to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes. The committee also looks at monthly estimates of real GDP.”

However, history suggests that the industrial production (IP) metric dominates the determination of recession. The graphs below were pulled fromDavid Carbon (davidcarbon@dbs.com). They show industrial production as a function of time for the last four recessions.



The key to note here is that the beginning the recessions as defined by the NBER seem to correlated with the peak in industrial production and to end when industrial production turns upward (regains positive derivative). Of course, the month-to-month industrial production data can be noisy and it would not be appropriate to mark every little bump and dip in industrial production as a recession. It is thus necessary wait some time to determine if industrial production as really peaked or begun increasing again.

Industrial production measures manufacturing and mining output. Given the changing nature of the economy toward a service-based one, one can question how good a measure industrial production is. Nonetheless, it appears to be the proxy that it used by NBER for economic activity.The current recession is very interesting, at least from a graphical point of view.

The figure below is a plot of recent industrial production.


Note that in December of 2007, industrial production reached a local peak. However, the downturn afterwards was shallow. Indeed, during the summer of 2008, industrial production seemed to be on the rise. It is easy to understand why the NBER was reluctant to declare a recession at that point. Then in August and September, industrial production took a nose dive. The fact that we are in a recession is now unescapable. It is also interesting to note industrial production increased quickly last month. Whether this is a bump on a long-term bottom or a V-shaped recession remains to be seen. At this point, it would be premature for the NBER to make any determination.

Gasoline Stimulus Package

Sunday, November 23rd, 2008

Our government is now considering the possibility of a stimulus package to prop up the staggering economy and how big this package should be. Whatever the ultimate wisdom of such an idea, it seems that the recent precipitous drop in gasoline prices alone is providing some measure of stimulus. Focus for an instant on gasoline alone and neglect the savings in fuel oil and the propagation of the reduction of the price of oil through the economy. Any savings from lower costs for fuels other than gasoline will only add to the total we compute below.

According the the Energy Information Administration in 2007, the US consumed gasoline at the rate of 18,457 thousand barrels per day (or 18,457 million barrels per day). Integrated over a year, this amounts to about 6.7 billion barrels. One barrel of gasoline is about 31 gallons. Hence over the course of a year, Americans drive through 209 billion gallons. Gasoline has plummeted  from $4 a gallon to about $2. As a consequence, Americans will save over $400 billion from what they would have paid for  gas.

Last year the government attempted a stimulus package returning $300 to $1200 per taxpayer yielding a $168 billion in stimulus. This provides a way a scaling the stimulus we are receiving from decreased gas prices. Is this stimulus enough? We do not pretend to know here, but we are already stimulating at four times the rate we did earlier in the year.

Public Debt – It’s Not So Bad

Saturday, August 16th, 2008

Both Democrats and Republicans find convenient rhetorical uses for complaining about current budget deficits and total public debt. Democrats cite the deficit and debt to argue for increasing taxes, while Republicans point to  them as reasons to reduce government expenditures. One verbal tactic is to compare either the current tax receipts, total expenditures, the deficit, or total debt in terms of absolute values as in: This is “the largest tax increase in history” or the “deepest budget deficit in history.” But as the country continues to grow at a rate of about 3% per year and as even low inflation devalues the currency, over the long run modest tax increases or deficits can be made to appear much larger than they really are.

To appropriately understand our fiscal situation is it necessary scale national fiscal values the same way we scale our own finances, by our income. The house one purchases today may be substantially more expensive in nominal dollars that a house bought twenty years ago. However, during the intervening time one’s ability to afford that house increases with income growth, while inflation has increased the house’s nominal, but not real value. This is evidenced by the historic expansion in the rate of home ownership. Even though house prices have increased with time, more and more people over the last century have been able to own their own home. Despite price increases, growth in incomes have made homes are more affordable

Similarly, government expenditures, revenues, and debt must be scaled by the gross national product GDP. Here, we focus particularly on the national debt as measured against the national GDP. The graph below is instructive. It is a plot of total US debt divided by GDP as a function of time from the beginning of the country to 2006.

The national debt has taken on a greater importance as the size of government expanded so tremendously since the 1930’s so it is important to focus on the graph after that time. Even during the Civil War in the 1860s, government spending as a fraction of our total wealth was lower than it in the period after the early 1930s.

Government spending has a stimulative effect, taxation has depressing effect, and some level of public debt seems salutatory. The radical decrease in the debt-to-GDP ratio after the end of World War II in 1945 was not the result of budget surpluses, but very strong growth in GDP.  However, at the end of the 1960’s the debt ratio dropped below 40% and in the 1970s the US experienced decade-long economic stagnation. The period from 1980 to the present has experienced much higher levels of total debt-to-GDP and simultaneously much greater rates of economic growth and general well  being. While individual year surpluses may be beneficial, if they drive the debt too low, the government suppresses economic growth.

We are perpetually warned that we are leaving too much debt to our grandchildren. However, the erstwhile “Greatest Generation” that survived the Depression and won World War II left a debt-to-GDP ratio of over 120%, twice that of the current period. Their more generous and important legacy was the subsequent decades of rapid economic growth that dramatically reduced the debt-to-GDP ratio.  In the current period, we should perhaps be a little less concerned about the debt we leave our children and more concerned about whether we bequeath to them a vibrant and rapidly expanding economy.

The current debt-to-GDP ratio is not only reasonable but hovers around a level consistent with a period of nearly three decades of continuous and robust economic expansion. The long-term concern should not be the current debt, but the unfunded Social Security and Medicare liabilities we have incurred. The only way we can hope to meet these obligations is to maintain high economic growth, and a proper level of debt is necessary for such growth.