CBO Director Asks for Chat on Their Questionable Health Cost Increase Model

Interesting post:

The evidence from the closest comparable to the US, which is Japan in its post crisis era, in fact suggests the exact reverse of the CBO fearmongering, namely, that fiscal tightening in a post crisis economy is likely to precipitate financial firm failures. The collapse of Japan's real estate and stock market bubbles caused a severe contraction in household consumption and private investment spending which culminated in a brief real contraction in 1994. Once the stimulus from the expanding budget deficit began to work, real GDP growth regained momentum.

By 1996, the same calls for austerity that we hear in the US now led to increases in taxes. The contraction in public spending on top of very fragile private sector spending – akin to the situation that most nations face today – caused a massive contraction in 1997 and 1998 – which increased the budget deficit (via the automatic stabilisers) and added to the public debt ratio (given both debt was rising and GDP was falling). Most importantly, it also led to a second wave of financial firm failure, including one of the four biggest securities firms in Japan, Yamaichi, as well as some of its long term credit banks.

The Lady Doth Protest Too Much: CBO Director Asks for a Chat Regarding Our Post on Their Questionable Health Cost Increase Model « naked capitalism

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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