Ed Lazear – Higher Net Exports Risk Recession

Blogging economists have been opining on how to reduce the current account deficit and maintain full employment without risking inflation with the 50 year old insights of Jan Tinbergen playing a prominent role. Someone must not have been paying attention:

While Bush touted prospects for compromise with Democrats, his chief economic adviser warned yesterday that the new Congress poses the “biggest risk,” potentially, to the nation’s robust economy. Edward P. Lazear, chairman of Bush’s Council of Economic Advisers, told reporters that he is worried that Democratic lawmakers may try to raise taxes or enact “isolationist” trade policies that could steer the country toward recession.

In what model does expansionary expenditure-switching policies cause recessions? And what is Lazear opposed to my suggestion – easy money with tight fiscal policy, which was the 1993 approach?

As this Washington Post article noted President Bush would support an increase in payroll taxes, Dean Baker has an objection to its coverage:

The Washington Post writes again on Social Security, describing the system as the “fiscally imperiled Social Security system.” For the facts, CBO says that if nothing is done, the program first faces a shortfall in 40 years. It’s too bad the Washington Post doesn’t give the same attention to the problems (e.g. global warming, rising health care costs, the increasing prison population) that will impose much larger costs on the country. But, hey, it’s a jihad.

Economic advice from this CEA and the coverage by the Washington Post – Dumb and Dumber.