When Ann Johnston (left), Mayor of Stockton, California, informed the city council in March that Stockton was about to go bankrupt, making it the largest municipal bankruptcy in history, it took her six hours to explain why. The primary reason was overborrowing, overspending, and thinking that the good times would go on forever. They didn’t.
In his attempt to explode the myth that there is unlimited demand for U.S. government debt, former Treasury official Lawrence Goodman explained that there is high perceived demand because the Federal Reserve is doing most of the buying.
When Federal Reserve Chairman Ben Bernanke donned his professorial cap and addressed 30 undergraduate students at George Washington University on Tuesday, he claimed it was all in the interest of transparency. According to the New York Times, “The Fed is concerned that it is neither loved nor understood by many Americans, and that public anger could lead to constraints on its powers.”
Rep. Paul Ryan (R-Wis.) announced on Tuesday the Republican budget plan to take into the election debate; it is in sharp contrast to the Obama administration’s budget announced last month. Two key differences stand out: reducing the number of income tax brackets from the current six to just two (10 percent and 25 percent), and cutting corporate income tax rates from 35 percent currently to 25 percent. The Obama administration wants to raise taxes instead.