Home Ownership This High?

Brad De Long delong at econ.Berkeley.EDU
Sun Oct 25 19:18:30 PST 1998


>...went ballistic at a symposium when it was remarked that he [had]
>cautiously approv[ed] something like the Tobin Tax under certain limited
>circumstances. As part of the federal bureaucracy in Washington is it
>worse to
>propose an action in an early academic paper which threatens the interests of
>core constituents of a ruling party or group than to write something which
>potentially undermines the dominant ideology?

I believe that the key is that the U.S. is now a debtor nation--with a national debt of $4 trillion, with a net foreign investment balance of somewhere between -$1 and -$1.5 trillion, with our continued economic prosperity dependent on something like $200 billion a year of capital inflows in order to keep investment at an acceptable level given our current relatively anemic savings rate.

If that $200 billion a year of capital inflow from foreign investors disappeared, the consequences might well be very unpleasant. And if the foreign investors who hold any large portion of the $1 billion or so decided that they wanted out of the United States, the consequences *would* be very unpleasant--would make Thailand in late 1997 look like a ripple on a pond caused by a frog making a bad landing.

Thus as a result the--how shall I put it?--the relative autonomy of the state in this area is low. My take on the subject is that Senior Treasury Officials do not believe that they can even think about ideas they thought about a decade ago because job #1 is keeping foreigners who make portfolio investments in the U.S. calm, happy, and tranquilized. In fact--as has been related on this list--Senior Treasury Officials regard mention of ideas that they thought about a decade ago as a hostile and aggressive action.

Brad DeLong

More information about the lbo-talk mailing list