Key Reading on the U.S. Economy: Vital Policy Issues

Duffield, John S.  Over a barrel: the costs of U.S. foreign oil dependence.  Stanford Law and Politics, 2008.  290p bibl index afp; ISBN 9780804754996, $27.95. Reviewed in 2008jul CHOICE.
45-6292  HD9566  2007-27396 CIP 

This timely volume is a valuable addition to the literature on world oil markets and particularly on the important issue of US dependence on foreign oil and how the country should deal with it. In a presidential election year, this issue will no doubt take center stage, given soaring oil prices. Duffield (Georgia State Univ.) explains the subject well, making the book accessible to all readers. While he makes it clear that his goal is not to prescribe a particular set of policies, this should have been the next logical step of his presentation. The author’s main focus is assessing the benefits and costs of US oil dependence as well as how this dependence affects US foreign policy and diplomacy. Duffield also considers options for lowering domestic oil consumption, e.g., fuel economy standards, energy taxes, alternative fuels. Duffield does a good job at looking at the cost of military expenditures to secure safe passage of oil. The US unfortunately subsidizes the rest of the world with its military presence overseas and effectively reduces the ultimate cost of oil to other oil-importing countries. Summing Up: Highly recommended. General readers; all levels of undergraduate and graduate students; researchers and practitioners. — M. Akacem, Metropolitan State College of Denver 

Gramlich, Edward M.  Subprime mortgages: America’s latest boom and bust.  Urban Institute, 2007.  108p bibl index afp; ISBN 9780877667391 pbk, $26.50. Reviewed in 2007dec CHOICE.
45-2145  HG2040  2007-17806 CIP
 
While the problems of residential mortgages in the US have been brewing for years, the crisis of the subprime mortgage market did not erupt until 2007, so this book is among the first on the subprime bust. In this timely analysis, Gramlich (senior fellow, the Urban Institute; formerly a governor of the Federal Reserve Board and chair of its Committee on Consumer and Community Affairs) describes how during the preceding several years, riskier loans were extended to financially uninformed low- and moderate-income borrowers. This expansion of credit was facilitated by the secondary market in mortgages, as Fannie Mae and Freddie Mac bought mortgages from the originators and then packaged them into securities sold to institutions such as insurance companies, mutual funds, and hedge funds. As mortgages have defaulted, leveraged holders sold securities, which then roiled financial markets worldwide. To prevent this problem in the future, Gramlich recommends increased governmental regulation. He does not address the more fundamental monetary and fiscal policies that have generated this boom-bust cycle; for that, see Fred Harrison, Boom Bust: House Prices, Banking and the Depression of 2010 (London, 2005). Summing Up: Highly recommended. General readers; students, upper-division undergraduate and up; and researchers and professionals. — F. E. Foldvary, Santa Clara University 

Hardy, Melissa.  Pension puzzles: Social Security and the great debate, by Melissa Hardy and Lawrence Hazelrigg.  Russell Sage Foundation, 2007.  284p bibl index afp; ISBN 9780871543332, $37.50. Reviewed in 2008may CHOICE.
45-5096  HD7125  2006-102838 CIP 

Sociologists Hardy and Hazelrigg (Pennsylvania State Univ.) address efforts to avert an ascribed crisis in the US Social Security system generated by the expected increase in retiring baby boomers. Already in a fiscal quagmire, Social Security revenues are expected to diminish below benefit payments in the future due to a low number of workers in relation to retirees. Much of the book analyzes the many proposals offered to confront the gap between expected revenues and mandated benefits, none of which have received general public acceptance. The economics and demographic processes are said to be too complex for public comprehension. Moreover, the authors describe the US political process as broken, foreclosing the hope of rational resolution. Aside from rejecting proposals that involve set-asides for investment in securities by individuals to provide retirement income–so-called privatization–the authors explicitly eschew choosing or offering their own recommendations. Since the problems facing Social Security are described as technical, they believe a group of technicians should be appointed to work together to develop solutions. This volume is distinguished by immense scholarship in economics and political science extending beyond the Social Security issue to the proper role of government in the economy. An important addition to the literature. Summing Up: Highly recommended. Graduate, research, and professional collections. — H. I. Liebling, emeritus, Lafayette College 

Iley, Richard A.  Untangling the US deficit: evaluating causes, cures and global imbalances, by Richard A. Iley and Mervyn K. Lewis.  E. Elgar, 2007.  272p bibl index; ISBN 9781845429201, $115.00. Reviewed in 2008apr CHOICE.
45-4497  HJ2051  2007-735 CIP
 
Iley (senior economist, BNP Paribas) and Lewis (Univ. of South Australia) address the timely and pressing issue of the US current account deficit. They analyze the causes of the US external deficit within the framework of four major approaches: trade balance, absorption, savings and investment, and portfolio balance. These approaches have been discussed under the overriding themes of “Made in USA” or “The Rest of the World.” Subsequently, the authors discuss the sustainability of the US external deficit and conclude that it is “conditioned by the nature and composition of international holdings of US dollar assets.” The authors also discuss the vexing issue of the American trade deficit vis-à-vis China, emphasizing the undervalued yuan and its role in widening the deficit. The general theme that emerges from this volume is that imbalances in the external sectors should be left to market forces. The book is written in a very accessible fashion, even though the authors strive to accommodate competing and complex views on the causes and cures of the US external deficit, which makes for enjoyable and informative reading. Their reliance on data, charts, and bibliography result in persuasive arguments. Summing Up: Recommended. General readers; upper-division undergraduates through practitioners. — A. Sharma, Elmira College 

Kelly, Robert E.  The national debt of the United States.  2nd ed.  McFarland, 2008.  393p bibl index afp; ISBN 9780786432332  pbk, $45.00. Reviewed in 2008aug CHOICE.
45-6904  HJ8119  2007-49741 CIP
 
Kelly (retired CPA, corporate consultant, and columnist) presents brief histories of the growth of US public debt under the administrations of 12 presidents, from Franklin D. Roosevelt to George W. Bush. For each administration, he identifies sectors contributing to public debt growth and analyzes them with respect to the social, economic, and political settings of each period. Kelly discusses at length how presidents, members of Congress, political leaders, and judges affected fiscal policy, and he provides thumbnail characterizations of their personalities and prejudices. Detailed investigation focuses on the role each president played in major public budget decisions, which is supported by figures showing start-off debt and its subsequent development in each case. Kelly’s major conclusion is that the government’s power to borrow has been misused over the past four decades in a so-called orgy of social spending, propagated by human failures rather than compelling events; i.e., the political agendas of officials determined policy. This book is easily accessible to the general public and is especially useful because of its abundant time-sequenced tables. Many readers will find it appropriate to refer to so-called principles of economics textbooks on the controversial topic of rising debt in the US economy. Summing Up: Recommended. General readers, all levels of undergraduate students. — H. I. Liebling, emeritus, Lafayette College 

Kotlikoff, Laurence J.  The coming generational storm: what you need to know about America’s economic future, by Laurence J. Kotlikoff and Scott Burns.  MIT, 2004.  274p index ISBN 0-262-11286-8 <http://worldcatlibraries.org/wcpa/isbn/0-262-11286-8> , $27.95.  Outstanding Title! Reviewed in 2004sep CHOICE.
42-0420  HB3505  2003-69121 CIP 

Economist Kotlikoff (Boston Univ.) and journalist Burns warn readers not to expect the US economy to continue systematically translating technological progress into rising standards of living. They explain that in recent generations politicians have made unsustainable promises about government spending on retirement programs and medical care–creating a gap between spending and revenue of a mind-numbing $45 trillion (not a typo)–and that the looming retirement of baby boomers means the next generation will face a doubling of lifetime net tax rates unless citizens make very large sacrifices very soon. They relentlessly explain why standard remedies will not fix the problem, why their own innovative, yet sensible, proposal is not likely to be adopted by selfish voters, and why continuing along the current path could easily drag the economy into a torpor replete with stultifying taxes, resurgent inflation, and capital flight. The authors close with investment advice to help individuals weather the storm. Kotlikoff’s talents as a pioneer of generational accounting are joined with Burns’s engaging (though occasionally flippant) prose to make the book accessible to almost any reader. This may be the year’s most important book. Summing Up: Essential. All library collections. — R. M. Whaples, Wake Forest University 

MacAvoy, Paul W.  The unsustainable costs of partial deregulation.  Yale, 2007.  181p bibl index afp; ISBN 9780300121285, $55.00. Reviewed in 2007dec CHOICE.
45-2147  HD2766  2007-1335 CIP

Thirty years of government deregulation of specific industries has produced some successes (e.g., airlines, trucking, rail). In this volume, MacAvoy (emer., Yale) analyzes three failures: natural gas, electricity, and telecoms. Public policy in these partially deregulated industries has been made by Congress, regulatory agencies, and the courts. These markets are characterized by economies of scale and scope, where fewness of suppliers (oligopoly) makes competition problematic. Partial deregulation involves a mixture of some freedom to set prices, some price regulation, some forced corporate relationships, and some divestiture. This approach has resulted in several problems including price caps (at time of peak demand) that produced revenues inadequate to allow investment in capacity, as well as unreliable service. MacAvoy uses network theory and classic oligopoly models (the Lerner index of monopoly) to infer the type of oligopolistic interactions among firms. He concludes that partial deregulation did not produce the expected lower consumer prices and higher quality of services. Instead, deregulation produced shortages, lower reliability, and financial problems for suppliers (including bankruptcy)–in short, policy failures. Of particular interest is the careful analysis of the California power crisis (2000-1). The volume contains other examples of political considerations trumping sound economics. Excellent footnotes and bibliography. Summing Up: Highly recommended. Upper-division undergraduate through professional collections. — R. A. Miller, emeritus, Wesleyan University 

Miller, Richard M., Jr.  Funding extended conflicts: Korea, Vietnam, and the War on Terror.  Praeger, 2007.  179p bibl index afp; ISBN 9780275998967, $49.95. Reviewed in 2008mar CHOICE.
45-3898  HC110  2007-16120 CIP
 
This is a major contribution to the study of US war expenditures. Miller (US Navy) examines US funding of three wars: Korea, Vietnam, and the global war on terror. For each he covers cost estimates and appropriation, allocation, and spending. He tries to place the material in context by preceding each introduction with a caption from a prominent source. Miller clearly explains the funding process in each case study and raises many questions, which he answers with healthy cynicism. One conclusion is that all estimates depend on assumptions; hence, they all end up wrong. Supplemental funding has been significant, incremental, and expensive in terms of opportunity costs. In discussing resources, Miller considers 12 serious issues including cost estimates, transition from supplemental to baseline budgets, advantages and disadvantages of supplemental budgeting, benefits and durability of flexible appropriations, importance of authorities relative to funding, cost components, overtime, predisposed outlook of the political leaders, congressional activism, and tensions and suspicions surrounding war expenditures. This volume would be more valuable had the author addressed opportunity costs of these expenditures in more detail. Charts, tables, glossary, footnotes, plus introductions and summaries of chapters and sections enrich the text. Summing Up: Highly recommended. Upper-division undergraduate students through professionals. — E. H. Tuma, emeritus, University of California, Davis 

Musgrave, Frank W.  The economics of U.S. health care policy: the role of market forces.  M.E. Sharpe, 2006.  186p bibl index afp ISBN 0-7656-1255-0 <http://worldcatlibraries.org/wcpa/isbn/0-7656-1255-0> , $76.95; ISBN 0765612569 <http://worldcatlibraries.org/wcpa/isbn/0765612569>  pbk, $29.95; ISBN 9780765612564 pbk, $29.95. Reviewed in 2007jun CHOICE.
44-5766  RA395  2005-21725 CIP

Musgrave (Ithaca College) writes on the economics behind health care policy in the US, currently one of the most debated topics. He explains that the essential questions are whether health care is a public, quasipublic, or private good, and whether health care markets should be more free market or more government involved. Centering on these questions, Musgrave examines pharmaceutical pricing, managed care, the uninsured, medical/health savings accounts, and reform of Medicare. He explains the economics excellently without resorting to jargon. This book does not provide comprehensive coverage of health economics; instead, it succinctly covers the few more important topics. While Musgrave focuses on the US, he draws international comparisons from time to time. Compared with James W. Henderson’s Health Economics and Policy with Economic Applications (3rd ed., 2005), this work is less technical and more accessible to people not trained in economics. A valuable resource for undergraduates, health professionals without an economics background, and general readers. Summing Up: Highly recommended. Public, academic, and professional library collections. — D. Li, Kansas State University 

Nesvetailova, Anastasia.  Fragile finance: debt, speculation and crisis in the age of global credit.  Palgrave Macmillan, 2007.  190p bibl indexes; ISBN 9780230006904, $80.00. Reviewed in 2008jun CHOICE.
45-5688  HB3722   MARC

With the subprime lending debacle and resulting reverberations in US financial markets, there could hardly be a more propitious time for the appearance of this brief volume. These challenges to the US financial system, after recent periodic crises in emerging market systems, will undoubtedly lead to more mainstream consideration of whether there are inherent instabilities in the capitalist system. Nesvetailova (City Univ., London) argues that the financial crises of the last decade are connected–the commonality being increased opportunities for speculation resulting from the liberalization and globalization of financial markets. The foundation of the analysis is Minsky’s paradox of financial fragility. The basis for this fragility was the collapse of the Bretton Woods regime, which brought about rapid financial innovation. Deregulation and the accompanying global integration of financial markets have facilitated the spread of financial contagions across the world. Nesvetailova maintains that the financial crises experienced throughout the last two decades demonstrate that liquidity management and control pose difficult challenges to the current financial structure, and that this structure guarantees that instability will continue to be a central feature of capitalist systems. Summing Up: Highly recommended. Graduate, faculty, and research collections. — D. C. Messerschmidt, Lynchburg College 

Restoring fiscal sanity, 2007: the health spending challenge, ed. by Alice M. Rivlin and Joseph R. Antos.  Brookings, 2007.  233p index afp ISBN 0815774931  pbk, $16.95; ISBN 9780815774938   pbk, $16.95. Reviewed in 2007aug CHOICE.
44-6948  RA410  2007-586 CIP 

The editors of this timely, well-written volume are highly reputable economists with backgrounds in the Congressional Budget Office (Rivlin was the founding director). They represent different political philosophies, as do the other contributors. The result is a balanced contribution to the literature assessing approaches to achieving the goals of “higher quality, greater efficiency, broader coverage, and slower overall health spending growth.” Contributors delineate and analyze the roles of government, private payers, and the institutions of health care with respect to these goals. Economic analysis is nicely applied to these payment systems. Chapter 2, written by the editors, addresses “strategies for slowing the growth of health spending” together with “seeking efficient and effective care.” Table 2.1 lists reform options (e.g., improve price setting, promote consumerism, limit outlays) together with the appropriate strategies, such as reimbursement based on performance. Chapter 6, by Paul B. Ginsburg, analyzes the roles of market forces, especially private payers, in providing greater efficiency in health care spending. Other chapters detail the central issues in Medicare and Medicaid and offer some political insights. Chapter-end notes and references. Summing Up: Highly recommended. General readers; students, lower-division undergraduate and up; faculty and professionals. — F. W. Musgrave, Ithaca College 

Shaviro, Daniel N.  Taxes, spending, and the U.S. government’s march toward bankruptcy.  Cambridge, 2007.  251p bibl index ISBN 0-521-86933-1, $75.00; ISBN 0521689589  pbk, $29.99; ISBN 9780521689588 pbk, $29.99. Reviewed in 2007jul CHOICE.
44-6351  HJ257  2006-8552 CIP

Shaviro (taxation, New York Univ. Law School) hopes to remedy the fiscal distress of the federal government by reengineering the language of government finance. In particular, he would shift attention away from annual deficits toward the long-term fiscal gap and toward redistributions between generations. These deficits represent short-term cash flow positions that can be easily manipulated for political advantage and misinterpreted as a gauge of the impact of tax and spending programs on the fiscal position. And when surpluses do occur, they may mislead as to how much they are actually improving the national fiscal position. Shaviro proposes a change in the focus of fiscal discussion to longer-term concepts, in particular measures that capture huge future liabilities being incurred now without regard to their ultimate consequences. Public finance professionals will applaud his analysis and proposals for a revised discussion. But will politicians, having short-term horizons based on the electoral cycle, respond with the politically challenging decisions necessary to reverse the prognosis? Summing Up: Recommended. Upper-division undergraduate through professional collections. — J. L. Mikesell, Indiana University–Bloomington 

Slemrod, Joel.  Taxing ourselves: a citizen’s guide to the debate over taxes, by Joel Slemrod and John Bakija.  4th ed.  MIT, 2008.  382p bibl index afp; ISBN 9780262195737, $60.00; ISBN 9780262693639  pbk, $22.95. Reviewed in 2008jul CHOICE.
45-6306  HJ4652  2003-70625 CIP

A nontechnical explanation of the US federal tax system is no small challenge, but economists Slemrod (Univ. of Michigan) and Bakija (Williams College) manage remarkably in this updated edition (CH, 2nd ed., Nov’00, 38-1676). They outline the federal tax structure (individual and corporate income, Social Security payroll, and estate and gift); assess it according to fairness, economic impact, simplicity, and enforceability; describe tax reform principles; and examine primary reform alternatives, including both improving the present system (emphasizing income taxation) and radical restructuring (mostly adopting some general consumption tax). They maintain a balanced assessment of the current and alternative systems with a thoughtful, accessible integration of current theoretical and empirical thinking about tax impacts. They take full advantage of the work of the President’s Advisory Panel on Federal Tax Reform and its proposals. Their last chapter is a voters’ guide to tax policy, which includes a reminder that tax policy choices extend beyond the question of what is best for one’s family. An important argument is that the best ought not prevent the good: even if the perfect system cannot be attained, smaller changes that can improve performance of the federal tax system should be pursued. Summing Up: Highly recommended. General readers; all levels of undergraduate and graduate students; professionals. — J. L. Mikesell, Indiana University–Bloomington 

Stern, Gary H.  Too big to fail: the hazards of bank bailouts, by Gary H. Stern and Ron J. Feldman.  Brookings, 2004.  230p bibl index afp ISBN 0-8157-8152-0 <http://worldcatlibraries.org/wcpa/isbn/0-8157-8152-0> , $32.95. Reviewed in 2004oct CHOICE.
42-1064  HG2491  2003-26258 CIP

Authors Stern and Feldman (president and vice president respectively, of the Federal Reserve Bank of Minneapolis) provide a timely warning on the perils of the government bailout of large financial institutions–a policy labeled “Too Big to Fail” (TBTF). Years of economic stability have lulled the American public into blasé (blase) attitudes about the potential for bank failures. However, changing economic times may once again perk public interest in TBTF. In this brief but important book, the authors define the problem, explain why it is an important policy issue, and provide recommendations for reducing the potential threat. They also evaluate the alternatives, which include the FDIC Improvement Act, making policy makers more responsible, greater supervision and regulation, and increasing market discipline. The bottom line is that the TBTF problem has not been solved, and leads to wasted resources. To counter this trend, the authors argue, policy makers must credibly demonstrate that they do not intend to bail out uninsured creditors when large banks fail. Failure to do so will worsen the economic difficulties in the future. This book should be required reading for all policy makers. Summing Up: Highly recommended. Public; academic, lower-division undergraduate through faculty; and professional library collections. — R. J. Phillips, Colorado State University 

© American Library Association. Contact [email protected] for permission to reproduce or redistribute.