It's obviously true that earmarks are not a significant cause of rising federal spending; eliminating all of them will save at most one percent of the budget. I've always suspected that this is the main reason why right wingers focus on them so obsessively--it makes them look tough on spending while actually doing nothing meaningful to cut it.

That said, I think earmarks are underrated in terms of their contribution to corruption. It's really poisonous when members of Congress can so easily direct federal spending to a favored business in order to attract campaign contributions or just the mistaken belief that they are doing something for their district by helping out a local company.

Furthermore, I think the idea that if Congress stops earmarking that they will somehow disappear is ludicrous. It will just increase congressional pressure on the administration to include favored projects in the president's budget, which for some reason is always treated as being earmark-free.

 The Wall Street Journal is reporting that San Francisco Fed President Janet Yellen will be nominated to be Vice Chair of the Federal Reserve Board. Since she is already a member of the FOMC, however, this doesn't really change the direction of monetary policy. The Journal says that persons have been selected for the other two Fed vacancies. It is likely that all three names will be sent to the Senate simultaneously.

Addendum

Fomer Fed Governor Larry Meyer has a good comment here.

Friday's Wall Street Journal has the latest survey of 54 professional economic forecasters. Among the questions they were asked was this: "What would the real gross domestic product (annualized growth rate) be/have been for the following period absent the American Recovery and Reinvestment Act?"

The average response said that growth would have been -0.93 percent last year in the absence of fiscal stimulus. Since growth was essentially zero on a 4th quarter over 4th quarter basis--the measure favored by forecasters--this suggests that the stimulus added almost a full percentage point to real GDP growth in 2009.

For 2010, the forecasters say that growth would be 2.2 percent in the absence of stimulus. Since the average growth forecast for this year is 3.0 percent by these same forecasters, this suggests that the stimulus bill will add 0.8 percent to growth this year as well. In other words, the real GDP growth rate this year will be more than a third higher than it would be in the absence of stimulus.

In my Forbes column this week I discuss the dangers. BB

The other day I commented on a blogger's suggestion that it might be better to default on the debt than raise taxes. In the course of doing some research on debt default I came across the following article in which a friend of mine, Chris Whalen, actually made a serious argument for defaulting on the debt. It's too good not to share. BB

I just received the following e-mail from David Malpass, former chief economist at Bear Stearns. I've know him for at least 25 years; we worked together at the U.S. Treasury Department. I wish him the best of luck.

Dear Friends and Colleagues,

As many of you know, I believe strongly in our country’s future, but have been dismayed at the decisions Washington has been making and their impact on New York state.   The problems go across the board – astronomical debt, out-of-control spending and taxes, federal decisions that undermine our security, health care legislation that would appall the drafters of the Constitution, and more.

As a result, I’ve been exploring a run for the U.S. Senate seat held by Sen. Gillibrand and wanted to give you an update.   I'm thrilled to say that we are making great progress on several fronts:  I'm assembling a top-notch team, we're reaching out to party members and county chairmen around the state, and we're taking the legal steps necessary to launch this huge effort in coming days.

 My Forbes column this week tries to answer the question. BB

It's a rare public opinion poll these days that doesn't show the national debt near the top of Americans' concerns. Huge budget deficits as far as the eye can see are a source of great worry, encouraging many people to join the so-called tea party movement to demand fiscal responsibility. President Obama has responded by asking for a freeze on nondefense discretionary spending, and appointing a commission to study the deficit and make recommendations for reducing it.

 Daniel Gross thinks so. BB

On the heels of the dopey Hensarling-Pence spending limitation constitutional amendment, which I tear apart here, the so-called Blue Dog Democrats are now supporting a balanced budget amendment (see here and here). When Republican presidential wannabe Tim Pawlenty put forward the same idea a few weeks ago I explained why it was a bad idea here. (Many of my criticisms of the Hensarling-Pence proposal are also valid against a BBA as well).

In today’s Wall Street Journal, Republican Reps. Jeb Hensarling of Texas and Mike Pence of Indiana put forward a dopey idea for reducing federal spending so that they can appear to be fiscally responsible while still supporting every tax cut that comes down the pike and opposing any and all tax increases. Their simplistic idea is to just enact a constitutional amendment that would limit federal spending to “one fifth of the economy.”

This is a terrible idea on so many levels that it is hard to know where to begin to dissect it, but here goes.