How to think about the U.S. budget challenge

The long‐term budget prospects of the United States are grim. Projected spending greatly exceeds projected revenue over the next few decades. Projected growth of health care spending accounts for more than all of the anticipated gap. Without action to narrow the gap, accumulating deficits will drive up the ratio of debt to GDP. Interest payments will rise correspondingly. At some point, domestic and foreign holders of U.S. debt will come to doubt the capacity of the government to service this debt. At that point, they will demand sharply higher interest rates. The combination of increasing debt and rising interest rates will cause debt service costs to explode. What follows would be some combination of collapsing investment, declining production, debt default, and inflation—in brief, a calamitous mess. That such a mess will occur is certain if budget deficits as large as those currently anticipated are realized. Precisely when is impossible to forecast accurately.     

Income, assets, and health insurance: economic resources for meeting acute health care needs of the aged.

In this article, the authors use data from the Survey of Income and Program Participation (SIPP) to examine the relationship between economic resources and acute health care needs among the aged. The circumstances of individuals who rely on Medicare as their only form of health insurance are considered in detail because they are potentially more vulnerable when faced with health care expenses. Particular attention is given to the amount of family income and personal contingency assets held by this group and the level of out-of-pocket liability for acute care they might have been expected to face in 1984. The authors point out that their research findings would be strengthened by linkage of a more current SIPP data set to Medicare program records and the development of Medicaid eligibility simulation capability in the SIPP context.     

How to win the political contest: A monopolist vs. environmentalists

This paper sheds light on the political economy of local energypolitics both from a theoretical and an empirical perspective.First, a case study of a small town in Southern Germany(Schönau) is presented, where environmentalists have won thepolitical contest against the regional energy monopolist and havefounded an energy supply firm themselves. The different stagesof the political process are explained and analysed. Second, apolitical economy model is developed, where environmentalists anda monopolistic utility firm confront each other both on thepolitical and on the energy market. In the lobbying equilibriumthe probability of the environmentalists' winning the gamedepends on the monopoly rent and the perceived social costs ofenergy production. It is shown that it is optimal for themonopolist to reduce his output below the monopolistic output.Finally, the winning strategy in the Schönau case is discussedin the light of the theoretical results of the paper.