Paul Krugman and others have recently claimed that Chinese currency manipulation is “an issue whose time has passed.” There are two fundamental problems with these arguments. First, China’s global trade surplus appears to be perhaps three to four times larger than has previously been reported. Second, productivity in China is growing much faster than in the United States and other developed countries and therefore, China’s exchange rate likely needs to appreciate at least 3 to 5 percent per year just to keep its trade surplus from growing. On the first issue—what the size of the Chinese current account surplus and its recent movement tell us about the need for currency realignment—it’s worth noting that most of the decline in China’s global trade surplus since 2008 is explained by the great recession and the sluggish recovery, especially in Europe. However, the U.S. bilateral deficit with China has increased by a third since it bottomed-out in 2009, which has slowed the U.S. recovery.
Further, China’s trade data likely understates its global trade surplus by a significant amount, a problem that has been ignored by officials in the United States, the International Monetary Fund and other international agencies. The IMF relies on self-reported data from each member country. Analysis of trade data from the United Nations shows that China is massively under-reporting its exports. Read more
A number of commenters declare that currency management by our trading partners is an issue “whose time has passed.” At the risk of violating Brad DeLong’s wise rules (Paraphrased: “Mistakes are avoided if you follow two rules: (1) Remember that Paul Krugman is right, and (2) If your analysis leads you to conclude that Paul Krugman is wrong, refer to rule No. 1”), I’m not convinced by claims—even Krugman’s—that this is a dead issue.
Look at one key piece of evidence Krugman presents: the real (inflation-adjusted) appreciation of the yuan in the last year. But, as Krugman himself has said in previous writings on this:
“Notice that I didn’t mention the value of the renminbi at all in this account [ed: of China’s currency management]. … You want to keep your eye on the ball: it’s the artificial capital exports that are the driving force here.
We know that the renminbi is grossly undervalued … on a PPE (proof of the pudding is in the eating) basis: the current value of the renminbi is consistent with massive artificial capital export, and that’s that.” [Edited for clarity; I’m pretty sure I haven’t done any (much?) damage to his argument].
So, have the artificial capital exports from China continued? Read more
Every once in a while, someone will write a column so densely packed with deception and misinformation that it truly astonishes me. Last week, U.S. News and World Report published such a column about government regulation of business by John Allison of the Cato Institute. I feel compelled to respond.
Let’s start with Allison’s use of a thoroughly discredited study that estimated the annual cost of regulation to be $1.75 trillion in 2008. This report, by Nicole and Mark Crain of Lafayette College, has been shown to be based on flimsy data, a flawed methodology based on a misuse of polling data, and an equally discredited estimate of the costs of OSHA regulation whose original data are untraceable. The Small Business Administration funded the research, but the Chairman of the Council of Economic Advisers has condemned it:
“The Council of Economic Advisers has looked at those claims and the $1.75 trillion figure is utterly erroneous. In fact, their [Crain and Crain’s] own data (which come from the World Bank) show that countries with smarter regulations have higher standards of living, and the United States has one of the best regulatory systems in the world.” Read more
Sen. Chuck Schumer (D-NY) recently made headlines in declaring that marginal income tax rate reductions are a terrible starting point for tax reform—they shouldn’t be a priority, period—and that the dual objectives of the Tax Reform Act of 1986 are completely inappropriate today. The 1986 reform, the last comprehensive “cleaning” of the tax code, is often touted as the model for tax reform, which Schumer attributes more to coalescing political bipartisanship than policy specifics. The ’86 framework of base-broadening, rate reductions, and distributional neutrality was recently adopted by two prominent tax proposals Schumer is now urging Democrats to reject—reforms proposed by Fiscal Commission Co-Chairs Alan Simpson and Erskine Bowles, as well as the Gang of Six (although both of these proposals would raise revenue, unlike the ’86 reforms). And Schumer is absolutely right about both the premise and conclusion of his argument. Here’s his take in a recent interview with Ezra Klein:
Klein: “The core of your argument is that tax reform in 2012 is proceeding atop a mistaken analogy to tax reform in 1986. So why isn’t 2012 like 1986?”
Schumer: “It’s not like 1986 for two reasons. Read more
As a follow-up to my earlier post, another issue likely to be raised in tonight’s debate is the issue of federal budget deficits that force us to “borrow from China.” Is this a real problem, and will it hurt if China suddenly decides to stop lending us money?
No and no.
First, rising budget deficits since the Great Recession began have actually been more than financed by rising domestic savings of U.S. households and businesses. In fact, the huge spike in private savings that began in 2007 (see the chart below) is the reason for the Great Recession: households and businesses stopped spending in 2008 and the economy cratered thereafter, cushioned a bit by the rise in government deficits. So, we have not relied on rising borrowing from China to finance the increased budget deficits in recent years, instead the rise in domestic savings has been more than sufficient to cover these.
But what happens if China turns off the spigot and stops trying to buy U.S. Treasuries and other dollar-denominated assets?
This would have two effects. First, the decline in available savings that can be borrowed by American households, businesses, and governments would decline. In normal times, this could bid-up interest rates. Think of interest rates as the price of loanable funds—as the supply of loanable funds falls, the price should be expected (all else equal) to rise. But we’re not in normal times. Instead, the American economy remains characterized by a huge excess of savings over demand for new loans, meaning that there’s no upward pressure on interest rates. Absent this upward pressure on interest rates, no damage would be done if China stopped plowing money into buying dollar-denominated assets.
Second, if China did stop buying U.S. assets, the value of its currency would increase vis-à-vis the dollar, and this would spur U.S. exports, both to China as well as to third-country markets.
So, in regards to China buying the U.S. government’s debt, it’s not only nothing to worry about, it would be better for the U.S. economy if they stopped.
Notes for tonight’s debate: Faster growth without growing budget deficits requires a more competitive U.S. dollar
Tonight’s presidential debate will mostly focus on issues out of my wheelhouse, but there are a couple of international economic issues that will come up that people should be prepared for. This post tackles one (currency management by our trading partners, particularly China) and a subsequent post will tackle the other (alleged reliance of the U.S. on China to buy our public debt).
The primary reason why the United States ran large (and generally-growing) trade deficits over the past 15 years was that the value of the U.S. dollar was too expensive. This expensive dollar prices our exports out of too many global markets. The source of this too-expensive dollar has actually varied over that time, but over the past decade it has been clearly driven by the policy of foreign governments buying hundreds of billions of dollars of dollar-denominated assets, hence increasing the demand for dollars, which pushes up the price of dollars on world markets.
In the late 1990s and early 2000s, it was largely private investors demanding dollars to buy into the U.S. stock market, and to find a safe haven for their investments in the fallout Read more
One year ago, on Oct. 11, 2011, the Senate passed Sherrod Brown’s Currency Exchange Rate Oversight Reform Act of 2011. This legislation aimed to put an end to the exchange rate intervention practiced by China and other countries, which kills jobs in the United States by artificially lowering the cost of the intervening countries’ exports while making goods produced in the U.S. artificially expensive. The Senate passed the bill 63-35, on a rare bipartisan vote.
The next day, the bill was sent to the Republican-controlled House of Representatives, where it has been blocked ever since. This gridlock is especially unfortunate because a year earlier, in Sept. 2010, the House passed a somewhat tougher bill, the Currency Reform for Fair Trade Act, by an overwhelming vote of 348–79, with a majority of Republicans joining their Democratic colleagues in support.
China continues to peg its currency to the dollar at an artificially low rate, and good-paying manufacturing jobs in the U.S. continue to be lost as a result. At an event hosted by EPI, two economists who have long favored free trade, Fred Bergsten and Paul Krugman, agreed that ending China’s “staggering and unprecedented” currency intervention could create up to a million jobs in the U.S., a result that would also improve the U.S. budget deficit and add as much as $200 billion to U.S. GDP.
So why hasn’t Congress acted? What happened to change the outcome in the House from one year to the next? Most obviously, control switched from the Democrats to the Republicans in the 2010 elections, and the new Speaker of the House, John Boehner, and the new majority leader, Eric Cantor, both opposed the bill in 2010.
Penalizing imports from China that have benefited from illegal currency intervention is very popular, with public support more than 70 percent in most polls. But the U.S. Chamber of Commerce and other business groups representing the multinational corporations that benefit from China trade are dead-set against the currency bill. From their point of view, policies like China’s currency intervention that put pressure on U.S. workers to accept pay cuts and other concessions to save their jobs are just fine. Corporate lobbying and campaign contributions almost guarantee that Congress will remain deadlocked on this issue.
Republican presidential candidate Mitt Romney has been adamant that his tax plan won’t cut taxes for the rich. In the debate earlier this week, he said:
“The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects… I will not reduce the share paid by high-income individuals.”
So would his plan cut taxes for high-income households? Most likely. Note that he specifies the share of federal income taxes. Why is this important? If his plan was revenue-neutral, there would be no distinction: the same share of the same total revenue equals the same amount of taxes paid.
But it’s clear that his plan can’t be revenue neutral: According to the Tax Policy Center, the 20 percent cut would give households with income of more than $200,000 a $251 billion tax cut, but they only get $165 billion in tax breaks (excluding the tax breaks for savings, which Romney has proposed to retain). A more recent TPC analysis shows that the $25,000 cap on itemized deductions he floated in the debate would only raise $1.3 trillion, offsetting only a quarter of the $5 trillion cost of his across-the-board rate cut.
So it seems that Romney’s plan would lose revenue, and if high-income households are paying the same share of a lesser amount of overall tax revenue, that means their tax bill will fall. This conclusion is reinforced by Romney’s own choice of words. If his plan really did ensure that the top households didn’t get a tax cut, why would he often insist on describing his plan using the clunky “I will not reduce the share of taxes paid” explanation? It’s a roundabout explanation that suggests that even Romney knows that his plan will result in high-income households paying less in taxes.
Politicians love to complain about “waste, fraud and abuse,” and to promise to root it out. But few of them ever actually take the opportunity to attack actual waste or abuse (as opposed to making fun of scientific research they don’t understand or bike path construction projects they disagree with). But soon, in the lame duck session of Congress that will begin after the election, members of Congress will have a chance to vote against actual waste and abuse, or—if they’re so inclined—to allow it to continue, at great cost to the taxpaying public. Thanks to an amendment to the Department of Defense authorization bill introduced by Sen. Joe Manchin of West Virginia, Congress has an opportunity to put an end to an egregious practice of self-dealing and self-aggrandizement by federal defense contractors that costs the government billions of dollars a year.
Top federal contract employees are treated very differently (and much better) than equivalent employees on the federal civil service payroll. Current law permits federal contractors to charge the government up to $763,029 a year for their employees, while even federal cabinet secretaries are paid no more than $200,000 a year, and the president is paid only $400,000 a year. Read more
Today is the 40th anniversary of the Clean Water Act, federal legislation that has improved quality of life for millions of Americans, increasing recreational opportunities, improving public health, adding to our aesthetic enjoyment of nature and our environment, and providing business opportunities to manufacturers of boats and fishing equipment, rafting outfitters, and retailers of outdoor equipment. The Act is proof of the power and benefits of federal regulation; it transformed our world in so many visible ways and did more to protect our precious water resources than any other action, public or private, in the nation’s history.
It’s hard for young people to imagine just how polluted and threatened our waters were in 1972, when the Act was passed and signed into law by President Richard Nixon. I grew up near Detroit, on the shores of Lake St. Clair, the lake that, along with the Detroit River, connects Lake Erie and Lake Huron. After heavy rains, tides of human sewage and fecal matter would flow out into the lake, and continuous discharges of mercury and other toxins from industrial plants killed all but the hardiest and least appetizing fish. I swam in that lake Read more
Here’s some of the thought-provoking content that EPI’s research team enjoyed reading today:
- “Income Inequality May Take Toll on Growth” (New York Times)
- “Economic Health? It’s Relative” (New York Times)
- “Leading by Example: Minneapolis Acts on Employment Equity” (PolicyLink)
- “How a High-Speed Rail Disaster Exposed China’s Corruption” (The New Yorker)
- And finally, in case you missed it over the weekend, here’s a great Saturday Night Live skit on Apple’s iPhone 5 and the Chinese workers toiling away in Foxconn’s factories—something EPI has covered extensively:
Republican presidential nominee Mitt Romney’s budget proposal is short by nearly $9 trillion worth of specifics—the tax increases and spending cuts needed to meet promises of revenue-neutral tax changes and capping government spending at 20 percent of GDP. In this context, the Washington Post editorial board’s recent “pox on both houses” indictment of President Obama for a lack of second-term policy specifics, particularly with regard to fiscal sustainability, was entirely off the mark. Though too often lost on the punditry, the president has produced four comprehensive, independently analyzed and scored budgets—largely consistent and all fiscally sound—offering guidance to what a second Obama administration would imply for economic recovery and fiscal sustainability.
Economy: The president’s fiscal 2013 budget request included an adaptation of the American Jobs Act (AJA), originally a $447 billion package of stimulus spending and tax cuts proposed in Sept. 2011. I recently estimated that full passage of the AJA, relative to the scaled-back payroll tax cut and Emergency Unemployment Compensation extension Congress enacted, would have boosted real GDP growth by 1.4 percentage points and employment by more than 1.6 million by the end of 2012. Read more
Here’s some of the thought-provoking content that EPI’s research team enjoyed reading today:
- “The judicial jihad against the regulatory state” (Washington Post)
- “Social Security Keeps 21 Million Americans Out of Poverty: A State-by-State Analysis” (Center on Budget and Policy Priorities)
- “Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums” (Kaiser Family Foundation)
- “The Presidential Debate Commission is Chaired by Corporate Lobbyists, Funded by Corporations” (BoldProgressives.org)
- “A Risky Lifeline for the Elderly Is Costing Some Their Homes” (New York Times)
Despite a massive and endless campaign by business lobbyists and associations to vilify government regulation, 50 percent of Americans in a recent Gallup poll think there is too little regulation or just the right amount, while a minority (46 percent) think there is too much. According to the poll, Democrats tend to think regulation is too lax (42 percent think there is too little regulation while 32 percent think the balance is about right), and more Independents think the balance is right or that there is too little regulation (50 percent) than think there is too much (46 percent).
In one sense, this is good news, showing that anti-government cynicism is substantial but still a minority position. Yet it is disturbing to know that 77 percent of Republicans are so opposed to additional regulation when
- an estimated 100,000 people a year die needlessly from preventable hospital acquired infections;
- thousands die, more than 100,000 are hospitalized, and millions are sickened by contaminated food while the rate of infections linked to foodborne salmonella has been rising and food safety rules are stalled in Washington;
- air pollution that can be controlled for less than $3 billion a year causes between 13,000 and 34,000 preventable, premature deaths, 15,000 preventable, non-fatal heart attacks, 19,000 hospital and emergency room visits and 1.8 million days of missed work or school each year. As Steven Pearlstein points out in a recent column, the projected annual compliance cost of EPA’s final cross-state air pollution rule is $2.4 billion, compared with annual health benefits ranging from $120 billion to $280 billion. But the EPA rule was recently struck down by two Republican judges.
It is perfectly clear to me that more regulation would make millions of us both safer and freer—free from the fear that a random bite of spinach or a routine surgery will kill us or a loved one. And when I look back over the past 40 years and consider how much cleaner our lakes and rivers are now, how much more dangerous our workplaces were, and how unsafe the mines, factories, pharmaceuticals, and even the bridges and railways are in less advanced and less regulated countries like China, the last feeling I have about regulation is that we have too much, rather than too little.
Last night’s vice presidential debate was a good, lively, back-and-forth between Vice President Joe Biden and Rep. Paul Ryan (Wis.). The statement I singled out below was one that I found troubling (among a few)—and one that does a huge disservice in informing American voters on what changes in tax policy essentially mean. About halfway through the debate, Ryan said:
“Now, we think that government taking 28 percent of a family and business’s income is enough. President Obama thinks that the government ought to be able to take as much as 44.8 percent of a small business’s income.”
Far too often when discussing tax policy you will hear lawmakers and pundits use phrases such as the one above—government is “taking X percent of a family’s or a business’s income.” This, whether purposeful or not, unfortunately promotes misinformation regarding how tax rates work. A voter might hear something like what Ryan said and think, “I make $200,000, which puts me in the 33 percent bracket, which means government is literally going to take $66,000, or around a third of my total income, in taxes ($66,000 is 33 percent of $200,000).” This is wrong on a number of levelsRead more
Sen. Paul Wellstone (D-Minn.) was an inspiration to millions, an unrelenting advocate for the poor, for the disabled, for victims of domestic violence, and for the powerless in our society. When Wellstone and his wife and daughter died in a plane crash 10 years ago, along with staff members and the plane’s crew, the nation lost one of its most important and original voices. We also lost one of our most effective advocates for decency in political life, for justice, and for peace in the world.
We were honored to work closely with Sen. Wellstone on issues of worker safety, labor standards, unemployment insurance, and budget policy. After his death, EPI named its conference room the Paul Wellstone Room, and in our work we still look to his example and courage in telling the truth, fighting for the well-being of the poor and all working families, and treating everyone with the respect and dignity they deserve.
In These Times has published a remembrance of Sen. Wellstone, written by Peter Dreier of Occidental College, that captures how rare he was and what a tremendous loss his death was to Minnesota, to the United States, and to the world.
In the vice presidential debate last night, Rep. Paul Ryan (Wis.) cherry-picked statistics from the Congressional Budget Office on the number of people covered by employer-sponsored health insurance once the Affordable Care Act (ACA) takes full effect. Several fact-checkers (PolitiFact, Washington Post, CNN, Huffington Post, Wall Street Journal, Think Progress) have already challenged his assertion that 20 million people would lose their employment-based health insurance. His number comes from a CBO report, which explored various extreme scenarios for employers under the ACA. That report states: “in CBO and JCT’s judgment, a sharp decline in employment-based health insurance as a result of the ACA is unlikely.”
What’s often left out of this story is the fact that, even in this extreme and unlikely scenario, 29 million more Americans will have insurance (under the ACA). Even if the extreme scenario where 20 million no longer retain insurance through their employer, the vast majority of them will be able to find high-quality, fairly-priced insurance through the new exchanges. Unlike today, the insurance exchanges will be well-run insurance markets where consumers can’t be discriminated against for having pre-existing conditions and where many will be offered subsidies to make insurance affordable. Further, as the CBO estimates, it is expected that those who no longer received ESI would receive “an increase in taxable wages and salaries.”
In that same report, the CBO illustrates another scenario where 3 million more Americans would receive employment-based insurance under the ACA. Their best guess was 5 million fewer, and 31 million more insured overall. So, while the scenario Ryan cherry-picked is highly unlikely, if it comes to bear, Americans without employer-sponsored health insurance will still be captured by the ACA safety net.
The budget plan of Republican presidential nominee Mitt Romney includes large unspecified consequences; these are tallied here, and the complete implications of the plan are briefly illustrated. The tally includes not only the unspecified tax increases his plan dictates that have been the subject of much debate, it also includes the less-discussed unspecified budget cuts necessitated by a proposal to cap federal outlays at 20 percent of the economy.
- To meet Romney’s commitment to limit spending as a percent of the economy to 20 percent while at the same time increasing defense spending to 4 percent of GDP, would require nondefense spending cuts totaling $6.1 trillion from 2014–2022, according to an analysis by the Center on Budget and Policy Priorities (CBPP). The Romney campaign has proposed only $2.4 trillion of specific spending reductions. It has not specified the other $3.7 trillion in spending cuts necessary to achieve its budget plan.
- Similarly, over the next decade Romney proposes $5 trillion in tax cuts, a widely-discussed figure that in fact appears to be understated.1 Beyond suggesting possibly capping the dollar value of itemized deductions—doing so could increase taxes on middle-income households and even fully eliminating itemized deductions would not keep upper-income households from receiving a net tax cut—the Romney campaign has not identified any specific changes in tax policies to offset these tax cuts, but in the Oct. 3 debate Romney stated his tax plan would be revenue neutral.
- In combination, over the next decade the Romney budget plan would necessitate $11.1 trillion of spending cuts and tax increases. It specifies just $2.4 trillion of these, thereby hiding $8.7 trillion of painful decisions. Read more
The series of small strikes at Walmart stores around the country reminds me of the first outbreak of what became the Arab Spring, in the sense that it’s so unexpected and requires so much courage that you can’t help being astonished. Democratic protest at Walmart is rarer than in any Arab dictatorship. Walmart, after all, is far more powerful financially than Tunisia, where the first Arab Spring protest occurred. In fact, Walmart’s $400 billion-plus revenues are about 10 times larger than the entire GDP of Tunisia.
But Walmart is very like Tunisia in two key ways: its workers tend to be impoverished while the benefits of its economic activity accrue to a tiny elite (principally, the Walton family). The World Bank reports that Tunisia is a highly unequal society:
“Tunisia continues to be a low-wage, low-value added economy, unable to absorb an increase in skilled workers. Cronyism and anticompetitive practices allowed a privileged minority to enjoy the lion’s share of the benefits of growth and prosperity.”
The striking Walmart workers’ complaints about poverty level wages contrast sharply with the Walton family’s shocking wealthRead more
“Sleight of Hand,” an article in the November-December issue of The American Prospect, describes how federal, state, and local housing policies, including the public housing program, were designed a half-century ago to segregate our major metropolitan areas, and how the residential patterns created by public policy at that time persist to this day.
The article does so by way of describing the childhood of Joel Klein, former New York City schools chancellor and now CEO of a Rupert Murdoch company selling technology and software to public schools. Klein has often used his life story to prove an educational theory—that poor quality teachers are the cause of disadvantaged children’s failures. The life story is that he grew up poor, in public housing, “a kid from the streets” with little interest in education until a high school teacher “saw something that I hadn’t seen in myself.” And this life story, Klein and his allies imply, proves that if only disadvantaged students today had the kind of teacher from whom he had benefited, they too would excel and succeed. Read more
The last generation has been marked by a stark disconnect between productivity growth (up 80 percent between 1973 and 2011) and slow or stunted wage growth. The real hourly wages of the median worker grew less than 4 percent over this span, and real hourly compensation (wages and benefits) grew only 10.7 percent. The graphic at the end of this post parses this dismal wage record by gender, by wage decile, and by business cycle (wage dated updated through 2012, in June 2013).
For all workers, the erosion of real wages was broad and uneven from 1973 through 1995. The upturn of 1995–2000, the latter part of the 1989–2000 business cycle, brought a brief respite of across-the-board wage growth, some of which spilled past 2000 (although the wage growth from 2000–2007 skews much more to higher earners). The current recession and recovery (2007–2012) have brought with them wage losses for most workers.
For men, the pattern is even starker. Real wages begin falling for low-wage men in the mid-1970s, and this spread across all but the highest percentiles through 1979–1989 and through the first half of the 1990s (1989–1995). The late 1990s brings some relief, but this is short-lived: wage growth grinds to a halt in 2000–2007 and then loses ground—for all but highest earners—from 2007–2012.
For women, wage growth has been generally stronger. All wage levels show growth of at least 8 percent over the full 1973–2012 span, although the gains at the top (almost 60 percent for the 90th percentile, more than 70 percent for the 95th) are much more dramatic. Read more
Digging deeper into the BLS data: It was the ‘job creators’ and those in ‘real America’ that led to the job growth
I decided to dig a bit deeper into Bureau of Labor Statistics (BLS) data to gauge the divergence of employment growth in the household survey and the establishment survey in September and recent times. It is, after all, the divergence between these two series in September’s jobs report that generated outrageous charges of BLS economists manipulating the data (the household survey showed employment growth of 873,000 in September, which pushed the unemployment rate down to 7.8 percent from 8.1 percent in spite of a surge of new workers into the labor force).
The BLS, being the highly professional agency that it is, provides documentation on how the two series differ and compares the trends obtained in each series on an apples-to-apples basis (or, as close as they can get it); this information is available when the numbers are released each month. That is impressive, by the way. BLS will also share, on request, a spreadsheet providing the actual adjustments made to reconcile the two series over the last 12-month period (using “not seasonally adjusted” data, which is why they show it for the same month a year apart).
The bottom line is that the household survey has shown comparable employment growth as the payroll survey over the last year and less employment growth than in the payroll survey since the trough in June 2009. That’s pretty strong evidence that the trends in the household survey are not spectacular or implausible Read more
Wednesday night, Republican presidential nominee Mitt Romney added to the myriad of promises that make up his part-exceptionally detailed, part-mystery meat tax agenda—promising that none of his tax cuts would add to the deficit, that the middle class would see a tax break, and that upper-income households would see no tax break. Yesterday, I explained at length why these pledges, coupled with his specific tax cutting plans that cannot be written off, are mathematically impossible. Romney’s tax plan didn’t add up before Wednesday night, and it’s now further into the realm of fantasy. But the Washington Post’s Robert Samuelson didn’t get the memo; instead he’s drinking Romney’s tax cut Kool-Aid.
Essentially, Samuelson is giving greater weight to vague promises—promises that don’t add up, mind you—than to the very detailed plan Romney has laid out for cutting individual and corporate income taxes and eliminating the individual and corporate Alternative Minimum Taxes, estate tax, and Affordable Care Act taxes, among other tax cuts. In doing so, he unjustifiably criticizes President Obama for Read more
On Sept. 26, the Economic Policy Institute sponsored a Congressional Briefing on how transportation infrastructure, transportation jobs, and public transit can provide good jobs for black men. This is a brief summary and discussion of key points of the presentations. Links to presentation materials can be found at the end of this post.
African American men have the highest unemployment rate by race and gender. So far in 2012, the black male unemployment rate has averaged 15 percent. This is the overall national rate, but in some metropolitan areas the black male unemployment rate has been even higher.
The figure shows the average metropolitan unemployment rates for non-Hispanic black and white males since the technical end of the recession in June 2009. From July 2009 to May 2012, in many of the nation’s largest metro areas, the black male unemployment rate has averaged close to or above 20 percent. Much needs to be done to end the “economic depression” black men are facing. Transportation investments provide one promising avenue for improving the employment situation of black men. Read more
When asked about the role of government in the first presidential debate on Wednesday, both candidates touched on the importance of teachers, revealing what they would try to do to address the loss of teachers over the last several years due to recession-induced state and local budget shortfalls.
“But what I’ve also said is let’s hire another hundred thousand math and science teachers … and hard-pressed states right now can’t all do that. In fact, we’ve seen layoffs of hundreds of thousands of teachers over the last several years, and Governor Romney doesn’t think we need more teachers. I do, because I think that that is the kind of investment where the federal government can help.”
“Well, first, I love great schools. Massachusetts, our schools are ranked number one of all 50 states. And the key to great schools: great teachers. So I reject the idea that I don’t believe in great teachers or more teachers. Every school district, every state should make that decision on their own.”
Romney’s comment that school districts and states should make their own decision on whether to hire teachers ignores the fact that budget shortfalls over the last four years due to a loss of revenues caused by the recession have meant school districts have been forced to lay off teachers. It’s hard to imagine this is a choice any state or school district actually wanted to make. Read more
Jim Tankersley really strikes out in his column yesterday. He levels the charge that the Baby Boom generation has somehow put the nation into unsustainable debt and calls them, only half-jokingly, “parasites.”
As a member of Generation X, I used to enjoy some good-ol’ hating on the Baby Boomers, but it turns out that such generational finger-pointing is really silly. The prime exhibit offered in defense of the parasite charge is a comparison between federal debt as a share of GDP in 1965 and 2012. It’s 37.9 percent in 1965 and 74.2 percent in 2012 so, voila! Parasites!
Here’s a similar chart. Look closely at what happened between 1965 and 2007—debt held by the public is lower in 2007 than 1965. So, the charge must be somehow that the Baby Boomers’ mooching in the past five years is the real culprit, right?
Or, more likely, some very large economic event happened between 2007 and 2012 that caused Federal borrowing to rise. What could that have been? Oh yeah, the Great Recession.
And this one is hard to hang on the entire Baby Boom generation.
As a general rule, if you find yourself blaming large macroeconomic trends on the moral failings of entire generations … you are surely barking up the wrong tree.
Apparently, Jack Welch, former chairman and CEO of General Electric, is accusing the Bureau of Labor Statistics of manipulating the jobs report to help President Obama. Others seem to be adding their voices to this slanderous lie. It is simply outrageous to make such a claim and echoes the worrying general distrust of facts that seems to have swept segments of our nation. The BLS employment report draws on two surveys, one (the establishment survey) of 141,000 businesses and government agencies and the other (the household survey) of 60,000 households. The household survey is done by the Census Bureau on behalf of BLS. It’s important to note that large single-month divergences between the employment numbers in these two surveys (like the divergence in September) are just not that rare. EPI’s Elise Gould has a great paper on the differences between these two surveys.
BLS is a highly professional agency with dozens of people involved in the tabulation and analysis of these data. The idea that the data are manipulated is just completely implausible. Moreover, the data trends reported are clearly in line with previous monthly reports and other economic indicators (such as GDP). Read more
Here’s some of the thought-provoking content that EPI’s research team enjoyed reading today:
- “Footnoting the [presidential] debate!” (Wonkblog)
- “Women Still Missing From Medicine’s Top Ranks” (New York Times)
- “Ex-Clinton staffer backs [Charlie] Bass: [Erskine] Bowles says GOP rep has ‘the guts’” (Concord (NH) Monitor)
Last night, Republican presidential nominee Mitt Romney made news by substantially “etch-a-sketching” the tax policy he had been running on since the GOP primaries began. In making up policy on the fly, he promised that his tax cuts would be entirely revenue-neutral, that he would cut taxes on the middle class, and that he would not cut taxes on high-income earners. Taken together with his specific tax cutting plans, these pledges violate basic rules of arithmetic.
Early on in the debate, Romney disputed President Obama’s claim that the former governor’s central economic plan was a $5 trillion tax cut on top of extending the Bush-era tax cuts:
“First of all, I don’t have a $5 trillion tax cut. I don’t have a tax cut of a scale that you’re talking about. My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high-income people.”
I’ve gone over these numbers before, but it’s worth a quick refresher about the broad thrust of what’s wrong with this claim: Romney is hugely specific about just how he’ll cut taxes (mostly for high-income earners) but refuses to specify any real-world offset though the “base-broadening” that he’s promising. Read more