Matt Yglesias doesn’t think that Figure B in Tom Hungerford’s new paper on corporate tax rates and economic growth “proves” a non-relationship between the two. He’s right, of course, but then goes on to argue that including this chart specifically, and including charts in blogs generally, is a borderline shady practice. This I don’t really get.

So, I shall make the case for the use of charts with a chart, below.

But, first, a quick thought on another point in Matt’s post. He notes that we at EPI aren’t keen on seeing corporate tax rates cut reformed anytime soon because we like revenue and we “feel that the corporate income tax raises it in a distributionally progressive way.” We do like revenue, but our thoughts on the incidence of corporate tax rates are not “feelings”—they’re pretty evidence-based. The CBO, for example, used to assume that 100% of the corporate income tax fell on owners of capital (a very well-off bunch relative to the rest of the population). Now they assume that 3/4ths does. So our view that most of the incidence of the corporate income tax falls on capital is not some wild-eyed heterodox view.

We’d probably quibble even with the change to put some of the incidence on wages (though I’m not a huge expert in this one), and we know of the growing effort by some economists to claim that the incidence of the corporate income tax is actually borne by workers, but we’re convinced by the counter-evidence (see here (PDF) and here (PDF) for some of this evidence). A side-note—it’s always fun to see people who claim in one venue that corporate tax rates should be cut reformed because the incidence is actually borne by workers claim in another that the corporate income tax is bad because it “double-taxes” capital income. Really, you can’t have both claims.

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What we read today (and the rest of this week):

• From the Mouths of Babes (New York Times)
• Study: Tax Cuts Might Drive Income Inequality After All (The Atlantic)
• Disability, Social Security, and the missing context (Columbia Journalism Review)
• Joblessness Shortens Lifespan of Least Educated White Women, Research Says (New York Times)
• Discipline and Punish: The New Unemployment ‘Reform’ (Labor Notes)
• Low interest rates are the final straw for many company pensions (Washington Post)
• The Unemployed Need Bold, Creative Moves from the Fed (Fiscal Times)
• Report: More seniors are living in poverty (Politico)

Every year since 1941, the Social Security Trustees have issued a report on the long-term financial outlook of Social Security. The 2013 report is out today, along with the Medicare trustees report. The Social Security trust fund reserves increased by $54.4 billion in 2012, and this year’s surplus is projected to be $28 billion. Social Security will continue to run a surplus through the end of the decade, with the trust fund growing from $2.76 trillion in 2013 to a peak of $2.92 trillion in 2020.

Beginning in 2021, Social Security will begin drawing down the trust fund to provide a cushion to help pay for the Baby Boom retirement. This was anticipated. The trust fund was never meant to grow indefinitely and its drawdown should not be cause for concern, though the recession and weak recovery have accelerated the process.

If no policy changes are made to Social Security, the trust fund will reach exhaustion in 2033, unchanged from last year’s report. (See this interesting blog from CBPP looking at how trust fund exhaustion dates have fluctuated since 2000 due to demographic and economic uncertainties; note that the exhaustion date was the same in 2000 as it was during the recession in 2009.) Even in the unlikely event that nothing is done to prevent automatic benefit cuts when the trust fund runs out, Social Security would still be able to pay out 77 percent of promised benefits to recipients. Modest increases in revenue, however, could keep Social Security paying out full benefits for the foreseeable future. Even without any changes, Social Security will be able to keep paying full benefits for another two decades. So there is absolutely no reason why any action or “grand bargain” including Social Security reform must happen now, especially with a dysfunctional Congress.

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Piggybacking on my colleague Josh Bivens’ recent post refuting claims that the economy is “holding up surprisingly well,” it seems some in the press corps could benefit from a primer on economic expansion versus economic recovery. Rebounds in certain economic indicators, particularly stock indices and housing prices—very incomplete metrics of overall health being buoyed by the Federal Reserve’s quantitative easing asset purchases—are too often being conflated with or contributing to a “recovery” that presupposes the economy is recovering.

Part of this confusion likely reflects misidentification of the affliction at hand. The U.S. faces a sharp aggregate demand shortfall stemming from the housing bubble’s implosion and a jobs crisis that resulted from this pullback in spending by households, businesses and government. On these fronts, the U.S. is mostly oscillating between recovery and backwards progress, and “treading water” tends to be a better characterization than recovery since the end of 2010, after the Recovery Act’s boost faded and the federal government joined state and local governments on the austerity bandwagon.

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The number of disabled worker beneficiaries grew by 187 percent between 1980 and 2010, much faster than the 39 percent growth in the workforce. Much of this can be explained by the aging of the Baby Boomers, who were 45-64 in 2010 (peak years for disability), and the rise in the number of insured women, according to recent testimony by Social Security Chief Actuary Stephen Goss (pdf). (An additional factor was the increase in Social Security’s normal retirement age (pdf) from 65 to 66, which delayed when beneficiaries are shifted from disability to retirement benefits.)

However, age-adjusted incidence rates also increased from 3.1 percent in 1980 to 4.4 percent in 2010.1 This and the fact that the Disability Insurance (DI) trust fund is projected to run out in 2016 has brought a flurry of negative attention to the program. Advocates are bracing for more when the Social Security Trustees Report is released tomorrow.

Much of the media coverage focuses on workers with seemingly minor impairments who apply after losing their jobs, giving the impression that DI is luring people out of the workforce and causing a drain on public resources. In a particularly misleading story, National Public Radio dubbed the disability program a “hidden, increasingly expensive safety net.” But as a new report from the Center for American Progress (pdf) points out, DI benefits are a modest lifeline for disabled workers, and the difficult and lengthy application process makes it highly unlikely that workers with real options will choose this route. Even among the more than half of applicants who are rejected, relatively few find jobs later (pdf), though the fact that some applicants who nearly qualify manage to engage in “substantial gainful activity” suggests that DI does have a modest dis-employment effect.

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President Obama is reportedly planning to nominate economist Jason Furman to replace Alan Krueger as the head of the Council of Economic Advisers. Like Krueger and, for that matter, Austan Goolsbee and Christina Romer who previously served this administration in the same capacity, Furman boasts an impressive resume, with a Harvard economics doctorate as well as stints at the Brooking Institution, the Center on Budget and Policy Priorities (CBPP), and the CEA under President Clinton, among others. If you’re still of the incorrect belief that tax cuts largely pay for themselves (looking at you, Senate Minority Leader Mitch McConnell), do yourself a favor and read his CBPP report explaining the mechanics and empirics of “dynamic scoring” (pdf) and why invoking it as a talisman doesn’t mean one can claim anything one finds politically expedient.

The Beltway coverage of this news is overly focused on the inside baseball politics between the CEA and the National Economic Council, where Furman has been serving as Deputy Director since January 2009. But it’s important to step back and remember that economic policy in recent years has been principally driven not by well-qualified economists with the CEA, NEC, or elsewhere in the executive branch, but instead by conservative congressional obstructionism. Jason Furman’s appointment to the CEA will not alter the troubling reality that the United States is on an autopilot course of premature, excessive austerity and intentionally poorly designed sequestration spending cuts. But even if the ghost of conservative saint Milton Friedman rose up and warned the GOP against such austerity, today’s conservatives in Congress would declare him an apostate and continue their destructive course.

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As my colleague Heidi Shierholz has noted, the recent “hold steady” jobs report represents an ongoing disaster for all workers. But historically, and since the Great Recession, unemployment has inflicted significantly more pain on black and Hispanic workers. EPI recently released five reports on unemployment through the recession that reveal the depth of suffering among black and Hispanic workers in states with large minority populations, focusing particularly on black and Hispanic unemployment in Michigan, Mississippi, New Mexico, North Carolina, and Texas. Coupled with historic barriers to employment for people of color, the economic collapse of the recession and painfully slow recovery have taken a much greater toll on African Americans and Hispanics than whites.

The figure below shows the significant disparities in black-white and Hispanic-white unemployment in the U.S. over the last 34 years. African American unemployment rates have almost always been at least twice—and sometimes more than two and a half times—that of whites since 1979. Even at the depths of the Great Recession, when white unemployment was much higher, the black unemployment rate was 1.88 times that of whites. At this disparity’s peak in 1989, the black unemployment rate was 2.71 times the white unemployment rate. Likewise, Hispanic unemployment rates have been at least one and a half times (and, throughout the 90s, more than twice) that of whites since 1979. The Hispanic-white unemployment gap peaked in 1998 when the Hispanic unemployment rate was 2.12 times that of whites. At the end of 2012, the black unemployment rate was more than twice (2.11) that of whites, and the Hispanic unemployment rate stood at more than one and a half times (1.56) that of whites.

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The normally excellent Neil Irwin and Ylan Q. Mui at Wonkblog are mostly wrong, I think, in arguing that the economy is “holding up surprisingly well” in a year of austerity. The data they cite to make this judgment are rising prices in both the stock market and home prices and falling gasoline prices.

But rising stock prices are actually pretty irrelevant to most American families, and today they mostly reflect the stunningly high profit margins of American corporations. These profit-margins in turn are boosted by extremely weak wage-growth, as inflation-adjusted wages for the vast majority of American workers have fallen in each of the last three years. In short, one could easily make the case that today’s high stock prices are actually mostly a sign of bad news for American workers.

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This week, we learned that Apple is sitting on over $100 billion in untaxed overseas cash, and this cash will remain untaxed until and unless Apple repatriates this income (that is, brings the cash home to the United States).

In a blog post, Jared Bernstein asked about how we can stop this sort of international tax avoidance. The simplest and most direct way of taxing offshore income would be to simply end deferral entirely. Taxing the overseas income of U.S. multinationals would raise revenue, helping ease current budget pressures, and eliminate incentives for complicated tax avoidance schemes.

Not only do millionaires have low tax rates, so do many corporations, with some large corporations paying less in taxes than the typical middle-class American taxpayer. So how do large multinational corporations avoid paying taxes? The full answer is as complicated as the tax code; the short answer involves profit-shifting and deferral.

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Although the House and Senate have yet to reconcile their respective budget resolutions, the House Appropriations Committee forged ahead and recently approved a GOP spending plan for fiscal year 2014, capping base discretionary funding at $967 billion—the level set by the sequestration. The committee also defeated a Democratic proposal that would have set the top-line discretionary funding allocation at $1.058 trillion—the same level of spending called for in both President Obama’s budget request and the Senate budget resolution.

We know that the two chambers of Congress will not likely reach agreement on spending levels for FY2014. But where exactly do they differ? The chart below indicates that there are very minor differences between the House and Senate on Defense, Homeland Security, and Military Construction-Veterans Affairs appropriation levels. (The latter two allocations are the only without disagreement between the two chambers.) The biggest relative differences occur in funding levels for the Financial Services and General Government, Labor-Health and Human Services-Education, and State and Foreign Operations subcommittee allocations. The biggest dollar difference in proposed appropriations between the two chambers is for the Labor-HHS-Education subcommittee allocation, which the House GOP recommends funding $44 billion below both the Senate and the administration’s budget requests for FY2014.

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