One of the most influential findings in the never-ending debate over American fiscal policy came from a 2010 paper by economists Carmen Reinhart and Kenneth Rogoff—“Growth in a Time of Debt.” They claimed to have identified a clear debt ratio (total public debt divided by  gross domestic product) threshold above which countries’ economic growth would significantly slow. This 90 percent debt ratio has been referenced by budget writers, policymakers and others arguing for steep reductions in budget deficits soon.

We didn’t buy it. In the same year their paper was released, I co-authored a paper (along with John Irons) looking at the historical record for the U.S., and found very little evidence that such a threshold existed (and we weren’t alone in our skepticism). Further, we noted that the causality of any such finding was deeply in doubt—slow growth could lead to high debt as surely (actually, much more surely) as high debt could impede growth.

Most importantly (if not most thrillingly), we argued (in the first bullet-point!) that “there is no compelling theoretical reason why the stock of debt at a given point in time should harm contemporaneous economic growth.”

And it turns out that there is no longer any compelling empirical reason to think that the 90 percent threshold is operable any more either, as a new working paper by Herndon, Ash and Pollin makes clear. After receiving the original Reinhart and Rogoff data set (collegially provided by the original authors), they found a number of errors that, when corrected, essentially overturn the finding that debt ratios of over 90 percent are associated with slower growth. Mike Konczal reviews the paper in some detail here.

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The Republican majority on the House Education and Workforce Committee could raise the minimum wage, cover more employees with overtime protection, pass paid sick days legislation, pass a paid family leave bill, or do a host of other things to make life easier for America’s working families. Instead, as Judith Lichtman of the National Partnership for Women and Families testified last week, they have chosen to weaken overtime protections and shift more power from employees to their bosses.

The Republicans have trotted out a bill introduced back in 1995 and unsuccessfully pushed again by business lobbyists in 2003. They call H.R. 1406 the Working Families Flexibility Act, apparently because it will bend and twist working families even more than they already are as they try to balance the needs of home and work. Rather than give employees the flexibility to take a paid day off when they or their kids are sick, the bill gives their employers the flexibility not to pay them overtime when it is earned.

Lichtman does a great job of pointing out what a sham the bill is, and the National Partnership has also published a good fact sheet that points out that the bill greatly increases the risk that employees will work overtime but never get paid for it. The chance that thousands of businesses will fail each year while holding millions of dollars of unpaid overtime credits in leave banks is very real. Half a million businesses fail in an average year.

Judy Lichtman politely calls H.R. 1406 “smoke and mirrors.” I think it’s fair to call it a fraud, for the truth is that the law already permits the only benefit the bill claims to provide, time off for employees who work overtime. Nothing in current law prevents an employer that makes an employee work overtime from paying for that overtime and then providing unpaid compensatory time off to the employee at a later date.

Happy tax day! Here are a few stories we found interesting in the past couple weeks:

• A Tax System Stacked Against the 99 Percent (New York Times)
• Mortgage Interest Deduction Is Ripe for Reform (CBPP)
• How the I.R.S. Hurts Mothers (New York Times)
• African Americans Chained by President Obama’s CPI Proposal (Global Policy TV)
• Sequestration Effects: Cuts Sting Communities Nationwide (Huffington Post)

Around the enactment of the lame-duck budget deal, which permanently extended the Bush-era tax cuts and most  expiring income tax provisions for roughly 99 percent of households, policymakers were claiming to be preventing the largest tax hike in American history. Yet every worker saw their taxes go up between 2012 and 2013.

And during the “fiscal cliff” policy debates, some conservatives (wrongly) warned that full expiration of the Bush tax cuts would push the economy back into recession. Neither event occurred, but enough other fiscal retrenchment is slated for 2013 that the labor market will likely experience renewed deterioration—in large part because the expiring two-percentage-point Social Security payroll tax cut went ignored during the policy debate.

So with tax day upon us, here’s a brief overview of the budgetary and economic impacts of tax changes for 2013. Notably, the relatively well targeted payroll tax cut’s expiration is the tax change overwhelmingly felt by the vast majority of households, whereas other tax changes were rather progressively targeted. Correspondingly, the expiration of the payroll tax cut will exert a fairly sizable drag on economic growth in 2013, whereas tax changes more targeted to upper-income households pose only about one-fifth as much of a drag per dollar.

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A version of this post originally appeared at the Fiscal Times.

Over at Forbes, Tim Worstall didn’t take kindly to an op-ed I authored for The Fiscal Times pointing out that research by two economists, Peter Diamond and Emmanuel Saez, indicates that individual income tax rates are currently well below their revenue-maximizing rates. He accuses me of misrepresenting their work … by completely misrepresenting their work, as well as mine. The crux of his ire with my “propaganda” is this paragraph in my piece:

“Most importantly, recent economic research has shown that productive economic activity is relatively unresponsive to increases in the top income tax rate, and the top income tax rate is well below the levels where it maximizes revenue. Economists Peter Diamond and Emmanuel Saez estimate that the revenue maximizing income tax rate is 73 percent (combing federal, state and local taxes).”

Worstall: “No, that is not what that paper says. What it does say is that in a tax system with no allowances then that peak of the Laffer Curve, that revenue [maximizing] rate, is 73 percent. What it also says is that the peak in a system with allowances is more like 54 percent.”

Nope, that’s totally wrong. What the paper says — it’s on page 7 — is that in today’s system the best estimate of the revenue-maximizing rate is 73 percent. Period.

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There was once a time in the mid-2000s—a golden era, if you will—when it finally seemed widely recognized that long-run federal spending trends were driven near-entirely by rising health care costs. An equally important corollary recognition was that these health care costs were driven in turn near-entirely by rising per beneficiary cost-growth, a function of our dysfunctional health system and not a function of demographics. Lots of people deserve credit for getting this truth out, and Peter Orszag’s tenure at the Congressional Budget Office was especially useful in drumming this truth home to the Very Serious People™. Figures and bullet-points like this one seemed to help…

Recognizing that demographics alone do not constitute a coming budget crisis was hugely important, because it was (a) correct and (b) focused attention on where it belonged in budget issues: reforming health care. It also relieved pressure stemming from efforts to cut Social Security. This is crucially important because Social Security is the only leg of our retirement system that is not a frank disaster, so defanging efforts to chip away at it was a huge policy win.

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The president has proposed cutting the cost-of-living adjustment for Social Security by tying it to a “chained” consumer price index that rises more slowly than the current one, but with a partially offsetting benefit enhancement intended to protect vulnerable beneficiaries. In a fact sheet about the chained CPI belatedly released by the Office of Management and Budget, the White House claims: “Because of the benefit enhancement for the very elderly, the Budget proposal would not increase the poverty rate for Social Security beneficiaries, and would slightly reduce poverty among the very elderly according to SSA [Social Security Administration] estimates.”

This claim deserves scrutiny, since the SSA estimates aren’t shown and the description of the “benefit enhancement” was slow to be released and remains sketchy. While we await further information, a quick look at the benefit enhancement casts some doubt on this claim, since retirees with average benefits would see a benefit cut until their late 90s, and few retirees live that long.1

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President Barack Obama’s fiscal year 2014 budget request, released Wednesday, is a more centrist blueprint than his fiscal 2013 request—which was the most progressive and ambitious with regards to job creation and taxation to date. As I argued in a U.S. News debate club series, the contrast is most conspicuous and consequential on three fronts: proposing less ambitious revenue targets, largely abandoning the American Jobs Acts, and identifying benefit cuts (not just efficiency savings) in social insurance programs that the president would exchange for the more modest revenue increases.

Of these, the pre-compromise on Republicans’ third rail—raising new revenue—is perhaps the most perplexing, because unlike scaling back stimulus or cutting Social Security benefits it works directly against the administration’s prioritization of deficit reduction (a priority regrettably at odds with ensuring faster economic recovery). Remember that the “ten dollars in spending cuts for a dollar in revenue” formulation—an empirical policy slam-dunk for the GOP and twice as conservative as the five-to-one ratio for deficit-reduction measures enacted in the 112^th Congress—was heretical during the GOP presidential primary campaign. The political hurdle on taxes is getting Republicans to accept the first penny of revenue and buck Grover Norquist’s Taxpayer Protection Pledge. Given this, scaling back revenue proposals accomplishes nothing.

At first blush, the president’s budget doesn’t appear to have given away much on the revenue front. The OMB Summary tables show revenue averaging 19.1 percent of GDP over FY2014-2023, seemingly roughly in line with revenues at 19.2 percent of GDP over FY2013-2022 in his previous budget request (and revised to 19.1 percent in the Mid-Session Review). But it’s important to dig deeper and figure out what’s going on here.

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Yesterday the president released his FY2014 budget request. While there is a lot to be commended in the budget (canceling sequestration cuts, calling for an (admittedly insufficient) increase in the minimum wage, infrastructure investment, creating a “Buffett rule”) there is also plenty to dislike. Perhaps the most controversial measure is the inclusion of the chained CPI to measure the cost of living adjustment for Social Security (and to index tax brackets and other programs). This is a not a policy favorite of EPI’s (see here and here for why).

Less commented on is the dramatic scaling back of stimulus efforts in this year’s budget relative to previous versions. In last year’s FY2013 budget request, the president included a section within his proposals dedicated to “temporary tax relief and investments to create jobs and jumpstart growth.” While perhaps not as robust and exhaustive as we would like to see in an effort to insure a full economic recovery, last year’s budget was not too shabby on stimulus. It included $178 billion in stimulus proposals for FY2012, and $355 billion over FY2012-2022. Examples of stimulus in the FY2013 request included a two-year payroll tax holiday, an extension of unemployment insurance benefits, some business and energy tax credits, investment in surface transportation priorities, and a number of different policies aimed on hiring and supporting teachers and first responders and rehabilitating and rebuilding neighborhoods and schools (many of these policies were seen in his September 2011 American Jobs Act proposal).

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Sports website Deadspin just published a leaked internal memo circulated by ESPN that gives us a small window into the sports entertainment giant’s questionable (at best) labor practices.

ESPN staffers are currently preparing to put on a new international X Games competition in Foz do Iguaçu, Brazil. In advance of their trip, ESPN operations manager Severn Sandt sent out a memo outlining ESPN’s expectations of its staff.

Citing extreme budget constraints, ESPN is asking its employees to take one for the team on their time sheets. Singling out hourly employees, the memo encourages,

“…Don’t push OT. If it’s 9:10, take the 9:00 out – don’t push for 9:30.”

The legality of this admonition aside, let’s put it into a broader business context. ESPN is owned mostly by The Walt Disney Company, and accounts for almost half of the entire value of the Disney empire. With a valuation of $40 billion, according to Wunderlich, ESPN is by no means suffering from prohibitive financial constraints.

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