Dean Baker
The Hankyoreh, November 14, 2017

Eileen AppelbaumSacramento Bee, November 13, 2017

Eduardo Porter had a good piece noting that the United States is an outlier among rich countries in that it takes in far less tax revenue each year than other wealthy countries. As a result, it provides less in public services like health care and higher education. However, this is an incomplete story.

Tax collections are only one way in which the government pays for goods and services. There are three other important mechanisms:

1) patent and copyright monopolies;

2) tax expenditures, and;

3) loan guarantees.

While tax collections have increased little over the last three decades, the money committed in these three categories has expanded hugely relatively to the size of the economy over this period.

In the case of patent and copyright monopolies, these are mechanisms that the government uses to pay for innovation and creative work as an alternative to direct spending. For example, the United States could spend another $50 billion a year on biomedical research (in addition to the $32 billion it spends through the National Institutes of Health) and take responsibility for developing and testing new drugs. Instead, it tells the pharmaceutical industry to develop drugs and it will give it patents and other types of monopolies so it can recoup its costs.

Mark WeisbrotAlterNet, November 13, 2017

Dean Baker
Truthout, November 13, 2017

The main claim of proponents of the Republican tax bill is that lowering corporate taxes will lead to a surge in corporate investment. This is supposed to lead to more rapid productivity growth and therefore higher wages.

As those of us who are fond of data have pointed out, the world doesn't seem to work this way. There is very little relationship between after-tax profit rates and investment. In fact, the period of strongest investment was the late 1970s and early 1980s when after-tax profits were at their post-World War II low, while the current period of very high profits has been associated with lackluster investment. This leaves little reason to believe that cutting the corporate tax rate will have much impact on investment. (Of course, we also tried this trick in 1986, also with little impact on investment.) 

But there is another aspect to this story that folks in the reality-based universe should be thinking about. Productivity growth has been dismal in recent years, in spite of all the talk about robots taking our jobs. (Pundits aren't paid to know anything about the world.) Over the last five years, productivity growth has averaged less than 0.7 percent annually. That compares to rates of close to 3.0 percent from 1995 to 2005 and also during the long golden age from 1947 to 1973.

However this may be changing. Last quarter, productivity rose at a 3.0 percent annual rate. As everyone familiar with productivity data knows, the best thing to do with quarterly number is to ignore it. Nonetheless, a faster trend has to start somewhere and what is striking is that we seem to be on a path for another strong number for the fourth quarter.

November 2017, Dean Baker

November 2017, Brian Dew

It’s a new era in America. Fake News, grandiose claims, misinformation, obfuscation…you name it. When the President of the United States tweets things like:

And

We all feel like we’re going crazy. We can’t understand how this can be happening. It’s all so daunting.

It's amazing the stuff you can find in the NYT. Most of us learn at a fairly early age that the people who sit in Congress are politicians. They get there by appeasing powerful interest groups who give them the money and political support necessary to get and hold their seats. However, NYT columnist David Brooks seems to think that they get their seats as a result of their political philosophy.

In his column on the tax debate, titled "the clash of social visions," Brooks tell readers:

"The Republicans have a social vision. The Republican vision is that the corporate sector is more important to a healthy America than the professional and nonprofit sector. The Republican vision is that companies that thrive in the red states, like manufacturing and agriculture, are more important for the country than the industries that thrive in blue states, like finance, media, the academy and the movies."

Hmmm, so the Republicans have a vision that people (like Donald Trump) who get their income from pass-through corporations (or can devise a scheme that makes it look like they get their income from pass-through corporations) should pay taxes at a lower rate than people who get their income working as a lawyer, doctor, or other highly paid professional and don't cheat the I.R.S.?

And their social vision also tells Republicans that like kind transactions involving real estate (like those done by Donald Trump) should be exempt from the more general requirement that such transactions be subject to capital gains tax? (A like kind transaction involves exchanging two businesses or properties that have some general similarities.) Does the Republican social vision also tell them that heavily leveraged real estate deals (like those done by Donald Trump) should be exempt from the caps on the deductability of interest?

It would also be interesting to know how the Republican social vision implies that cancer victims should not be able to deduct massive medical bills from their income taxes. It's also not clear how ending the tax deduction for the interest on college loans advances the Republican social vision.