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Article Artículo

Financial Transaction Tax

Steven Davidoff Doesn't Consider the Successful 300 Years of Financial Transactions Taxes In London (See addendum)

Steven Davidoff really doesn't like financial transactions taxes (FTT) but is not honest enough to acknowledge this fact. Instead he tells readers that proponents of a tax haven't thought about its consequences and uncritically repeats every piece of nonsense produced by the financial industry to attack the idea.

In the course of a 1300 word essay, we get assessments of the tax from Credit Suisse, Blackrock, and the Partnership for the City of New York, which is effectively the New York City Chamber of Commerce. All of these accounts are presented uncritically, as though the purveyors of this information had no interest other than conveying the truth. We are also told that the New York Stock Exchange "threatened to jump across the Hudson River to New Jersey" in reaction to a plan to increase the city's stock tax in the 1966 (interesting image). Davidoff apparently has never heard of businesses making threats to extract concessions from governments. 

The NYT running a column like Davidoff's is like the Iowa City Press Citizen running a column on a plan to cut back farm subsidies where the views of the state's leading wheat and corn farmers are presented as unquestioned truth, along with a study from the corn growers trade organization. I suspect that the Press Citizen has higher standards.

Meanwhile when it comes to the proponents of the tax, Davidoff lectures:

"advocates of this neat idea conveniently ignore the century of less-than-successful experience with this tax, including New York State’s own failed attempt."

This comment is more than a little bizarre. Davidoff writes as though proponents of the tax are completely ignorant of economics and have not done research into the history of financial transaction taxes.

Dean Baker / February 27, 2013

Article Artículo

Workers

Studying the Studies on the Minimum Wage
In a full page ad in today's Politico, the conservative Employment Policies Institute (not to be confused with the progressive Economic Policy Institute) claims that “85 percent of the most credible economic research from the last 20 years” demonstrates t

John Schmitt / February 26, 2013

Article Artículo

UN’s Immunity Claim Provokes Outrage
The U.N.’s claim of immunity in response to the legal complaint filed against it on behalf of over 6,000 cholera victims has provoked outrage. Author Kathie Klarreich called it “unconscionable and immoral” in a Miami Herald op-ed yesterday, saying the U.N

CEPR / February 26, 2013

Article Artículo

Latin America and the Caribbean

Venezuela

World

Chávez Haters Not “Limited by Truth, Reality or Common Sense”

A new op-ed in the Guardian by Ricardo Hausmann portrays a dystopian fictional Venezuela, one in which the Venezuelan government has run the economy into the ground despite abundant oil wealth, but yet its charismatic president continues to be re-elected through some sort of sinister trickery.

Sound familiar? It should: it’s the same tired story repeated in the U.S. and U.K. media almost every day, but in this case Hausmann was apparently given free rein to present his own set of “facts.” It isn’t surprising that Hausmann would write something so divorced from reality; he went to elaborate lengths to invent a conspiracy theory about supposed fraud in Venezuela’s 2004 recall referendum by relying on fake exit polls. An independent panel of statisticians selected by the Carter Center determined that Hausmann and his colleague Roberto Rigobón had in fact found no evidence of fraud. [PDF]

But let’s get back to Hausmann’s latest Guardian piece, starting with the economy. Hausmann writes, "Since 1999, the year [Chávez] took over the presidency, Venezuela has had the lowest average GDP growth rate and the highest inflation of any Latin American country except Haiti."

The source for this “lowest average GDP growth rate” to which Hausmann links is a highly opinionated BBC article which in turn quotes a colleague of Hausmann’s from the Center for International Development at Harvard University who has a Bachelor of Arts degree in economics. Had Hausmann consulted official government data, or growth numbers for the region from the IMF, he would have found a very different set of facts.

Dan Beeton / February 26, 2013

Article Artículo

David Brooks Is Upset Because President Obama Won't Raise Taxes on Middle Income People and Cut Them for the Wealthy

After all, that is what real Democrats are supposed to do. (It's not sufficient in David Brooksland to have just one party that openly advocates redistributing money to rich people.) Of course Brooks doesn't put the agenda he imagines as bold in these terms, but these are two of his three big points.

On taxes he proposes replacing the income tax with a value added tax for people earning less than $100,000 and reducing the corporate income tax to 15 percent. Brooks asserts that this will increase fairness while boosting growth.

Really? We have been redistributing the tax burden downward for most of the last three decades. It is certainly possible that growth would be even worse had we not lowered marginal tax rates, but it is not easy to find the growth dividend in this picture.

Brooks associates this shift with eliminating unnecessary income tax forms. It is not clear that his preferred plan would lessen the need for forms, since it would require tens of millions of rebates if it were not to be horribly regressive compared to the current system.

However, the idea of getting rid of tax returns is an interesting one. The United States could get rid of most returns even under the current system. It could follow the example of several European countries where the IRS would compile tax returns for people and send the returns to them for their inspection. Taxpayers would then either accept the calculated tax liability or file the forms to show why the government's calculation is in error.

The reason for not going this route is that H&R Block doesn't want the government to save people the time and money involved in tax preparation. David Brooks doesn't talk about beating up on the tax preparation industry, because his hero president doesn't do things like that.

On Medicare, Brooks continues the myth about the affluent elderly suggesting that:

"Obama would take spending that currently goes to the affluent elderly and redirect it to the young and the struggling."

That's a great line, too bad Brooks has no clue about income distribution among the elderly. We just had a big debate over tax rates on the wealthy. The cutoff for this category was put at $400,000 for a single individual. If we used the same cutoff for defining "affluent" among the elderly, it would net us less than 0.5 percent of Medicare beneficiaries. This means that using this income level as a strict cutoff (as opposed to a phase-out) would save us less than 0.5 percent of benefits with a strict means-test at this point. Even if we made the cutoff $200,000, or less than half of this level, we would save much less than 1.0 percent of benefits with a strict cutoff.

Dean Baker / February 26, 2013

Article Artículo

Workers

The Family and Medical Leave Act at 20, Part 3
In Part 1 of this series we saw that two decades after passage of the FMLA, about a third of all workers (34 percent) still have not heard about the Act. More surprising, perhaps, is the finding that a significant share of employers who are covered by the

Eileen Appelbaum / February 25, 2013

Article Artículo

Robert Samuelson Tells Us That Our Ratio of Interest Payments to GDP Is Near a Post-World War II Low

Actually he neglected to mention this fact in his column this morning. (It's less than 1.0 percent of GDP and only about 0.5 percent of GDP if we net out the interest rebated by the Fed.) Samuelson tells us:

"The true national debt could be triple the conventional estimate, anywhere from $11 trillion to $31 trillion by my reckoning. The differences mostly reflect explicit and implicit “off-budget” federal loan guarantees. In another economic downturn, these could result in large losses that would be brought “on budget” and worsen already huge deficits. That’s the danger.

"My purpose is not to scare or sensationalize. It’s simply to illuminate the problem."

Actually, Samuelson may have inadvertently done the latter.

If you want to make the jump from the $11 trillion commonly used number, or the $16 trillion debt subject to the legal debt ceiling, to get to Samuelson's $31 trillion, you have to add $2.9 trillion in loan guarantees (largely student loans and small businesses), $5.1 trillion in mortgages guaranteed through Fannie and Freddie, and $7.3 trillion in federal deposit insurance. What's neat about these additional debts is that they are tied to assets.

In the case of small businesses, the assets are the businesses. In the case of mortgages, the assets are the houses. In the case of deposit insurance, the assets are the deposits and the banks' assets. (I left out student loans -- we can't force people to work, but it is pretty hard to imagine a situation where all of our doctors and lawyers can't pay any of the debt they owe.)

Dean Baker / February 25, 2013