That would be the conclusion of folks who played with its interactive calculator on ways to have President Obama reach his deficit reduction target. The calculator includes several possible taxes which it identifies as “the most popular proposals for wholly new sources of revenue.” A financial speculation tax is not included on the list. It does include a value-added tax (VAT), which would effectively be a national sales tax.
A bill calling for a financial speculation tax was sponsored last year by Tom Harkin in the Senate and Peter DeFazio in the House. According to the Joint Tax Committee, the tax would raise almost $40 billion a year in revenue. It has a number of co-sponsors in both chambers. By contrast, there is no current bill calling for a VAT and if any members of Congress support one, they are keeping pretty quiet.
Perhaps there are some poll results showing a great desire for a VAT. Otherwise, we can assume that the decision to include a VAT on the calculator and to exclude a financial speculation tax reflects the relative popularity of the two taxes at the Washington Post.
That would be the conclusion of folks who played with its interactive calculator on ways to have President Obama reach his deficit reduction target. The calculator includes several possible taxes which it identifies as “the most popular proposals for wholly new sources of revenue.” A financial speculation tax is not included on the list. It does include a value-added tax (VAT), which would effectively be a national sales tax.
A bill calling for a financial speculation tax was sponsored last year by Tom Harkin in the Senate and Peter DeFazio in the House. According to the Joint Tax Committee, the tax would raise almost $40 billion a year in revenue. It has a number of co-sponsors in both chambers. By contrast, there is no current bill calling for a VAT and if any members of Congress support one, they are keeping pretty quiet.
Perhaps there are some poll results showing a great desire for a VAT. Otherwise, we can assume that the decision to include a VAT on the calculator and to exclude a financial speculation tax reflects the relative popularity of the two taxes at the Washington Post.
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A NYT article on the problems facing France’s president Francoise Hollande included several peculiar assertions. At one point it noted Hollande’s efforts to meet a deficit target of 3 percent of GDP (strangely labeled as “economic rigor”) and then tells readers:
“Others complained that Mr. Hollande’s decision to meet the target by raising taxes and freezing spending, rather than cutting it, would throw France into recession, even as growth, so far elusive, would by itself provide more tax receipts and jobs.”
There is no obvious economic theory whereby spending cuts would be less contractionary in the short term than tax increases on the wealthy. If Hollande cut spending by 30 billion euros rather than raising taxes by the same amount, the spending cuts would almost certainly do more to cut jobs and reduce growth. (It might have been useful to disclose the identity of the “others.”)
The piece later tells readers:
“He [Hollande] has also sent mixed messages — vowing that France will not undergo austerity while raising taxes on companies and the rich, and at the same time trying to show that he is fiscally responsible to the markets and his euro zone allies.”
It’s not clear what the mixed message is here. It seems that Hollande is trying to reduce France’s budget deficit by imposing taxes on people who have money rather than hitting ordinary workers and retirees. There is nothing obviously contradictory in this picture.
A NYT article on the problems facing France’s president Francoise Hollande included several peculiar assertions. At one point it noted Hollande’s efforts to meet a deficit target of 3 percent of GDP (strangely labeled as “economic rigor”) and then tells readers:
“Others complained that Mr. Hollande’s decision to meet the target by raising taxes and freezing spending, rather than cutting it, would throw France into recession, even as growth, so far elusive, would by itself provide more tax receipts and jobs.”
There is no obvious economic theory whereby spending cuts would be less contractionary in the short term than tax increases on the wealthy. If Hollande cut spending by 30 billion euros rather than raising taxes by the same amount, the spending cuts would almost certainly do more to cut jobs and reduce growth. (It might have been useful to disclose the identity of the “others.”)
The piece later tells readers:
“He [Hollande] has also sent mixed messages — vowing that France will not undergo austerity while raising taxes on companies and the rich, and at the same time trying to show that he is fiscally responsible to the markets and his euro zone allies.”
It’s not clear what the mixed message is here. It seems that Hollande is trying to reduce France’s budget deficit by imposing taxes on people who have money rather than hitting ordinary workers and retirees. There is nothing obviously contradictory in this picture.
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It is common for news reports on efforts to limit global warming with carbon taxes to mention the negative impact that such taxes can have on growth and jobs. In the same vein it is worth pointing out that the costs associated with damage caused by global warming related storms, like Sandy, also will in the long-run slow growth and reduce the number of jobs.
For example, this Washington Post article that noted estimates of the damage from Sandy are in the range of $30-$50 billion could have pointed out to readers that this will have an economic impact similar to a gas tax in the range of 25-40 cents a gallon. This tax will mostly be paid in the form of higher insurance premiums in future years.
It is important to point out the economic costs of failing to control global warming since many politicians are trying to deceive the public into believing that global warming has no costs.
It is common for news reports on efforts to limit global warming with carbon taxes to mention the negative impact that such taxes can have on growth and jobs. In the same vein it is worth pointing out that the costs associated with damage caused by global warming related storms, like Sandy, also will in the long-run slow growth and reduce the number of jobs.
For example, this Washington Post article that noted estimates of the damage from Sandy are in the range of $30-$50 billion could have pointed out to readers that this will have an economic impact similar to a gas tax in the range of 25-40 cents a gallon. This tax will mostly be paid in the form of higher insurance premiums in future years.
It is important to point out the economic costs of failing to control global warming since many politicians are trying to deceive the public into believing that global warming has no costs.
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When NYT columnists make absurd assertions they deserve ridicule. In his NYT column today, David Brooks make the absurd assertion that, “the mounting debt is ruinous.” Right, and we know this because the interest rate on 10-year Treasury bonds is less than 1.8 percent? (That compares to rates of more than 5.0 percent when we had budget surpluses in the late 1990s.) Do we know that the mounting debt is “ruinous” because the ratio of interest on the debt to GDP is near a post-war low?
Source: Congressional Budget Office.
The real story is that the debt is not ruinous except in David Brooks’ head. He has no basis for this whatsoever. He is using fears of the debt to try to scare people to support his agenda in the way that others have appealed to racial or ethnic fears.
We have a large deficit because the economy plunged when the housing bubble collapsed. That is the story. The deficits are supporting the economy because the this collapse led to a massive loss of private sector demand. Without the deficit we would simply have lower GDP and higher unemployment, as all the “fiscal cliff” whiners are implicitly acknowledging. This fact is easily demonstrated by looking at the Congressional Budget Office projections from January of 2008 before it recognized the impact of the bubble’s collapse.
Source: Congressional Budget Office.
There were no big new permanent government spending programs or tax cuts put in place in 2008 or 2009, the deficit exploded because of the economic collapse, end of story. Anyone who says otherwise is trying to mislead people deserves nothing but ridicule and derision.
When NYT columnists make absurd assertions they deserve ridicule. In his NYT column today, David Brooks make the absurd assertion that, “the mounting debt is ruinous.” Right, and we know this because the interest rate on 10-year Treasury bonds is less than 1.8 percent? (That compares to rates of more than 5.0 percent when we had budget surpluses in the late 1990s.) Do we know that the mounting debt is “ruinous” because the ratio of interest on the debt to GDP is near a post-war low?
Source: Congressional Budget Office.
The real story is that the debt is not ruinous except in David Brooks’ head. He has no basis for this whatsoever. He is using fears of the debt to try to scare people to support his agenda in the way that others have appealed to racial or ethnic fears.
We have a large deficit because the economy plunged when the housing bubble collapsed. That is the story. The deficits are supporting the economy because the this collapse led to a massive loss of private sector demand. Without the deficit we would simply have lower GDP and higher unemployment, as all the “fiscal cliff” whiners are implicitly acknowledging. This fact is easily demonstrated by looking at the Congressional Budget Office projections from January of 2008 before it recognized the impact of the bubble’s collapse.
Source: Congressional Budget Office.
There were no big new permanent government spending programs or tax cuts put in place in 2008 or 2009, the deficit exploded because of the economic collapse, end of story. Anyone who says otherwise is trying to mislead people deserves nothing but ridicule and derision.
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The NYT has apparently designed to join the crusade against the European welfare state. A profile of German Chancellor Angela Merkel noted that Europe accounts for 25 percent of world GDP, but a “staggering” 50 percent of social spending.
There is nothing obviously out of line in this story. Poor countries don’t have much by way of social spending. In the United States, benefits like health care and pension coverage are largely provided through employers. Europe has adopted a much more efficient route of providing these benefits through the government. There is no obvious problem with going this route from an economic standpoint.
The NYT should have found a reporter who could discuss such issues without being staggered by them.
The NYT has apparently designed to join the crusade against the European welfare state. A profile of German Chancellor Angela Merkel noted that Europe accounts for 25 percent of world GDP, but a “staggering” 50 percent of social spending.
There is nothing obviously out of line in this story. Poor countries don’t have much by way of social spending. In the United States, benefits like health care and pension coverage are largely provided through employers. Europe has adopted a much more efficient route of providing these benefits through the government. There is no obvious problem with going this route from an economic standpoint.
The NYT should have found a reporter who could discuss such issues without being staggered by them.
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That’s what readers of a front page piece highlighting Japan’s “decline” would assume. After all, the major facts cited to make the case are a projection that its population would decline from 127 million today to 47 million at the end of the century and that it has the oldest population in the world.
The decline in population might be seen as good news except by those who feel that people exist to give their politicians more power in the world. Japan is a very densely populated country. People are employed to shove commuters into over-crowded subway cars. It is difficult to see why anyone would be concerned if the country becomes less crowded over the course of the century.
In terms of the aging of the population, this is due in part to the fact that Japanese have a life expectancy that is four years longer than the United States. It would have a younger population if its people could only expect to live as long as people in the United States.
In fact, a serious examination of the data does not support the case of a Japan in decline, at least in terms of the living standards of its population. According to the OECD, the average length of the workyear has fallen by almost 15 percent over the last two decades. At the same time, the IMF reports that per capita income has risen by more than one-third. It is difficult to see how this would fit the definition of a nation in decline.
That’s what readers of a front page piece highlighting Japan’s “decline” would assume. After all, the major facts cited to make the case are a projection that its population would decline from 127 million today to 47 million at the end of the century and that it has the oldest population in the world.
The decline in population might be seen as good news except by those who feel that people exist to give their politicians more power in the world. Japan is a very densely populated country. People are employed to shove commuters into over-crowded subway cars. It is difficult to see why anyone would be concerned if the country becomes less crowded over the course of the century.
In terms of the aging of the population, this is due in part to the fact that Japanese have a life expectancy that is four years longer than the United States. It would have a younger population if its people could only expect to live as long as people in the United States.
In fact, a serious examination of the data does not support the case of a Japan in decline, at least in terms of the living standards of its population. According to the OECD, the average length of the workyear has fallen by almost 15 percent over the last two decades. At the same time, the IMF reports that per capita income has risen by more than one-third. It is difficult to see how this would fit the definition of a nation in decline.
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The Post had an interesting idea that went badly awry. It thought to tell its readers what parts of the economy are lagging by comparing the share of GDP in the most recent quarter to the average over the period from 1985 to 2005. While the choice of years is somewhat problematic (in the years 1996-2000 the economy was being supported by an unsustainable stock bubble and in the years 2002-2005 by an unsustainable housing bubble), the bigger problems stem from a failure of arithmetic and also conceptualization.
On the arithmetic front, the piece comes up with a story where consumption of durables is $267 billion below the long-term average, while consumption of non-durables are $127 billion below their long-term average. While it has consumption of services somewhat about the long-term average, the next effect is that weak consumption is a big drag on the economy and accounts for a large share of the shortfall. It tells us:
“Consumers are holding onto their wallets — a continuing burden for the weak economy.”
Wow, that isn’t what the Commerce Department is telling my spreadsheet. I get that the average share of consumption (all categories together) in GDP was 67.3 percent in the years from 1985 to 2005. I get that it was 70.8 percent in the most recent quarter. This means that consumption was 3.5 percent higher than its longer period average as a share of GDP. This means that consumers are not hanging onto their wallets at all. In fact, they are spending at very ambitious rate. (Boys and girls, you can check this one for yourself by going to the National Income and Product Accounts and clicking up Table 1.1.5.)
This is consistent with the data showing that consumption is higher than normal relative to disposable income. (The adjusted consumption line has to do with the treatment of the statistical discrepancy in the national income accounts.) This means that consumption is not holding back the economy, it is actually unusually high.
Source: Bureau of Economic Analysis.
The amount of excess consumption is even more than this comparison suggests, since one reason that consumption is high relative to GDP is that tax revenue is low relative to GDP (i.e. we are running large budget deficits). If the deficit starts to come down, then disposable income will fall relative to GDP, which means that consumption will fall relative to GDP, even if the saving rate stays constant.
The other error along these lines is that imports should be expected to rise relative to GDP as the economy moves back toward its potential. If GDP were to rise by 6 percent to bring it back in line with its potential then imports would rise by roughly 20 percent as much or 1.2 percentage points of GDP. This would make it more clear that the biggest factor that is out of line with our historical experience is the trade deficit. That would be even more clear if we took a longer period as the basis of comparison that was not so distorted by asset bubbles.
Of course given the Washington Post’s unabashed celebration of recent trade agreements its reporters are probably not allowed to call attention to such facts.
The Post had an interesting idea that went badly awry. It thought to tell its readers what parts of the economy are lagging by comparing the share of GDP in the most recent quarter to the average over the period from 1985 to 2005. While the choice of years is somewhat problematic (in the years 1996-2000 the economy was being supported by an unsustainable stock bubble and in the years 2002-2005 by an unsustainable housing bubble), the bigger problems stem from a failure of arithmetic and also conceptualization.
On the arithmetic front, the piece comes up with a story where consumption of durables is $267 billion below the long-term average, while consumption of non-durables are $127 billion below their long-term average. While it has consumption of services somewhat about the long-term average, the next effect is that weak consumption is a big drag on the economy and accounts for a large share of the shortfall. It tells us:
“Consumers are holding onto their wallets — a continuing burden for the weak economy.”
Wow, that isn’t what the Commerce Department is telling my spreadsheet. I get that the average share of consumption (all categories together) in GDP was 67.3 percent in the years from 1985 to 2005. I get that it was 70.8 percent in the most recent quarter. This means that consumption was 3.5 percent higher than its longer period average as a share of GDP. This means that consumers are not hanging onto their wallets at all. In fact, they are spending at very ambitious rate. (Boys and girls, you can check this one for yourself by going to the National Income and Product Accounts and clicking up Table 1.1.5.)
This is consistent with the data showing that consumption is higher than normal relative to disposable income. (The adjusted consumption line has to do with the treatment of the statistical discrepancy in the national income accounts.) This means that consumption is not holding back the economy, it is actually unusually high.
Source: Bureau of Economic Analysis.
The amount of excess consumption is even more than this comparison suggests, since one reason that consumption is high relative to GDP is that tax revenue is low relative to GDP (i.e. we are running large budget deficits). If the deficit starts to come down, then disposable income will fall relative to GDP, which means that consumption will fall relative to GDP, even if the saving rate stays constant.
The other error along these lines is that imports should be expected to rise relative to GDP as the economy moves back toward its potential. If GDP were to rise by 6 percent to bring it back in line with its potential then imports would rise by roughly 20 percent as much or 1.2 percentage points of GDP. This would make it more clear that the biggest factor that is out of line with our historical experience is the trade deficit. That would be even more clear if we took a longer period as the basis of comparison that was not so distorted by asset bubbles.
Of course given the Washington Post’s unabashed celebration of recent trade agreements its reporters are probably not allowed to call attention to such facts.
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Steven Greenhouse has a great piece in the NYT reporting on how employers are gaining increasing control over their workers’ hours as a way to minimize costs. The obvious point, which seems to be lost on proponents of workplace flexibility, is that allowing employers to be flexible on their time demands means that workers cannot make plans in their lives. This requires them to be able to make child care and other arrangements on short notice. This is likely a very important factor in the quality of the lives of millions of workers that has received little attention in discussions of economic policy.
Steven Greenhouse has a great piece in the NYT reporting on how employers are gaining increasing control over their workers’ hours as a way to minimize costs. The obvious point, which seems to be lost on proponents of workplace flexibility, is that allowing employers to be flexible on their time demands means that workers cannot make plans in their lives. This requires them to be able to make child care and other arrangements on short notice. This is likely a very important factor in the quality of the lives of millions of workers that has received little attention in discussions of economic policy.
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NPR’s Planet Money did a nice piece deflating the nonsense on energy independence. Their crew took the long trip all the way to distant Canada, a country that is energy independent. And, thanks to the fact that they have courageous politicians who are willing to kick environmentalists in the teeth, the free people of Canada only have to pay $4.00 a gallon for gas.
As those of us who took intro economics have tried to explain to the reporters covering the campaign, being energy independent doesn’t mean anything unless we are at war and somehow cut off from foreign oil supplies. (If this is our concern then drilling out our oil and gas now is incredibly stupid. That means that it will not be there if we ever face such a crisis.)
Oil prices are determined on world market just like the prices of wheat and corn. When a drought in Asia sends up the price of wheat, we will pay more for wheat in the United States even though we are a huge net exporter of wheat. And, as the Planet Money crew showed us, when the world price of oil skyrockets people in Canada pay more for gas even though they are energy independent, as would we even if we were energy independent.
This basic fact means that when a candidate says that he/she wants to make the U.S. energy independent, they are actually saying either that they don’t have a clue about economics, or that they think the reporters covering the campaign are so incompetent that they won’t call attention to the fact that they are spewing utter nonsense.
NPR’s Planet Money did a nice piece deflating the nonsense on energy independence. Their crew took the long trip all the way to distant Canada, a country that is energy independent. And, thanks to the fact that they have courageous politicians who are willing to kick environmentalists in the teeth, the free people of Canada only have to pay $4.00 a gallon for gas.
As those of us who took intro economics have tried to explain to the reporters covering the campaign, being energy independent doesn’t mean anything unless we are at war and somehow cut off from foreign oil supplies. (If this is our concern then drilling out our oil and gas now is incredibly stupid. That means that it will not be there if we ever face such a crisis.)
Oil prices are determined on world market just like the prices of wheat and corn. When a drought in Asia sends up the price of wheat, we will pay more for wheat in the United States even though we are a huge net exporter of wheat. And, as the Planet Money crew showed us, when the world price of oil skyrockets people in Canada pay more for gas even though they are energy independent, as would we even if we were energy independent.
This basic fact means that when a candidate says that he/she wants to make the U.S. energy independent, they are actually saying either that they don’t have a clue about economics, or that they think the reporters covering the campaign are so incompetent that they won’t call attention to the fact that they are spewing utter nonsense.
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