The Washington Post noted the 6.0 percent rise in business investment in the first quarter and said that it seems to contradict the drop of 0.1 percent in capital goods orders (excluding aircraft) in March. There actually is no contradiction.
Capital goods orders are forward-looking, indicating businesses’ intentions for how much they want to invest over the next year or two, sometimes longer. Their investment in the first quarter is mostly the outcome of investment made in prior quarters.
If we are looking for the impact of the tax cut on investment, we should be focused on orders. The growth figures touted by the Republicans imply growth of roughly 25 percentage points over baseline growth. The 6.0 percent figure is consistent with the recent trend; if the tax cut leads to anything like the growth promised by the Republicans, we should be seeing growth well into the double digits.
The Washington Post noted the 6.0 percent rise in business investment in the first quarter and said that it seems to contradict the drop of 0.1 percent in capital goods orders (excluding aircraft) in March. There actually is no contradiction.
Capital goods orders are forward-looking, indicating businesses’ intentions for how much they want to invest over the next year or two, sometimes longer. Their investment in the first quarter is mostly the outcome of investment made in prior quarters.
If we are looking for the impact of the tax cut on investment, we should be focused on orders. The growth figures touted by the Republicans imply growth of roughly 25 percentage points over baseline growth. The 6.0 percent figure is consistent with the recent trend; if the tax cut leads to anything like the growth promised by the Republicans, we should be seeing growth well into the double digits.
Read More Leer más Join the discussion Participa en la discusión
Yes, it’s the old looming demographic crisis again. It seems China is not going to have enough workers just as robots are taking all the jobs. Now that’s a bleak future.
Yes, it’s the old looming demographic crisis again. It seems China is not going to have enough workers just as robots are taking all the jobs. Now that’s a bleak future.
Read More Leer más Join the discussion Participa en la discusión
We all know how upset some folks get at the idea that people get food stamps from the government. So let’s get some of the righteous outrage directed at Robert R. Redfield, Trump’s pick to be the new head of the Center for Disease Control and Prevention (CDC).
According to an NYT article, Dr. Redfield will earn $375,000 a year in this post. According to the article, Redfield is able to get this high pay through a loophole that allows the government to pay more money to people who are uniquely qualified for their position. Redfield’s predecessor earned $197,300. It seems difficult to argue that Redfield is uniquely qualified for this position since he has no experience running a large bureaucracy and limited background in public health.
If people would like some context for this overpayment, the average annual benefit for a food stamp beneficiary is $1,512. This means that the overpayment to Redfield (compared to his predecessor’s pay) is equivalent to 110 years of a typical beneficiary’s food stamps.
Note: An earlier version had incorrectly identified the director of CDC as “Dr. Redford.”
We all know how upset some folks get at the idea that people get food stamps from the government. So let’s get some of the righteous outrage directed at Robert R. Redfield, Trump’s pick to be the new head of the Center for Disease Control and Prevention (CDC).
According to an NYT article, Dr. Redfield will earn $375,000 a year in this post. According to the article, Redfield is able to get this high pay through a loophole that allows the government to pay more money to people who are uniquely qualified for their position. Redfield’s predecessor earned $197,300. It seems difficult to argue that Redfield is uniquely qualified for this position since he has no experience running a large bureaucracy and limited background in public health.
If people would like some context for this overpayment, the average annual benefit for a food stamp beneficiary is $1,512. This means that the overpayment to Redfield (compared to his predecessor’s pay) is equivalent to 110 years of a typical beneficiary’s food stamps.
Note: An earlier version had incorrectly identified the director of CDC as “Dr. Redford.”
Read More Leer más Join the discussion Participa en la discusión
The NYT had a seriously confused column by Lan Cao on U.S. trade policy. The piece touts the dollar’s role as the world’s leading currency, highlighting the fact that most oil is traded in dollars.
In reality, the need for countries to get dollars to buy oil is trivial. If a country does not otherwise want to hold dollars, it can hold its assets in any major currency. Since there are massive currency markets in which trillions of dollars worth of currency change hands every day, it can sell whatever currency it chooses to hold half a second before it needs the dollars to pay for oil. It would then be the oil seller’s decision as to whether to keep the dollars or to change to a preferred currency.
The half-second demand for dollars created by the purchase of oil has a trivial impact in currency markets. If 60 million barrels of oil a day are traded and the price of oil is $70 a barrel, this comes to $4.2 billion a day. If this were done all the same half-second, it would be a minor blip in the currency market. Over the course of a day, it would not even be noticeable.
The piece also refers to China’s massive accumulation of dollars in the last decade as a positive for the US economy. China did not accumulate dollars because it in any way needed dollars. It accumulated dollars to keep down the value of its currency. This allowed it to run a massive trade surplus that peaked at more than 10 percent of GDP in 2007. (Fast-growing developing countries are expected to run trade deficits, as capital flows in.)
China’s trade surplus was associated with an explosion of the trade deficit in the United States. This led to the massive job loss in manufacturing in places like Pennsylvania, Ohio, and Michigan. It is difficult to see how this is a good story for the United States.
The gap in demand in the economy that resulted from the trade deficit was filled by the housing bubble. The collapse of the bubble gave us the Great Recession, from which we are just now recovering.
If this is “winning” the trade war, as the piece claims, it is difficult to imagine what losing would be like.
The NYT had a seriously confused column by Lan Cao on U.S. trade policy. The piece touts the dollar’s role as the world’s leading currency, highlighting the fact that most oil is traded in dollars.
In reality, the need for countries to get dollars to buy oil is trivial. If a country does not otherwise want to hold dollars, it can hold its assets in any major currency. Since there are massive currency markets in which trillions of dollars worth of currency change hands every day, it can sell whatever currency it chooses to hold half a second before it needs the dollars to pay for oil. It would then be the oil seller’s decision as to whether to keep the dollars or to change to a preferred currency.
The half-second demand for dollars created by the purchase of oil has a trivial impact in currency markets. If 60 million barrels of oil a day are traded and the price of oil is $70 a barrel, this comes to $4.2 billion a day. If this were done all the same half-second, it would be a minor blip in the currency market. Over the course of a day, it would not even be noticeable.
The piece also refers to China’s massive accumulation of dollars in the last decade as a positive for the US economy. China did not accumulate dollars because it in any way needed dollars. It accumulated dollars to keep down the value of its currency. This allowed it to run a massive trade surplus that peaked at more than 10 percent of GDP in 2007. (Fast-growing developing countries are expected to run trade deficits, as capital flows in.)
China’s trade surplus was associated with an explosion of the trade deficit in the United States. This led to the massive job loss in manufacturing in places like Pennsylvania, Ohio, and Michigan. It is difficult to see how this is a good story for the United States.
The gap in demand in the economy that resulted from the trade deficit was filled by the housing bubble. The collapse of the bubble gave us the Great Recession, from which we are just now recovering.
If this is “winning” the trade war, as the piece claims, it is difficult to imagine what losing would be like.
Read More Leer más Join the discussion Participa en la discusión
Many progressives, including this one, have worked to come up with ways around the Republican tax laws limits on the deduction for state and local taxes (SALT). The reason is that we worry that the increased cost of these taxes will reduce the ability of states like New York and California to maintain and expand relatively generous social safety nets and support for education, health care, and child care.
When these taxes were fully deductible, the federal government effectively picked up 40 cents of each dollar of taxes on these states higher income residents. With the cap, these taxes will be borne 100 percent by the states’ residents. This is likely to make them more resistant to taxes. (This is the hypothesis that rich people are more resistant to higher taxes than to lower taxes.) It may also cause some to leave the state or find ways to avoid/evade their taxes.
For some reason, the Post was unable to find anyone to make these points until most of the way through its piece on efforts to work around the tax. It also misrepresented these efforts by implying that only very high-income people would benefit from them.
The first workaround to be passed into law was an optional 5.0 percent employer-side payroll tax in New York, which could apply to wages above $40,000. This would be a substitute for the state income tax.
A person who earns $100,000 a year (apparently now a high-income person in Washington Post land) would pay $3,000 in state employer-side taxes under this plan. That would be expected to come out of their wages, meaning that their taxable income for federal tax purposes would now be $97,000 instead of $100,000. Since this person (assuming a single individual) is in the 22 percent tax bracket, this switch would save them $660 dollars on their federal income taxes. This is the case whether or not they itemize.
Since their pay is $3,000 less, they would also save their Social Security and Medicare taxes as well. This is a 7.65 percent on the employee’s side, which gets them another $230 in savings, bringing their total savings to $890 a year.
It is obvious that the Post doesn’t like this sort of workaround but usually, pieces like this are reserved for the opinion pages and also try to be more accurate.
Many progressives, including this one, have worked to come up with ways around the Republican tax laws limits on the deduction for state and local taxes (SALT). The reason is that we worry that the increased cost of these taxes will reduce the ability of states like New York and California to maintain and expand relatively generous social safety nets and support for education, health care, and child care.
When these taxes were fully deductible, the federal government effectively picked up 40 cents of each dollar of taxes on these states higher income residents. With the cap, these taxes will be borne 100 percent by the states’ residents. This is likely to make them more resistant to taxes. (This is the hypothesis that rich people are more resistant to higher taxes than to lower taxes.) It may also cause some to leave the state or find ways to avoid/evade their taxes.
For some reason, the Post was unable to find anyone to make these points until most of the way through its piece on efforts to work around the tax. It also misrepresented these efforts by implying that only very high-income people would benefit from them.
The first workaround to be passed into law was an optional 5.0 percent employer-side payroll tax in New York, which could apply to wages above $40,000. This would be a substitute for the state income tax.
A person who earns $100,000 a year (apparently now a high-income person in Washington Post land) would pay $3,000 in state employer-side taxes under this plan. That would be expected to come out of their wages, meaning that their taxable income for federal tax purposes would now be $97,000 instead of $100,000. Since this person (assuming a single individual) is in the 22 percent tax bracket, this switch would save them $660 dollars on their federal income taxes. This is the case whether or not they itemize.
Since their pay is $3,000 less, they would also save their Social Security and Medicare taxes as well. This is a 7.65 percent on the employee’s side, which gets them another $230 in savings, bringing their total savings to $890 a year.
It is obvious that the Post doesn’t like this sort of workaround but usually, pieces like this are reserved for the opinion pages and also try to be more accurate.
Read More Leer más Join the discussion Participa en la discusión
The NYT had an interesting column on the impact that the location of Amazon’s new headquarters would have on rents in the finalist cities. The column reports projections from Zillow on how much more the median rents would rise over the next decade due to the presence of Amazon.
Topping the list is Los Angeles, where Zillow projected that the median monthly rent will be $740 higher in 2028 if Amazon puts its second headquarters there. This means that the median renter in the city will be paying an Amazon tax, in the form of higher rents, of almost $9,000 a year for the privilege of having Jeff Bezos company located in her city.
If Bezos chooses Denver, the median tenant will be paying an extra $720 a month, or $8,600 a year to enjoy Amazon’s presence. Bostonians would have to pay $485 a month or $5,800 a year to have Amazon as a neighbor.
While this analysis is very speculative, it shows how many residents of the city “winning” the Amazon location game show could be big losers. This is especially true if the city’s secret concession package costs large amounts of future tax revenue and/or commits the city to large Amazon-specific subsidies.
The point about the location of businesses and the cost of housing is an issue that comes up in other contexts as well. For example, the explosion of the financial sector in New York has sent rents through the roof there. This likely means that New Yorkers who do not derive their income directly or indirectly from the industry lose from its presence. (That would not be the case for property owners.)
It is worth noting that the piece reports Amazon says it contributed $40 million to support affordable housing in Seattle. If a new unit costs on average $200,000, this means Amazon’s contribution was sufficient to build 200 units.
The NYT had an interesting column on the impact that the location of Amazon’s new headquarters would have on rents in the finalist cities. The column reports projections from Zillow on how much more the median rents would rise over the next decade due to the presence of Amazon.
Topping the list is Los Angeles, where Zillow projected that the median monthly rent will be $740 higher in 2028 if Amazon puts its second headquarters there. This means that the median renter in the city will be paying an Amazon tax, in the form of higher rents, of almost $9,000 a year for the privilege of having Jeff Bezos company located in her city.
If Bezos chooses Denver, the median tenant will be paying an extra $720 a month, or $8,600 a year to enjoy Amazon’s presence. Bostonians would have to pay $485 a month or $5,800 a year to have Amazon as a neighbor.
While this analysis is very speculative, it shows how many residents of the city “winning” the Amazon location game show could be big losers. This is especially true if the city’s secret concession package costs large amounts of future tax revenue and/or commits the city to large Amazon-specific subsidies.
The point about the location of businesses and the cost of housing is an issue that comes up in other contexts as well. For example, the explosion of the financial sector in New York has sent rents through the roof there. This likely means that New Yorkers who do not derive their income directly or indirectly from the industry lose from its presence. (That would not be the case for property owners.)
It is worth noting that the piece reports Amazon says it contributed $40 million to support affordable housing in Seattle. If a new unit costs on average $200,000, this means Amazon’s contribution was sufficient to build 200 units.
Read More Leer más Join the discussion Participa en la discusión
A NYT article on Finland’s plan to end its experiment with a basic income for its citizens, noted its attraction, including to some rich people in Silicon Valley:
“In much of the world, the concept of basic income retains appeal as a potential way to more justly spread the bounty of global capitalism while cushioning workers against the threat of robots and artificial intelligence taking their jobs.”
There would be less need to be concerned about spreading the bounty if the government did not give out patent and copyright monopolies. These monopolies make robots and artificial intelligence expensive and allow people to collect billions of dollars in rents.
In the absence of these monopolies, the products of new technology would be cheap. We would all be able to get a robot for a few hundred dollars (the materials and energy required to assemble a robot would almost certainly not be expensive) that would mow our lawns, clean our houses, do our laundry, cook our dinner, and do all sorts of other things for us.
Robots can only make some of us poor and unemployed and others very rich because of a government policy that gives some people ownership of the technology. The inequality is the result of the policy, not the technology.
A NYT article on Finland’s plan to end its experiment with a basic income for its citizens, noted its attraction, including to some rich people in Silicon Valley:
“In much of the world, the concept of basic income retains appeal as a potential way to more justly spread the bounty of global capitalism while cushioning workers against the threat of robots and artificial intelligence taking their jobs.”
There would be less need to be concerned about spreading the bounty if the government did not give out patent and copyright monopolies. These monopolies make robots and artificial intelligence expensive and allow people to collect billions of dollars in rents.
In the absence of these monopolies, the products of new technology would be cheap. We would all be able to get a robot for a few hundred dollars (the materials and energy required to assemble a robot would almost certainly not be expensive) that would mow our lawns, clean our houses, do our laundry, cook our dinner, and do all sorts of other things for us.
Robots can only make some of us poor and unemployed and others very rich because of a government policy that gives some people ownership of the technology. The inequality is the result of the policy, not the technology.
Read More Leer más Join the discussion Participa en la discusión
There seems to be a big market for analysis that argues upward redistribution did not play a role in the switch of many voters from Democrats to Donald Trump in 2016. The NYT wrote up the latest effort in a major article headlined, “Trump voters driven by fear of losing status, not economic anxiety, study finds.”
The study, by Diana C. Mutz, a professor of political science and communications at the University of Pennsylvania, focused on the change in people’s economic circumstances between 2012, when Obama comfortably won the election, and 2016 when Trump carried several states that had gone Democratic in the prior election. Mutz found no link between a deterioration in people’s economic circumstances and their switch to voting for Trump, arguing that this switch was instead driven by whites (mostly men) fearful about losing their status to blacks and immigrants.
It is worth noting that most analyses attributing this switch to economics look at a longer-term deterioration in economic well-being, not the change from 2012 to 2016. For example, a paper by David Autor, David Dorn, Gordon Hansen, and Kavah Majlesi found a strong link between the areas that lost jobs due to the explosion of imports from China in the period 2000 to 2008 and switching from voting Democratic to voting for Trump. If this explanation is correct, then the economic causation would be largely missed by Mutz’s analysis.
There seems to be a big market for analysis that argues upward redistribution did not play a role in the switch of many voters from Democrats to Donald Trump in 2016. The NYT wrote up the latest effort in a major article headlined, “Trump voters driven by fear of losing status, not economic anxiety, study finds.”
The study, by Diana C. Mutz, a professor of political science and communications at the University of Pennsylvania, focused on the change in people’s economic circumstances between 2012, when Obama comfortably won the election, and 2016 when Trump carried several states that had gone Democratic in the prior election. Mutz found no link between a deterioration in people’s economic circumstances and their switch to voting for Trump, arguing that this switch was instead driven by whites (mostly men) fearful about losing their status to blacks and immigrants.
It is worth noting that most analyses attributing this switch to economics look at a longer-term deterioration in economic well-being, not the change from 2012 to 2016. For example, a paper by David Autor, David Dorn, Gordon Hansen, and Kavah Majlesi found a strong link between the areas that lost jobs due to the explosion of imports from China in the period 2000 to 2008 and switching from voting Democratic to voting for Trump. If this explanation is correct, then the economic causation would be largely missed by Mutz’s analysis.
Read More Leer más Join the discussion Participa en la discusión
Erik Loomis had an NYT column arguing for a government jobs guarantee by telling readers:
“Employment numbers may look solid now, but economists, physicists and industrial engineers all say that automation will, in the not-so-distant future, drive higher unemployment.”
This is not true. Productivity growth (a.k.a. “automation”) has been very weak for the last decade, averaging just over 1.0 percent annually. Most projections assume that productivity growth will remain slow, implying a relatively limited amount of displacement. (The Congressional Budget Office assumes growth of less than 1.8 percent annually over the next decade.)
Furthermore, if productivity growth did accelerate, there is no reason to believe that it will lead to large-scale unemployment. Productivity growth averaged 3.0 percent annually from 1947 to 1973. This period was one of low unemployment and rapid wage growth.
This doesn’t mean that Loomis is wrong to argue for a job guarantee, but the case should not rest on a massive surge in productivity growth leading to widespread unemployment. That is not a very plausible scenario.
Erik Loomis had an NYT column arguing for a government jobs guarantee by telling readers:
“Employment numbers may look solid now, but economists, physicists and industrial engineers all say that automation will, in the not-so-distant future, drive higher unemployment.”
This is not true. Productivity growth (a.k.a. “automation”) has been very weak for the last decade, averaging just over 1.0 percent annually. Most projections assume that productivity growth will remain slow, implying a relatively limited amount of displacement. (The Congressional Budget Office assumes growth of less than 1.8 percent annually over the next decade.)
Furthermore, if productivity growth did accelerate, there is no reason to believe that it will lead to large-scale unemployment. Productivity growth averaged 3.0 percent annually from 1947 to 1973. This period was one of low unemployment and rapid wage growth.
This doesn’t mean that Loomis is wrong to argue for a job guarantee, but the case should not rest on a massive surge in productivity growth leading to widespread unemployment. That is not a very plausible scenario.
Read More Leer más Join the discussion Participa en la discusión
The NYT had a very good article on the deterioration of the quality of public sector jobs over the last two decades. The piece notes the decline in pay and benefits for teachers, prison guards, and a wide variety of other public sector workers. As a result, many workers are leaving the public sector and vacancies are often left unfilled.
At one point the piece comments:
“Short of money, many states have also privatized services like managing public water systems, road repair, emergency services or prisons, transferring jobs from the public sector to private companies that have reduced salaries and benefits to increase their profits.”
While saving money is usually given as a motive for privatization, it often does not result in savings. The politicians who push privatization often receive campaign contributions from the companies that stand to profit. In such cases, it is at least as likely that they are acting out of a desire to pay back political benefactors as a desire to save money.
The NYT had a very good article on the deterioration of the quality of public sector jobs over the last two decades. The piece notes the decline in pay and benefits for teachers, prison guards, and a wide variety of other public sector workers. As a result, many workers are leaving the public sector and vacancies are often left unfilled.
At one point the piece comments:
“Short of money, many states have also privatized services like managing public water systems, road repair, emergency services or prisons, transferring jobs from the public sector to private companies that have reduced salaries and benefits to increase their profits.”
While saving money is usually given as a motive for privatization, it often does not result in savings. The politicians who push privatization often receive campaign contributions from the companies that stand to profit. In such cases, it is at least as likely that they are acting out of a desire to pay back political benefactors as a desire to save money.
Read More Leer más Join the discussion Participa en la discusión
