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Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau (CFPB), effectively decided to incentivize ripoff schemes by taking away the enforcement powers of the CFPB division that is charged with blocking such schemes. As fans of free markets everywhere know, if it possible to make money by designing deceptive financial products that rip off low- and moderate-income people, profit-maximizing companies will do it.
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau (CFPB), effectively decided to incentivize ripoff schemes by taking away the enforcement powers of the CFPB division that is charged with blocking such schemes. As fans of free markets everywhere know, if it possible to make money by designing deceptive financial products that rip off low- and moderate-income people, profit-maximizing companies will do it.
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As I have pointed out repeatedly, the Republicans story about how their corporate tax cut will benefit everyone hinges on the idea that it will kick off a huge round of new investment. In their telling, investment is hugely responsive to tax rates. This means their tax cut will spark an investment boom. The higher levels of investment will increase productivity, which will eventually lead to higher wages.
We got our first weak test of this story with the Commerce Department’s release of advanced data on capital goods orders for December. As I pointed out, these are orders, not deliveries, so fast-moving companies should have been able to get some in before the end of the month.
Even though the tax bill was not signed until almost the end of the year, its passage was virtually certain by the middle of the month. Furthermore, the outlines had been known since Labor Day, so unless a corporation’s management was sleeping on the job, they had four months to plan their response.
As it turned the initial release showed a modest 0.1 percent drop in new orders for capital goods. Today the Commerce Department released its full report on manufacturing orders for January, with more complete data. This showed a 0.5 percent drop in orders for non-defense capital goods (0.4 percent, excluding aircraft).
Perhaps we will see a different story in future months, but so far it doesn’t look like corporate America is feeling inspired to undertake an investment just yet.
As I have pointed out repeatedly, the Republicans story about how their corporate tax cut will benefit everyone hinges on the idea that it will kick off a huge round of new investment. In their telling, investment is hugely responsive to tax rates. This means their tax cut will spark an investment boom. The higher levels of investment will increase productivity, which will eventually lead to higher wages.
We got our first weak test of this story with the Commerce Department’s release of advanced data on capital goods orders for December. As I pointed out, these are orders, not deliveries, so fast-moving companies should have been able to get some in before the end of the month.
Even though the tax bill was not signed until almost the end of the year, its passage was virtually certain by the middle of the month. Furthermore, the outlines had been known since Labor Day, so unless a corporation’s management was sleeping on the job, they had four months to plan their response.
As it turned the initial release showed a modest 0.1 percent drop in new orders for capital goods. Today the Commerce Department released its full report on manufacturing orders for January, with more complete data. This showed a 0.5 percent drop in orders for non-defense capital goods (0.4 percent, excluding aircraft).
Perhaps we will see a different story in future months, but so far it doesn’t look like corporate America is feeling inspired to undertake an investment just yet.
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The Commerce Department gave us more news today indicating that manufacturing isn’t bouncing back like Donald Trump promised. The Commerce Department released its data on construction spending for December.
It turns out that construction of manufacturing plants is down by 11.7 percent from its December 2016 level. It was running at $60,595 million annual pace in December of 2017, down from a $68,624 pace in December of 2016. This probably shouldn’t be a surprise given the $50 billion (0.26 percent of GDP) increase in the size of the trade deficit, but it does go against President Trump’s promises about bringing back manufacturing.
Another noteworthy change was a drop in construction spending on power plants of 10.8 percent. Also, spending on religious facilities fell by 8.3 percent.
The Commerce Department gave us more news today indicating that manufacturing isn’t bouncing back like Donald Trump promised. The Commerce Department released its data on construction spending for December.
It turns out that construction of manufacturing plants is down by 11.7 percent from its December 2016 level. It was running at $60,595 million annual pace in December of 2017, down from a $68,624 pace in December of 2016. This probably shouldn’t be a surprise given the $50 billion (0.26 percent of GDP) increase in the size of the trade deficit, but it does go against President Trump’s promises about bringing back manufacturing.
Another noteworthy change was a drop in construction spending on power plants of 10.8 percent. Also, spending on religious facilities fell by 8.3 percent.
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An NYT article noted that people are more likely to work at home now than in the early part of the last decade and that this is reducing energy usage. Near the end, the piece included this paragraph:
“In addition, between 2003 and 2012 the number of part-time workers in the United States almost doubled, from 4.6 million part time workers to 8.3 million, many of whom are involuntarily part-time workers. “The number of people who are spending time at work is going to go down because you’re sort of swapping out a full-time worker for a part-time worker,” said Dr. Simon. That may be good for energy use, but not necessarily so great for the employee’s wallet.”
The problem is choosing 2012 as an endpoint. The labor market has tightened considerably since 2012. The percentage of workers who report working part-time because they could not find full-time jobs is the same now (3.5 percent) as it was in 2003.
Strangely, the piece ignores the much larger number of workers who choose to work part-time. (The workers say they choose to work part-time, that’s how we know.) In the most recent data, this number stood at 21.1 million workers or 13.9 percent of the labor force.
This is also roughly the same as the share in 2003, but the endpoints conceal an important pattern. Voluntary part-time had dropped considerably until 2014 when the main provisions of the Affordable Care Act. The number of people choosing to work part-time rose from 18.9 million in 2013 to 20.9 million last year, an increase of 10.6 percent. This is presumably due to the fact that people were now able to get insurance without working at full-time jobs.
Addendum
I thought I would add the link to our paper showing that the rise in voluntary part-time is almost entirely among young parents, the people who we would expect health care insurance to be most important to. Also, just to give numbers here, taking averages for the last three months (single month data is erratic) the number of people reporting that they are working part-time for non-economic reasons rose by 291,000 from the last three months of 2011 to 2012, then fell by 38,000 the following year. In the first year the ACA was fully in effect it rose by 1,043,000.
An NYT article noted that people are more likely to work at home now than in the early part of the last decade and that this is reducing energy usage. Near the end, the piece included this paragraph:
“In addition, between 2003 and 2012 the number of part-time workers in the United States almost doubled, from 4.6 million part time workers to 8.3 million, many of whom are involuntarily part-time workers. “The number of people who are spending time at work is going to go down because you’re sort of swapping out a full-time worker for a part-time worker,” said Dr. Simon. That may be good for energy use, but not necessarily so great for the employee’s wallet.”
The problem is choosing 2012 as an endpoint. The labor market has tightened considerably since 2012. The percentage of workers who report working part-time because they could not find full-time jobs is the same now (3.5 percent) as it was in 2003.
Strangely, the piece ignores the much larger number of workers who choose to work part-time. (The workers say they choose to work part-time, that’s how we know.) In the most recent data, this number stood at 21.1 million workers or 13.9 percent of the labor force.
This is also roughly the same as the share in 2003, but the endpoints conceal an important pattern. Voluntary part-time had dropped considerably until 2014 when the main provisions of the Affordable Care Act. The number of people choosing to work part-time rose from 18.9 million in 2013 to 20.9 million last year, an increase of 10.6 percent. This is presumably due to the fact that people were now able to get insurance without working at full-time jobs.
Addendum
I thought I would add the link to our paper showing that the rise in voluntary part-time is almost entirely among young parents, the people who we would expect health care insurance to be most important to. Also, just to give numbers here, taking averages for the last three months (single month data is erratic) the number of people reporting that they are working part-time for non-economic reasons rose by 291,000 from the last three months of 2011 to 2012, then fell by 38,000 the following year. In the first year the ACA was fully in effect it rose by 1,043,000.
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Some folks may have been impressed with Donald Trump’s plan for $1.5 trillion in infrastructure spending over the next decade. This is both because they have little sense of the size of the economy and also because they don’t realize that he is not proposing for most of this spending to come from the federal government.
While he didn’t lay out a specific plan, past documents indicate that he wants the federal government to increase spending by $200 billion, with the rest coming from state and local governments, as well as private investors. Since GDP is projected to be almost $240 trillion over the decade, Trump is proposing to spend an amount equal to a bit more than 0.08 percent of projected GDP.
Some folks may have been impressed with Donald Trump’s plan for $1.5 trillion in infrastructure spending over the next decade. This is both because they have little sense of the size of the economy and also because they don’t realize that he is not proposing for most of this spending to come from the federal government.
While he didn’t lay out a specific plan, past documents indicate that he wants the federal government to increase spending by $200 billion, with the rest coming from state and local governments, as well as private investors. Since GDP is projected to be almost $240 trillion over the decade, Trump is proposing to spend an amount equal to a bit more than 0.08 percent of projected GDP.
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The centerpiece of the Republican tax cut was a big reduction in the corporate tax rate, lowering it from 35 percent to 21 percent. While critics argued this was just a handout to shareholders, who are overwhelmingly wealthy, the counter was the tax cut would lead to a surge in growth, which would benefit everyone.
The logic is that a lower tax rate provides more incentive to invest. With new investment in plant, equipment, and intellectual products, productivity will rise. Higher productivity will mean higher wages, which is good news for the bulk of the population that works for a living.
We got the first test of the jump in investment story today when the Commerce Department released data on capital goods orders for December. It is not good for the Republican position. New orders actually fell for the month, dropping by a modest 0.1 percent from the November level. Excluding aircraft orders, which are highly volatile, orders fell 0.3 percent.
These are not huge declines and this series is always erratic, so no one should make a big deal about the reported fall in December. But it certainly is hard to make the case here for some huge tax-induced jump.
If folks think it’s too early to make any assessment, let’s take the Republican argument at face value. They claim that the tax rate makes a huge difference in the investment decisions of firms. While the bill was just signed into law at the end of last month, it was pretty much a sure deal by the 20th. Furthermore, the basic outline was on the table at the start of September.
If the tax rate is really a big deal for investment decisions, then corporate America should have been putting together its list of likely projects as soon as a big tax cut became a clear possibility back in September. By December, forward-looking firms should have been ready to jump as soon as they knew the tax cut would be a reality.
This means that we should have seen at least some of these orders being registered before the end of the year. The fact that there is zero evidence of any uptick suggests that investment decisions are not as sensitive to tax rates as claimed.
It is, of course, early — maybe the January data will tell a different story. But so far, it doesn’t look the Republicans have much of a case. The tax cuts definitely made the rich richer, at this point we don’t have much evidence they will help anyone else.
The centerpiece of the Republican tax cut was a big reduction in the corporate tax rate, lowering it from 35 percent to 21 percent. While critics argued this was just a handout to shareholders, who are overwhelmingly wealthy, the counter was the tax cut would lead to a surge in growth, which would benefit everyone.
The logic is that a lower tax rate provides more incentive to invest. With new investment in plant, equipment, and intellectual products, productivity will rise. Higher productivity will mean higher wages, which is good news for the bulk of the population that works for a living.
We got the first test of the jump in investment story today when the Commerce Department released data on capital goods orders for December. It is not good for the Republican position. New orders actually fell for the month, dropping by a modest 0.1 percent from the November level. Excluding aircraft orders, which are highly volatile, orders fell 0.3 percent.
These are not huge declines and this series is always erratic, so no one should make a big deal about the reported fall in December. But it certainly is hard to make the case here for some huge tax-induced jump.
If folks think it’s too early to make any assessment, let’s take the Republican argument at face value. They claim that the tax rate makes a huge difference in the investment decisions of firms. While the bill was just signed into law at the end of last month, it was pretty much a sure deal by the 20th. Furthermore, the basic outline was on the table at the start of September.
If the tax rate is really a big deal for investment decisions, then corporate America should have been putting together its list of likely projects as soon as a big tax cut became a clear possibility back in September. By December, forward-looking firms should have been ready to jump as soon as they knew the tax cut would be a reality.
This means that we should have seen at least some of these orders being registered before the end of the year. The fact that there is zero evidence of any uptick suggests that investment decisions are not as sensitive to tax rates as claimed.
It is, of course, early — maybe the January data will tell a different story. But so far, it doesn’t look the Republicans have much of a case. The tax cuts definitely made the rich richer, at this point we don’t have much evidence they will help anyone else.
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Morning Edition had a lengthy segment telling us that most workers are not worried about automation, even though we hear so much about it. Insofar as this is accurate, these workers are in agreement with the bulk of the economics profession.
Productivity growth (the rate at which technology is displacing workers) had slowed to roughly 1.0 percent annually in the years since 2005. This compares to a 3.0 percent growth rate in the decade from 1995 to 2005 and the long Golden Age from 1947 to 1973. Most economists expect the rate of productivity growth to remain near 1.0 percent as opposed to returning back to something close to its 3.0 percent rate in more prosperous times.
This difference is actually central to the disputes between the Trump administration and Democrats over the tax cuts. The Trump administration argued that the economy could grow at 3.0 percent annually, which would imply productivity growth somewhat over 2.0 percent. Most Democrats derided this view.
If we see a more rapid pace of automation then a 3.0 percent growth rate should be possible. If we actually got back to a 3.0 percent rate of productivity growth, then we could see GDP growth of close to 4.0 percent.
It is also worth noting that the high productivity growth in the period from 1947 to 1973 was associated with low unemployment and rapid wage growth. If another productivity upturn instead leads to high unemployment and weak wage growth it will be the result of deliberate policy to shift the benefits of productivity growth to those at the top end of the income distribution (e.g. government-granted patent and copyright monopolies, high interest rates by the Fed, and trade policy that protects doctors and other highly paid professionals from competition — all discussed in Rigged [it’s free]). It will not be the fault of the robots.
Morning Edition had a lengthy segment telling us that most workers are not worried about automation, even though we hear so much about it. Insofar as this is accurate, these workers are in agreement with the bulk of the economics profession.
Productivity growth (the rate at which technology is displacing workers) had slowed to roughly 1.0 percent annually in the years since 2005. This compares to a 3.0 percent growth rate in the decade from 1995 to 2005 and the long Golden Age from 1947 to 1973. Most economists expect the rate of productivity growth to remain near 1.0 percent as opposed to returning back to something close to its 3.0 percent rate in more prosperous times.
This difference is actually central to the disputes between the Trump administration and Democrats over the tax cuts. The Trump administration argued that the economy could grow at 3.0 percent annually, which would imply productivity growth somewhat over 2.0 percent. Most Democrats derided this view.
If we see a more rapid pace of automation then a 3.0 percent growth rate should be possible. If we actually got back to a 3.0 percent rate of productivity growth, then we could see GDP growth of close to 4.0 percent.
It is also worth noting that the high productivity growth in the period from 1947 to 1973 was associated with low unemployment and rapid wage growth. If another productivity upturn instead leads to high unemployment and weak wage growth it will be the result of deliberate policy to shift the benefits of productivity growth to those at the top end of the income distribution (e.g. government-granted patent and copyright monopolies, high interest rates by the Fed, and trade policy that protects doctors and other highly paid professionals from competition — all discussed in Rigged [it’s free]). It will not be the fault of the robots.
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