The Republicans had planned to include a trigger mechanism in their tax plan, which would have automatically raised taxes in the event of budget deficits that exceeded targets. This is classically bad economic policy. It means that if growth slows and the economy falls into a recession, the government would be raising taxes. Such a tax increase when the economy is already slowing would further dampen growth, making a downturn worse.
This is very basic economics. The fact that the Republicans were prepared to include it in their bill indicates that they either have very little knowledge of economics or they don’t care about the economic impact of their tax plan. It would have been helpful if the media had highlighted this issue since it offers considerable insight into how the Republican leadership is thinking about this tax plan.
The Republicans had planned to include a trigger mechanism in their tax plan, which would have automatically raised taxes in the event of budget deficits that exceeded targets. This is classically bad economic policy. It means that if growth slows and the economy falls into a recession, the government would be raising taxes. Such a tax increase when the economy is already slowing would further dampen growth, making a downturn worse.
This is very basic economics. The fact that the Republicans were prepared to include it in their bill indicates that they either have very little knowledge of economics or they don’t care about the economic impact of their tax plan. It would have been helpful if the media had highlighted this issue since it offers considerable insight into how the Republican leadership is thinking about this tax plan.
Read More Leer más Join the discussion Participa en la discusión
When the Washington Post advertises for reporters, do they include “mind reading skills” as a necessary qualification? They gave us yet another example of these skills in an article discussing Republican efforts to craft a tax bill that will be able to get the support of 50 senators.
The piece told readers:
“Many Republicans believe the economic growth that will be unleashed by the tax cuts will be worth it, potentially creating such an economic boom that new revenue will come in from job creation and corporate investment.”
It’s good the Post’s reporters have this mind reading ability. The rest of us might just think that Republicans are saying utter nonsense about tax cuts and economic growth because, at least publicly, they can’t just say “we are trying to give more money to our wealthy campaign contributors.” This is, of course, what they are in fact doing, so some of us might think it is what they intend to do.
When the Washington Post advertises for reporters, do they include “mind reading skills” as a necessary qualification? They gave us yet another example of these skills in an article discussing Republican efforts to craft a tax bill that will be able to get the support of 50 senators.
The piece told readers:
“Many Republicans believe the economic growth that will be unleashed by the tax cuts will be worth it, potentially creating such an economic boom that new revenue will come in from job creation and corporate investment.”
It’s good the Post’s reporters have this mind reading ability. The rest of us might just think that Republicans are saying utter nonsense about tax cuts and economic growth because, at least publicly, they can’t just say “we are trying to give more money to our wealthy campaign contributors.” This is, of course, what they are in fact doing, so some of us might think it is what they intend to do.
Read More Leer más Join the discussion Participa en la discusión
One of the issues that has been raised in the debate over tax cuts is how fast the economy can grow. The Congressional Budget Office (CBO) is projecting growth averaging just 1.9 percent annually over the next decade. This is based on the assumption that the labor force will grow on average by 0.5 percent annually and productivity will grow by 1.4 percent.
By contrast, the Trump administration is arguing that with its tax plan the economy can grow 3.0–4.0 percent annually. It appears that the consulting firm McKinsey Global Institute agrees with the Trump administration’s projections on growth, but not due to its tax plan.
The Washington Post reported on a new study from McKinsey which projects that one third of all jobs in the United States will be lost due to robots and artificial intelligence by 2030. This rate of job loss translates into an annual rate of productivity growth of 3.1 percent, roughly the same pace of growth seen during the 1947 to 1973 Golden Age and the period from 1995 to 2005.
If the economy actually sees the productivity growth predicted by McKinsey and the CBO labor market projections prove accurate, then growth should average a bit more than 3.5 percent over the next decade. If this is the case, workers should receive much larger wage increases than they have had in recent decades. Also, the more rapid growth should mean much smaller budget deficits.
It is important to note that the McKinsey report is effectively a baseline projection. It is saying that growth will be considerably faster than is now projected by CBO assuming no change in policy, including no large tax cuts. In fact, if the McKinsey report is correct, it is difficult to see the rationale for tax cuts that predominantly benefit the richest people in the country.
One of the issues that has been raised in the debate over tax cuts is how fast the economy can grow. The Congressional Budget Office (CBO) is projecting growth averaging just 1.9 percent annually over the next decade. This is based on the assumption that the labor force will grow on average by 0.5 percent annually and productivity will grow by 1.4 percent.
By contrast, the Trump administration is arguing that with its tax plan the economy can grow 3.0–4.0 percent annually. It appears that the consulting firm McKinsey Global Institute agrees with the Trump administration’s projections on growth, but not due to its tax plan.
The Washington Post reported on a new study from McKinsey which projects that one third of all jobs in the United States will be lost due to robots and artificial intelligence by 2030. This rate of job loss translates into an annual rate of productivity growth of 3.1 percent, roughly the same pace of growth seen during the 1947 to 1973 Golden Age and the period from 1995 to 2005.
If the economy actually sees the productivity growth predicted by McKinsey and the CBO labor market projections prove accurate, then growth should average a bit more than 3.5 percent over the next decade. If this is the case, workers should receive much larger wage increases than they have had in recent decades. Also, the more rapid growth should mean much smaller budget deficits.
It is important to note that the McKinsey report is effectively a baseline projection. It is saying that growth will be considerably faster than is now projected by CBO assuming no change in policy, including no large tax cuts. In fact, if the McKinsey report is correct, it is difficult to see the rationale for tax cuts that predominantly benefit the richest people in the country.
Read More Leer más Join the discussion Participa en la discusión
The New York Times discussed the prospects for the Republican tax bill, comparing the difference in Republican attitudes towards the tax bill and the efforts to repeal the Affordable Care Act. In its effort to explain this difference, it told readers:
“But lowering taxes is, at heart, what makes a Republican a Republican.”
The problem with this assertion is that the Republican plans actually raise taxes for close to half of middle-income families, as the New York Times has reported. Given the structure of this tax cut and prior Republican tax cuts it would seem more accurate to say that cutting taxes for rich people is what makes a Republican a Republican.
The New York Times discussed the prospects for the Republican tax bill, comparing the difference in Republican attitudes towards the tax bill and the efforts to repeal the Affordable Care Act. In its effort to explain this difference, it told readers:
“But lowering taxes is, at heart, what makes a Republican a Republican.”
The problem with this assertion is that the Republican plans actually raise taxes for close to half of middle-income families, as the New York Times has reported. Given the structure of this tax cut and prior Republican tax cuts it would seem more accurate to say that cutting taxes for rich people is what makes a Republican a Republican.
Read More Leer más Join the discussion Participa en la discusión
The Washington Post proudly told readers that the economy had reached potential GDP in the third quarter of 2017 and therefore future GDP growth will have to be far slower than in the recent past, averaging just 1.8 percent over the next decade. While this is true based on the projections of the Congressional Budget Office (CBO) and most independent forecasters, it would have been worth noting that these projections have been very far from the mark frequently in the past.
CBO and other forecasters completely missed the economic crash caused by the collapse of the housing bubble. At the time, they projected potential productivity growth of 1.9 percent annually, rather than the roughly 1.0 percent rate we have seen over the last decade. CBO also completely missed the upturn in productivity growth that began in 1995. They had thought the slowdown rate of roughly 1.4 percent would continue indefinitely, instead productivity growth increased to close to a 3.0 percent annual rate over the next decade.
It is highly misleading to imply that these productivity growth projections are hard and fast numbers, given the dismal track record of the recent past. In this respect, it is worth noting that productivity growth was over 3.0 percent in the third quarter. If fourth quarter GDP is in line with the most recent projections, it will be well over 2.0 percent for the fourth quarter as well. While it is far too early to say that we are on a higher productivity track, it is certainly a possibility given these numbers.
If productivity growth remains over 2.0 percent, then 3.0 percent is perfectly plausible growth target for reasons that have nothing to do with the proposed tax cut. The rise in productivity growth is more likely due to a tightening of the labor market leading businesses to make greater efforts to economize on their use of labor. This means both that the least productive jobs go unfilled (e.g. greeters at Walmart and the midnight shift at convenience stores) and firms invest more in labor saving technology.
It is also worth noting that the “robots taking our jobs” folks have to believe that the Washington Post is spewing nonsense in this piece. Robots taking our jobs is a story of very rapid productivity growth. The Post is giving us a story of extremely slow productivity growth. Rapid is the opposite of slow — but many of our leading public intellectuals have not yet been able to grasp this fact.
The Washington Post proudly told readers that the economy had reached potential GDP in the third quarter of 2017 and therefore future GDP growth will have to be far slower than in the recent past, averaging just 1.8 percent over the next decade. While this is true based on the projections of the Congressional Budget Office (CBO) and most independent forecasters, it would have been worth noting that these projections have been very far from the mark frequently in the past.
CBO and other forecasters completely missed the economic crash caused by the collapse of the housing bubble. At the time, they projected potential productivity growth of 1.9 percent annually, rather than the roughly 1.0 percent rate we have seen over the last decade. CBO also completely missed the upturn in productivity growth that began in 1995. They had thought the slowdown rate of roughly 1.4 percent would continue indefinitely, instead productivity growth increased to close to a 3.0 percent annual rate over the next decade.
It is highly misleading to imply that these productivity growth projections are hard and fast numbers, given the dismal track record of the recent past. In this respect, it is worth noting that productivity growth was over 3.0 percent in the third quarter. If fourth quarter GDP is in line with the most recent projections, it will be well over 2.0 percent for the fourth quarter as well. While it is far too early to say that we are on a higher productivity track, it is certainly a possibility given these numbers.
If productivity growth remains over 2.0 percent, then 3.0 percent is perfectly plausible growth target for reasons that have nothing to do with the proposed tax cut. The rise in productivity growth is more likely due to a tightening of the labor market leading businesses to make greater efforts to economize on their use of labor. This means both that the least productive jobs go unfilled (e.g. greeters at Walmart and the midnight shift at convenience stores) and firms invest more in labor saving technology.
It is also worth noting that the “robots taking our jobs” folks have to believe that the Washington Post is spewing nonsense in this piece. Robots taking our jobs is a story of very rapid productivity growth. The Post is giving us a story of extremely slow productivity growth. Rapid is the opposite of slow — but many of our leading public intellectuals have not yet been able to grasp this fact.
Read More Leer más Join the discussion Participa en la discusión
In the bizarre world of Washington economics, where patent monopolies are “free trade” and projections of Social Security shortfalls decades in the future are a “crisis,” it’s perhaps not surprising to see reality turned on its head in the debate over the Republican tax bill. The Washington Post had a major article on Wisconsin senator Ron Johnson’s objections to the tax bill.
According to the article, Johnson’s is objecting because he wants a lower tax rate on income that individuals receive from pass-through corporations. In presenting Johnson’s case, the article gets the issue completely backward by telling readers:
“Johnson wants ‘pass-through’ companies to be treated more like other corporations that are seeing their rates reduced from 35 percent to 20 percent under the GOP legislation.”
Johnson absolutely does not want pass-through corporations to be treated like other corporations. Pass-through corporations by definition pay zero tax. Their profits are passed through to their owner(s), who then pay tax on it as normal income under current law.
Johnson has no interest in seeing the tax rate on pass-through corporations (which enjoy the privilege of limited liability like other corporations) raised to the same levels as other corporations. Instead, Johnson is arguing that individuals who get income from pass-through corporations should pay a lower tax rate than other people. This is an argument about the tax rate individuals face, it has nothing to do with corporate tax rates.
This is also considered textbook bad tax policy, since it means taxing income at different rates, depending on its source. If there is a big difference in the tax rate that people pay on income they get from pass-through corporations, as opposed to say working as a lawyer or doctor, then they have a large incentive to have their income come from a pass-through corporation. As a result, people will be spending lots of money creating pass-through corporations and misrepresenting the source of their income.
This is a great policy if the point is to promote the tax shelter industry, it is terrible policy if the goal is increasing economic growth and a fair tax code.
In the bizarre world of Washington economics, where patent monopolies are “free trade” and projections of Social Security shortfalls decades in the future are a “crisis,” it’s perhaps not surprising to see reality turned on its head in the debate over the Republican tax bill. The Washington Post had a major article on Wisconsin senator Ron Johnson’s objections to the tax bill.
According to the article, Johnson’s is objecting because he wants a lower tax rate on income that individuals receive from pass-through corporations. In presenting Johnson’s case, the article gets the issue completely backward by telling readers:
“Johnson wants ‘pass-through’ companies to be treated more like other corporations that are seeing their rates reduced from 35 percent to 20 percent under the GOP legislation.”
Johnson absolutely does not want pass-through corporations to be treated like other corporations. Pass-through corporations by definition pay zero tax. Their profits are passed through to their owner(s), who then pay tax on it as normal income under current law.
Johnson has no interest in seeing the tax rate on pass-through corporations (which enjoy the privilege of limited liability like other corporations) raised to the same levels as other corporations. Instead, Johnson is arguing that individuals who get income from pass-through corporations should pay a lower tax rate than other people. This is an argument about the tax rate individuals face, it has nothing to do with corporate tax rates.
This is also considered textbook bad tax policy, since it means taxing income at different rates, depending on its source. If there is a big difference in the tax rate that people pay on income they get from pass-through corporations, as opposed to say working as a lawyer or doctor, then they have a large incentive to have their income come from a pass-through corporation. As a result, people will be spending lots of money creating pass-through corporations and misrepresenting the source of their income.
This is a great policy if the point is to promote the tax shelter industry, it is terrible policy if the goal is increasing economic growth and a fair tax code.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Since 47 percent of the benefits of the proposed tax bill go to the richest one percent, and the very rich, like Donald Trump, will get an enormous bonanza from ending the estate tax and other provisions, many people thought the goal of Republicans with this tax bill was to give more money to the rich people who finance their campaigns. Thankfully, the New York Times is there to correct this mistaken impression.
The NYT told readers that the Republican tax proposals are an:
“…effort to clean up the tax code, close loopholes and secure bigger tax cuts for all.”
Fortunately, we have the NYT to explain the Republicans’ motives. Certainly, based on the evidence in the public domain, almost everyone would have thought they were just trying to give money to the rich.
Since 47 percent of the benefits of the proposed tax bill go to the richest one percent, and the very rich, like Donald Trump, will get an enormous bonanza from ending the estate tax and other provisions, many people thought the goal of Republicans with this tax bill was to give more money to the rich people who finance their campaigns. Thankfully, the New York Times is there to correct this mistaken impression.
The NYT told readers that the Republican tax proposals are an:
“…effort to clean up the tax code, close loopholes and secure bigger tax cuts for all.”
Fortunately, we have the NYT to explain the Republicans’ motives. Certainly, based on the evidence in the public domain, almost everyone would have thought they were just trying to give money to the rich.
Read More Leer más Join the discussion Participa en la discusión
That is the question millions are asking after she made this assertion in a segment on Morning Edition today. Economists would usually look to evidence that budget deficits are creating too much demand in the economy, such as a rising inflation rate and/or high interest rates. Both interest rates and inflation are at historically low levels, with inflation consistently running below the Federal Reserve Board’s 2.0 percent target. Based on these facts, it is not clear what could be the basis of Liasson’s assertion.
In some cases, people point to the interest on the debt as a burden placed on our children. This is misleading since some of our children (or at least Bill Gates’ children) will be receiving this interest. However, even this measure does not suggest a major problem. Currently, interest payments on the debt, after netting out money refunded by the Federal Reserve Board (the government pays interest on the bonds held by the Fed, which is then refunded to the Treasury) are less than 0.8 percent of GDP. They were more than 3.0 percent of GDP in the early 1990s.
Also, if anyone is concerned about the burden imposed by these future payments, they should also be concerned about the much larger commitments the government makes when issuing patent and copyright monopolies in order to finance innovation and creative work. In the case of prescription drugs alone, the added expense of patents and related protections comes to close to $370 billion a year, or almost 2.0 percent of GDP.
Adding in the costs from these monopolies in medical equipment, software, and other sectors would almost certainly double this amount. Anyone seriously concerned about burdens on future generations would have to be noting the burdens created by patent and copyright monopolies, which swamp any plausible interest burden of the debt. The fact this is never mentioned suggests that burdens on our kids are not a major concern for people complaining about budget deficits.
That is the question millions are asking after she made this assertion in a segment on Morning Edition today. Economists would usually look to evidence that budget deficits are creating too much demand in the economy, such as a rising inflation rate and/or high interest rates. Both interest rates and inflation are at historically low levels, with inflation consistently running below the Federal Reserve Board’s 2.0 percent target. Based on these facts, it is not clear what could be the basis of Liasson’s assertion.
In some cases, people point to the interest on the debt as a burden placed on our children. This is misleading since some of our children (or at least Bill Gates’ children) will be receiving this interest. However, even this measure does not suggest a major problem. Currently, interest payments on the debt, after netting out money refunded by the Federal Reserve Board (the government pays interest on the bonds held by the Fed, which is then refunded to the Treasury) are less than 0.8 percent of GDP. They were more than 3.0 percent of GDP in the early 1990s.
Also, if anyone is concerned about the burden imposed by these future payments, they should also be concerned about the much larger commitments the government makes when issuing patent and copyright monopolies in order to finance innovation and creative work. In the case of prescription drugs alone, the added expense of patents and related protections comes to close to $370 billion a year, or almost 2.0 percent of GDP.
Adding in the costs from these monopolies in medical equipment, software, and other sectors would almost certainly double this amount. Anyone seriously concerned about burdens on future generations would have to be noting the burdens created by patent and copyright monopolies, which swamp any plausible interest burden of the debt. The fact this is never mentioned suggests that burdens on our kids are not a major concern for people complaining about budget deficits.
Read More Leer más Join the discussion Participa en la discusión
Both the NYT and Washington Post articles on the battle over the succession and the Consumer Financial Protection Bureau (CFPB) neglected to mention the legislative history around the creation of the CFPB. There were competing sections on the order of succession in the event of the director’s departure in the House and Senate versions.
One specified that the normal procedure on vacancies, in which the president gets to appoint an acting director, would be followed. The other had language indicating that the deputy director would become acting director until a new director was approved by Congress. This was the language that was used in the final bill. That supports the interpretation of the Democrats that the deputy director should fill in as acting director until Trump nominates a person to be director and that person is approved by Congress.
Both the NYT and Washington Post articles on the battle over the succession and the Consumer Financial Protection Bureau (CFPB) neglected to mention the legislative history around the creation of the CFPB. There were competing sections on the order of succession in the event of the director’s departure in the House and Senate versions.
One specified that the normal procedure on vacancies, in which the president gets to appoint an acting director, would be followed. The other had language indicating that the deputy director would become acting director until a new director was approved by Congress. This was the language that was used in the final bill. That supports the interpretation of the Democrats that the deputy director should fill in as acting director until Trump nominates a person to be director and that person is approved by Congress.
Read More Leer más Join the discussion Participa en la discusión
