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Article Artículo

David Brooks Thinks Congress is Filled With Philosophers, Not Politicians

It's amazing the stuff you can find in the NYT. Most of us learn at a fairly early age that the people who sit in Congress are politicians. They get there by appeasing powerful interest groups who give them the money and political support necessary to get and hold their seats. However, NYT columnist David Brooks seems to think that they get their seats as a result of their political philosophy.

In his column on the tax debate, titled "the clash of social visions," Brooks tell readers:

"The Republicans have a social vision. The Republican vision is that the corporate sector is more important to a healthy America than the professional and nonprofit sector. The Republican vision is that companies that thrive in the red states, like manufacturing and agriculture, are more important for the country than the industries that thrive in blue states, like finance, media, the academy and the movies."

Hmmm, so the Republicans have a vision that people (like Donald Trump) who get their income from pass-through corporations (or can devise a scheme that makes it look like they get their income from pass-through corporations) should pay taxes at a lower rate than people who get their income working as a lawyer, doctor, or other highly paid professional and don't cheat the I.R.S.?

And their social vision also tells Republicans that like kind transactions involving real estate (like those done by Donald Trump) should be exempt from the more general requirement that such transactions be subject to capital gains tax? (A like kind transaction involves exchanging two businesses or properties that have some general similarities.) Does the Republican social vision also tell them that heavily leveraged real estate deals (like those done by Donald Trump) should be exempt from the caps on the deductability of interest?

It would also be interesting to know how the Republican social vision implies that cancer victims should not be able to deduct massive medical bills from their income taxes. It's also not clear how ending the tax deduction for the interest on college loans advances the Republican social vision.

CEPR / November 07, 2017

Article Artículo

Folks Who Believe in Secular Stagnation Don't Think the Trade Deficit Is Determined by the National Savings-Investment Balance

It is common for economists to assert that the trade deficit is equal to the gap between national savings and national investment. If the United States invests more than it saves (combining private savings and government savings) then it is running a trade deficit. This is true by definition.

Intro Econ fans may remember that we have the basic accounting identity saying that output is equal to income:

C+I+G+(X-M)=Y

...where C is consumption,

...I is investment,

...G is government spending,

...X-M is net exports (exports minus imports),

and Y is income.

We also can say that Y=S+C+T,

...where S is savings,

...C is consumption,

...and T is taxes.

The basic story is that the government taxes away some of our income and the rest is either saved or consumed (saved means it is not consumed).

CEPR / October 31, 2017