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Article Artículo

Can We Never Raise the Social Security Tax?

Most discussion in Washington of the projected long-term shortfall in the Social Security trust fund assumes that we can never raise the payroll tax. Many have advocated raising the cap on wages subject to the tax (currently just over $113,000), but raising the tax rate itself has largely been out of the question.

While there are good arguments for raising the cap (the increase in the share of income going over the cap due to the upward redistribution of income is a major reason for the projected shortfall), it is not obvious why increases in the tax rate at some future date should not be considered.

CEPR / October 21, 2013

Article Artículo

Let's Play Which Way Is Up With Steven Rattner

Economic policy debates in the United States suffer from the fact that participants often have trouble deciding whether the problem is too much of something or too little. They do however know the problem is really bad. Steven Rattner treats us to an excellent example of the which way is up problem in a column in the NYT today.

The focus of the piece is Japan. He notes Japan's recent upturn in growth following the aggressive stimulus policy being pursued by its new prime minister, Shinzo Abe. He tells readers:

"In the endless global debate about the importance of macroeconomic budgetary and monetary policies, insufficient attention is often given to the unsexy, often politically toxic pile of smaller-bore policy challenges that can be critical to restarting a faltering economy."

Okay, let's see what these policies look like. Rattner goes on to tell readers:

"During even a short visit, it’s easy to see that the need for microeconomic reform is glaring. All told, Japan’s labor productivity is 71 percent of America’s — and on a par with Italy’s. While Japan is still a wealthy country, its return on capital is equally unsatisfactory."

Okay, high productivity is definitely better than low productivity, but the second sentence is a non sequitur. What does Rattner mean that Japan's "return on capital is equally unsatisfactory?" To whom is it unsatisfactory?

Economists would look for evidence of an unsatisfactory return in Japan's rate of investment. Investment is a higher share of Japan's output than it is of U.S. output. Furthermore, we expect wealthy countries to have lower returns on capital than poorer countries. (Capital is plentiful.) Instead of "while," Rattner's sentence would have made more sense with the word "because." It is difficult to assign any meaning to "satisfactory" in this context other than Rattner thinks that people with lots of money should be making more money at the expense of workers.

Dean Baker / October 20, 2013

Article Artículo

Honduras

Latin America and the Caribbean

World

Are Honduran Election Polls Reliable?

The imminent Honduran presidential elections have been met with polls published by a surfeit of different polling firms. Unfortunately, however, these are notably inconsistent and show significant differences in their results. While the majority project Xiomara Castro, wife of the deposed President Zelaya, as the winner, there is a notable divergence in the size of the lead. In the scant coverage that they have given, the international press has paid almost exclusive attention to the polls conducted by the noted U.S. polling company, CID-Gallup.

Gallup has a lofty reputation in the U.S. as the first modern pollster. It accurately predicted the result of the 1936 presidential election by using modern sampling methods, and in the process destroyed the reputation of the Literary Digest poll, which had previously been considered the most accurate because of its much larger sample. This demonstrated the importance of representative sampling in order to reliably predict voting intentions. However, in Honduras, Gallup’s polling data has been divergent from actual electoral results, suggesting a bias towards the (right-wing) National Party.

This is important as Gallup is the most prolific, widely quoted and one of the longest standing pollsters in Honduras. In 2005, the last relatively free election in Honduras,1 Gallup in two separate polls predicted poll leads of 8 percent and 16 percent respectively in favor of the National Party candidate, Porfirio Lobo. These polls, coming just weeks before2 the actual election, were remarkably divergent from the actual result that Manuel Zelaya won with 45.6 percent of the vote to Lobo’s 42.2. This raises questions about the reliability of the recent poll by Gallup, paid for by the National Party controlled Congress, ahead of the coming election showing Xiomara Castro de Zelaya with a lead —within the margin of error— of just 2 percent.

CEPR and Joe Sammut / October 18, 2013