Economist Mike Kimel has been posting various pieces on the Angry Bear blog exploring the relationships between various tax rates and economic growth.  Like Beezer, he finds that reasonably progressive tax tables correlate very well with strong economies.  And they help pay the bills too.

In the following piece (and it looks like this piece will kick off a series) Kimel produces an interesting bar chart. 

by Mike Kimel

Top Marginal Income Tax Rates & Real Economic Growth, a Bar Chart
Cross posted at the Presimetrics blog.

The chart below shows tax rates on one axis and the growth rates in real GDP that accompanied those tax rates on the other:

I broke the tax ranges into 5 percentage point increments centered around intuitive numbers (30%, 35%, etc.). Growth rates are the median observed for each range. For ranges which did not occur in the real world, growth rates are left blank.

Top marginal tax rates come from the IRS’ Statistics of Income Historical Table 23, and are available going back to 1913. Real GDP can be obtained from the BEA’s National Income and Product Accounts Table 1.1.6, and dates back to 1929. Thus, the graph uses data starting in 1929.

Consider this post a quick follow up to my previous post on optimal tax rates that appeared at the Presimetrics blog and Angry Bear blogs. There will be a lot more follow-ups, but it occurs to me that a look a the data might be useful before going on.”

Beezer here.  Of course these are the top rates only, not all the rates.  But it clearly shows that top rates between 62.5% and 67.49% existed during the strongest times of real economic growth.  Also, there’s the issue of ‘effective’ rates.  Just because the top rate is that high, doesn’t mean many people actually ended up paying the rate.  Might such a high top rate cause more investment in productive capital, which is taxed at a lower rate, rather than investment in income producing securities?

From Maxine Udall, girl economist,  in a post aimed at explaining why sound macroeconomic policies are political losers. 

“Joan Robinson (girl economist) said something in her Richard T. Ely Lecture to the American Economic Association in 1972 during another economic crisis that I believe accounts for some of the “political loser” characteristics of good macro policies:

“A sure sign of a crisis is the prevalence of cranks. It is characteristic of a crisis in theory that cranks get a hearing from the public which orthodoxy is failing to satisfy. … The cranks are to be preferred to the orthodox because they see that there is a problem.”

I believe that the failure of “good macro policies” to be political winners is that they “fail to satisfy” on the dimension that matters most and is most visible and understandable to the public: fairness or justice.

Research in behavioral econ indicates that people care about fairness and are willing to take a loss in order to inflict pain (i.e., a loss) on someone who has failed to cooperate or who has been unfair. This is a direct contradiction of the assumptions underlying neoclassical econ theory where more is always and everywhere preferred to less.

Research also shows that people’s sense of fairness can be engaged simply by shaping the information they receive about a situation. Someone perceived as receiving an unfair advantage or someone perceived as taking unfair advantage elicits a desire to punish them. For this reason, narrative matters. The story that accompanies a redistribution of income, say, will shape perceptions of fairness. Think “Robin Hood” here. Except among devotees of the late Ayn Rand, Robin Hood is nearly universally regarded as a good guy because he stole from people who were not only rich, but also corrupt, exploitive, unproductive aristocratic thieves to (in effect) return to hard-working peasants in a feudal society the product of their labor. It’s hard to imagine how you can turn him into a villain, unless you tell a story in which the people he is stealing from are in fact the wealthy, productive members of society whose earnest and honest labors benefit the lazy, ne’er-do-well, grasping masses who desire only to loll about while others supply their provender. Think “welfare queen.”

See how easy it is?”

Beezer.  And that’s how you do it.  The Republican economic understanding is mostly eyewash, and even that which is true has been morphed into the ridiculous anyway.  So now we have the cranks in Congress.  And Robin Hood is a Welfare Queen.  Gotta love these fundamentalist utopians.

Gas at the pump has breeched the $3 gal. mark and heating oil has too, up by a third over the past two heating seasons.   The base oil product is at $90 per barrel and the usually unreliable sources predict it will soon hit $100 and higher.   One former oil company president, John Hoffmeister of Shell, predicts we’re on the way to $5 gal. at the pump.

We import about 12 million of the 18 million  barrels we use every day.  And it doesn’t look as though we’re going to do much to reduce the amount we use.   Gas guzzling SUVs are the top sellers, again, in America.  Sales of the smaller, more fuel efficient, vehicles are flat or down.  Efforts to prime the pump for sustainable energy sources will probably be tossed out with the new, conservative House of Representatives.   It will be ‘drill and spill’ once again in America.

So our economy will get creamed again.  Tipped over by the cost of  Big Fossil imports.   The prices will rise, the cash will be sucked out of our wallets, then our economy will tank and create more deficits, then the prices will decline and our economy will recover somewhat and the cycle can start again.    But each cycle leaves us poorer and weakened.  Some idiot somewhere will, no doubt, say ’That which doesn’t kill you makes you stronger.’   Nope.  ‘That which doesn’t kill you’ doesn’t kill you.  It just leaves you weaker.

The Republicans are going to concentrate on downsizing government.  They may be successful, who knows?  But their total lack of longterm vision will guarantee one thing getting much smaller:  Our economy.

So let’s just look at the data, shall we? 

http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html

November, 2010

Organisation for Economic Co-operation and Development Health Data

Total health care spending per person, 2008 *

United States ( 7538)
OCED average ( 3000)

Australia ( 3353)
Austria ( 3970)
Belgium ( 3677)
Canada ( 4079)
Chile ( 999)
Czech Republic ( 1781)
Denmark ( 3540)
Finland ( 3008)
France ( 3696)
Germany ( 3737)
Greece ( 2687)
Hungary ( 1437)
Iceland ( 3359)
Ireland ( 3793)
Italy ( 2870)
Japan ( 2729)
Korea ( 1801)
Luxembourg ( 4210)
Mexico ( 852)
Netherlands ( 4063)
New Zealand ( 2683)
Norway ( 5003)
Poland ( 1213)
Portugal ( 2151)
Slovak Republic ( 1738)
Spain ( 2902)
Sweden ( 3470)
Switzerland ( 4627)
Turkey ( 767)
United Kingdom ( 3129)

* Data are expressed in US dollars adjusted for purchasing power parities (PPPs), which provide a means of comparing spending between countries on a common base. PPPs are the rates of currency conversion that equalise the cost of a given “basket” of goods and services in different countries.

November, 2010

Organisation for Economic Co-operation and Development Health Data

Total health care spending as a share of GDP, 2008

United States ( 16.0)
OCED average ( 9.0)

Australia ( 8.5)
Austria ( 10.5)
Belgium ( 10.2)
Canada ( 10.4)
Chile ( 6.9)
Czech Republic ( 7.1)
Denmark ( 9.7)
Finland ( 8.4)
France ( 11.2)
Germany ( 10.5)
Greece ( 9.7)
Hungary ( 7.3)
Iceland ( 9.1)
Ireland ( 8.7)
Italy ( 9.1)
Japan ( 8.1)
Korea ( 6.5)
Luxembourg ( 7.2)
Mexico ( 5.9)
Netherlands ( 9.9)
New Zealand ( 9.8)
Norway ( 8.5)
Poland ( 7.0)
Portugal ( 9.9)
Slovak Republic ( 7.8)
Spain ( 9.0)
Sweden ( 9.4)
Switzerland ( 10.7)
Turkey ( 6.0)
United Kingdom ( 8.7)

November, 2010

Organisation for Economic Co-operation and Development Health Data

Pharmaceutical expenditure per person, 2008 *

United States ( 897)

Australia ( 480)
Austria ( 530)
Belgium ( 604)
Canada ( 701)
Chile ( …)
Czech Republic ( 363)
Denmark ( 303)
Finland ( 435)
France ( 607)
Germany ( 563)
Greece ( 677)
Hungary ( 454)
Iceland ( 468)
Ireland ( 656)
Italy ( 527)
Japan ( 548)
Korea ( 430)
Luxembourg ( 338) a
Mexico ( 241)
Netherlands ( 325) b
New Zealand ( 254)
Norway ( 381)
Poland ( 274)
Portugal ( 469)
Slovak Republic ( 489)
Spain ( 596)
Sweden ( 457)
Switzerland ( 461)
Turkey ( 115) c
United Kingdom ( 368)

a 2005
b 2002
c 2000

* Data are expressed in US dollars adjusted for purchasing power parities (PPPs), which provide a means of comparing spending between countries on a common base. PPPs are the rates of currency conversion that equalise the cost of a given “basket” of goods and services in different countries.

http://www.commonwealthfund.org/Content/Publications/In-the-Literature/2008/Jan/Measuring-the-Health-of-Nations–Updating-an-Earlier-Analysis.aspx

January, 2008

Measuring The Health Of Nations: Updating An Earlier Analysis
By Ellen Nolte and C. Martin McKee

The concept of amenable mortality before age 75 was developed in the 1970s to assess the quality and performance of health systems and to track changes over time. For this study, the researchers used data from the World Health Organization on deaths from conditions considered amenable to health care, such as treatable cancers, diabetes, and cardiovascular disease.

Between 1997–98 and 2002–03, amenable mortality fell by an average of 16 percent in all countries except the U.S., where the decline was only 4 percent. In 1997–98, the U.S. ranked 15th out of the 19 countries on this measure—ahead of only Finland, Portugal, the United Kingdom, and Ireland—with a rate of 114.7 deaths per 100,000 people. By 2002–03, the U.S. fell to last place, with 109.7 per 100,000….

Mortality Amenable to Health Care, 2002-2003

Deaths per 100,000 population

1. France ( 65)
2. Japan ( 71)
3. Australia ( 71)
4. Spain ( 74)
5. Italy ( 74)
6. Canada ( 77)
7. Norway ( 80)
8. Netherlands ( 82)
9. Sweden ( 82)
10. Greece ( 84)
11. Austria ( 84)
12. Germany ( 90)
13. Finland ( 93)
14. New Zealand ( 96)
15. Denmark ( 101)
16. United Kingdom ( 103)
17. Ireland ( 103)
18. Portugal ( 104)
19. United States ( 110)

Beezer.  So where in all this data is the ‘proof’ that the US has the world’s best health care system?  The facts don’t support the claim.  In fact, they totally discredit such a viewpoint.  Yet many Americans believe the claim.   Is this because they are totally uninformed?  Beezer believes this is the likely cause.  And this ignorance is purposefully buttressed by a total failure of the so-called professional media to reveal the data.  Why this is so raises several questions, the possible answers to which are all disturbing.

Thanks to Economist’s View and data miner extraordinaire, Anne.

We are a blessed nation and Christmas is the religious holiday where we buy gifts for our family and friends, and give charitably to those who are unable to give.

We are in recession and the number of those unable to give is greater than normal.   We must all redouble our efforts to reduce this number.  We must all redouble our efforts to employ those who are unable to gain employment.  To do so would be the greatest blessing of all.

Here’s the Bureau of Labor Statistics data re: Government employment gains, or losses.

December 3, 2010

Total Nonfarm Federal Government Employment, 1992-2010

(Thousands) *

December 1992 ( 3,101)
December 2000 ( 2,745)
December 2007 ( 2,755)
December 2008 ( 2,777)
December 2009 ( 2,824)
November 2010 ( 2,837)

Clinton (- 356) Total federal government jobs lost
Bush-Obama ( 92) Total federal government jobs created

(Actual averages)

Clinton (- 3,708) Monthly government jobs lost
Bush-Obama ( 773) Monthly government jobs created

* Establishment data, seasonally adjusted.

Beezer.  So Clinton actually reduced the total of government jobs, whereas Bush and Obama have added.  These totals must include military as they are described as ‘non farm’ positions.  The additions are relatively minor re: the total employed.  Hardly a surge, as is so often trumpeted by Republican politicians.   And 80% of the increase comes from Homeland Security.

Beezer correction.  Homeland Security didn’t account for 80% of all jobs added to government.  The three largest contributors between 2008 and 2009 were 27k in the military, 25k in veterans affairs, and 13k in Homeland Security.  The 80% figure I read was comparing non military increases.