Archive for May, 2012
From a recent column by economist Bruce Bartlett, former advisor to Presidents Ronald Read and George W. Bush, as well as staffer for Representatives Ron Paul and the late Jack Kemp. In other words, a rock ribbed Republican.
Beezer here. The important columns in this chart are the last two. The next to last column measures what’s known as the ‘tax wedge.’ The tax wedge is the difference between the cost to an employer of employing a worker and the after-tax reward that the employee receives. This is the underlying principle Republicans espouse to claim that lowering taxes (the cost to the employer) will result in more hiring.
As one can see, the United States is a low-tax country with a total tax wedge of 29.5 percent. Three-fourths of O.E.C.D. countries have a larger tax wedge on average workers.
I have also included the latest data on the percentage of workers employed as a share of the working-age population. I think this is a better measure of the health of the labor market than the unemployment rate, which goes up and down for a variety of reasons unconnected to taxes.
Here, too, there is little evidence that taxes affect employment one way or another. Almost half of the countries with a bigger tax wedge employ a larger percentage of their working-age populations than the United States does, and more than half of those with a smaller tax wedge have lower employment ratios.
One problem with the tax-wedge theory is that taxes are at a historical low as a share of the gross domestic product. According to the Congressional Budget Office, federal revenues will be 15.8 percent of G.D.P. this year. The postwar average is about 18.5 percent, and taxes averaged 18.2 percent during the Reagan administration; indeed, at their lowest point in 1984, federal revenues were 1.5 percent of G.D.P. higher than they are now.
Another problem is that there hasn’t been a significant tax increase affecting average working people since 1983, when Reagan raised the payroll tax rate to 15.3 percent from 13.4 percent (employer plus employee). Contrary to popular belief among Republicans, there have been no significant tax increases during the Obama administration. In fact, there have been tax cuts aimed directly at workers.
The making-work-pay tax credit consumed some 40 percent of the budgetary cost of the 2009 stimulus package and reduced taxes for every person or household with a positive income-tax liability and an income below $75,000 in 2009 and 2010. In 2011 and 2012, the making-work-pay credit was replaced by a temporary 2 percent cut in the payroll tax rate, reducing taxes for every worker.
The reason that unemployment is high clearly has nothing to do with taxes. Consequently, there is no reason to think that reducing taxes further will do anything to raise employment by reducing the tax wedge.
Beezer again. We’ve long maintained that reasonably progressive taxes have little or nothing to do with robust economies, they just help pay the bills. Strong economies are created by dynamics much more important than reasonable taxes. Things like innovation, strong educational institutions, robust infrastructures and solid research and development investment are far more important. Robust economies are also most often characterized by high employment rates. Which is why the number one job of Congress today should be to guarantee job growth. We have the labor, we have trillions of dollars worth of infrastructure projects already identified, and the rest of the world is literally paying us to take their savings. That we haven’t already begun hiring millions of people to go back to work this way is criminal.
From the New York Times:
Jay Carney, the White House press secretary, made a big show of reading reporters aboard Air Force One a MarketWatch report saying that the rate of spending growth under President Obama is lower than under any president since Eisenhower. Mr. Carney said this proves the president has demonstrated far more restraint and responsibility than his critics would allow.
“Do not buy into the b.s. that you hear about spending and fiscal constraint with regard to this administration,” he demanded. “I think doing so is a sign of sloth and laziness.”
This trumpet blast would seem to indicate that Mr. Carney has bought into a standard Republican line: restraint is good and spending is bad, even when government dollars are desperately needed by a struggling economy. When Mitt Romney and other Republicans claim the president is a big spender (as they do every waking minute), the administration’s first instinct is to say they’re wrong on the facts, not that they’re wrong on the principle.
The MarketWatch piece isn’t really a surprise to anyone who has kept an eye on budgets and spending for the last few years. It says spending under Mr. Obama (including the stimulus) has grown by about 1.4 percent a year, compared to 7.3 percent in George W. Bush’s first term, 3.2 percent in Bill Clinton’s first term, and 8.7 percent in Ronald Reagan’s first term. When inflation is taken into account, spending is now actually falling, the first decline since Richard Nixon.
The reason for this decline is that Republicans in Congress have successfully constrained Mr. Obama’s desire to spend more. By threatening a government shutdown a year ago, for example, they won spending cuts of about $25 billion over a decade. Then they threatened to send the government into default, and achieved cuts of more than $2 trillion over a decade. More extortion can be expected later this year.
The Obama administration should not be proud of the result. Congressional budget targets call for cuts of $800 billion over a decade in discretionary spending, in areas such as education, food and housing assistance, transportation, and job training – the kinds of things that help people move up the economic ladder. This category of spending, which used to be 5 percent of the gross domestic product in Nixon’s days, is heading down to less than 2 percent.
If he really wanted to forcefully counter Mr. Romney’s arguments, Mr. Carney could also explain that the current tentative recovery is the worst possible time to slow spending. That’s the point that Peter Orszag, something of a deficit hawk when he was Mr. Obama’s budget director, made in a Bloomberg View essay yesterday. Daring to use the word “stimulus,” he said much more of it is needed immediately because the labor market is so weak. After the economy recovers, future Congresses can cut the budget and the long-term deficit. (And, though he didn’t say so, raise taxes on the rich.)
Apparently, though, you have to leave the administration to favor a stimulus program, because everyone there would rather talk about austerity and restraint. Just like Mitt Romney.
Dominick Brocato of Kansas City worked in human resources for 20 years at the same company. Then the Chief Operating Officer retired and was replaced by someone new, who restructured the company and laid people off, including Brocato, who was 56 at the time.
From an article in the New York Times of an interview of Brocato by writer DW Gibson after Brocato had been unemployed two years.
Mr. Gibson describes Mr. Brocato: “He is 58 and has lived in Kansas City all his life. His shirt is pressed and tucked. His hair is definitely not gray, nor do I think Dominick would allow it to become so. He carries a notepad encased in a leather pouch. His appearance is immaculate and I can confirm it is not easy to remain so well turned out in the July humidity that grips this city, wringing composure from those who are exposed to it.”
I still have the utmost respect for the company and for the president of our company. The new chief operating officer, he doesn’t know me. He doesn’t know who I am. All he knows is a name and tenure and what I was making, and I’m guessing those were the reasons that decisions were being made…
I put three kids through college. We were thinking, “Finally, now, we’re going to be able to live and travel and do stuff just for us,” and I know she was sad thinking through that, realizing we finally got to this point and now this happens.
I said, “Hey, I’m starting outplacement on Monday, and we’re going to work through this.” I was positive. And I felt that I had enough skills that it was going to be fairly quick for me to find another position. I knew that now was time to start a new beginning, and I still try to have that feeling. But it’s hard after 17 months to keep realizing that maybe something will never happen….
I’ve learned in some meetings I’ve been in that companies are asking that recruiters and headhunters not even present them people that are 50 or older. They are not interested in people that have been unemployed for six months or longer because they feel something must be wrong with them. They also have made requirements that if someone has been in their job for 15 or more years, they’re not interested in seeing them either, because they feel that they’re set in their ways, and they haven’t updated or learned new skills. So again, a lot of the things that we were brought up with — a lot of the ethical things that we thought were going to make us successful and that we did to show our dedication to a company — are now used against us…
I always used to tease my wife, because all she ever wanted to do was watch “Leave It to Beaver” and “The Andy Griffith Show,” and I’d say, “Why is that all you ever want to watch? There’s so many things on TV.”
And she said, “Life was so simple, and you didn’t have to worry about everything that we have to worry about today.” And she said, “I just want to pretend I’m back in that time again.” And after she said it, I finally realized what she really meant.
Beezer here. Yup, there’s no question all those 14 million unemployed or underemployed are lazy. Why isn’t this guy selling shoes already? Next thing you know he’s going to take on food stamps (he hasn’t). Can’t believe how some people make the choices they make, you know? Must be a liberal.
File this under more comic nonsense from Republicans.
Tom Coburn, a Republican US Senator from from Ohio, says Sweden is the new right wing icon for slashing spending and taxes and is doing great. Sweden. Oh well, enter stage left Noble prize winning economist Paul Krugman, who writes a blog for the New York Times.
But Ezra didn’t challenge Coburn on the claim about spending cuts; why don’t we look at what Sweden has actually done, as opposed to the official right-wing line? Look, in particular, at actual government consumption — purchases of stuff. Here’s Sweden versus the United States, from Eurostat:
Somebody has been practicing harsh spending-side austerity — and it’s not Sweden.
And to make everything sweeter, a commentator writes the following:
Someone needs to tell nitwit Coborn:
Sweden’s ratio of government spending to GDP is over 50%, much higher than that of the US.
Sweden recently raised taxes on capital gains and dividends.
Sweden’s top marginal income tax rate is 57%.
Sweden’s ratio of government spending on their military is about 1.2%, about one quarter of that of the US.
Sweden’s government provides its citiizens free health care, free education and a generous safety net.
Sweden’s gini index, which measures income inequality, is in the low 20′s, about half that of the US.
In addition to free health care and generous unemployment and retirement benefits, here is what Sweden provides children:
480 paid days of parental leave.
A monthly, tax-free allowance paid to all children until age 16.
A study allowance to all children over 16 in full-time education.
Special large family supplement to families with two or more children.
Additional benefits for children with disabilities or illness.
What do we get in the US?
Endless wars and a military more expensive than the rest of the world combined.
Beezer here. Hey he’s a US Senator so it must be correct, right? Are you kidding me. The guy hasn’t got a clue what he’s talking about. We just have to pay better attention and stop voting for the GOP, which has gone stark raving mad.
The United States already spends more on defense than the next six largest countries. Behind social programs like Medicare, defense is the single largest government spending category. Such is the cost of doing business all over the world. Once our largest multi-national corporations make an investment overseas, it needs to be protected. Unlike most truly imperial nations of history, the US essentially backed into a similar imperial status as a result of these investments.
The last budget deal between the administration and Congress included $55 billion in automatic defense spending reductions. These reductions are part of the Obama administration’s proposed 2013 budget.
But it appears the Tea Party House of Representatives, those ideologues who constantly hector us over deficits, debt and the size of government, are suffering from reduction remorse. Apparently Tea Partiers instead prefer to cut spending on programs that provide help to American individuals and families. It’s a classic Guns over Butter choice. An opinion piece in the New York Times details the hypocrisy.
For more than a year, House Republicans have energetically worked to demolish vital social programs that have made this country both stronger and fairer over the last half-century. At the same time, they have insisted on preserving bloated military spending and unjustifiably low tax rates for the rich. That effort reached a nadir on Thursday when the House voted to prevent $55 billion in automatic cuts imposed on the Pentagon as part of last year’s debt-ceiling deal, choosing instead to make all those cuts, and much more, from domestic programs.
If this bill were enacted, estimates suggest that nearly two million Americans would lose food stamps and 44 million others would find them reduced. The bill would eliminate a program that allows disabled older people to live at home and out of institutions. It cuts money that helps low-income families buy health insurance. At the same time, the House bill actually adds more than $8 billion to the Pentagon budget.
In all, the bill would cut $310 billion from domestic programs; a third of that comes out of programs that serve low- and moderate-income people. Other provisions would slash by half the budget of the Consumer Financial Protection Bureau, which was set up after the financial meltdown to protect consumers from predatory lending and other abuses, and reduce the pay of federal workers.
Beezer here. The brazen hypocrisy and arrogance of these folks is astonishing. Equally astonishing is the silence of our professional media on what choices the Tea Party is making in our name. We believe bills like this will eventually become known to the public at large, and the reaction will be swift and certain in 2012.