RightField
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The fact that some articles like this are coming out in the mainstream press is amazing. I thought they'd keep it buried till after the 2010 elections if not permanantly.
Politics and the US Economy
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Sean
We'll see.
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Frisco_Slug_Esq
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Well, look at it this way, the press is bleeding jobs too and they AIN'T gonna point the finger at them and their fawning love-affair with El...
RightField
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Well, look at it this way, the press is bleeding jobs too and they AIN'T gonna point the finger at them and their fawning love-affair with El...
Yes, Gannet just annonounced 4,500 in layoffs.
Frisco_Slug_Esq
On Strike!
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You know it...
RightField
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Stimulus Spending Doesn't Work
Our new research shows no evidence of a Keynesian 'multiplier' effect. There is evidence that tax cuts boost growth
By ROBERT J. BARRO AND CHARLES J. REDLICK
The global recession and financial crisis have refocused attention on government stimulus packages. These packages typically emphasize spending, predicated on the view that the expenditure "multipliers" are greater than one—so that gross domestic product expands by more than government spending itself. Stimulus packages typically also feature tax reductions, designed partly to boost consumer demand (by raising disposable income) and partly to stimulate work effort, production and investment (by lowering rates).
The existing empirical evidence on the response of real gross domestic product to added government spending and tax changes is thin. In ongoing research, we use long-term U.S. macroeconomic data to contribute to the evidence. The results mostly favor tax rate reductions over increases in government spending as a means to increase GDP.
For defense spending, the principal long-run variations reflect the buildups and aftermaths of major wars—World War I, World War II, the Korean War and, to a much lesser extent, the Vietnam War. World War II tends to dominate, with the ratio of added defense spending to GDP reaching 26% in 1942 and 17% in 1943, and then falling to -26% in 1946.
Wartime spending is helpful for estimating spending multipliers for three key reasons. First, the variations in spending are large and include positive and negative values. Second, since the main changes in military spending are independent of economic developments, it is straightforward to isolate the direction of causation between government spending and GDP. Third, unlike many other countries during the world wars, the U.S. suffered only moderate loss of life and did not experience massive destruction of physical capital. In addition, because the unemployment rate in 1940 exceeded 9% but then fell to 1% in 1944, there is some information on how the multiplier depends on the strength of the economy.
For annual data that start in 1939 or earlier (and, thereby, include World War II), the defense-spending multiplier that applies at the average unemployment rate of 5.6% is in a range of 0.6-0.7. A multiplier less than one means that, overall, other components of GDP fell when defense spending rose. Empirically, our research shows that most of the fall was in private investment, with personal consumer expenditure changing little.
Our research also shows that greater weakness in the economy raises the estimated multiplier: It increases by around 0.1 for each two percentage points by which the unemployment rate exceeds its long-run median of 5.6%. Thus the estimated multiplier reaches 1.0 when the unemployment rate gets to about 12%.
To evaluate typical fiscal-stimulus packages, however, nondefense government spending multipliers are more important. Estimating these multipliers convincingly from U.S. time series is problematical, however, because the movements in nondefense government purchases (dominated since the 1960s by state and local outlays) are closely intertwined with the business cycle. Thus the explanation for much of the positive association between nondefense spending and GDP is that government spending increased in response to growing GDP, rather than the reverse.
The effects of tax rates on GDP growth can be analyzed from a time series we've constructed on average marginal income-tax rates from federal and state income taxes and the Social Security payroll tax. Since 1950, the largest declines in the average marginal rate from the federal individual income tax occurred under Ronald Reagan (to 21.8% in 1988 from 25.9% in 1986 and to 25.6% in 1983 from 29.4% in 1981), George W. Bush (to 21.1% in 2003 from 24.7% in 2000), and Kennedy-Johnson (to 21.2% in 1965 from 24.7% in 1963). Tax rates rose particularly during the Korean War, the 1970s and the 1990s. The average marginal tax rate from Social Security (including payments from employees, employers and the self-employed) expanded to 10.8% in 1991 from 2.2% in 1971 and then remained reasonably stable.
For data that start in 1950, we estimate that a one-percentage-point cut in the average marginal tax rate raises the following year's GDP growth rate by around 0.6% per year. However, this effect is harder to pin down over longer periods that include the world wars and the Great Depression.
It would be useful to apply our U.S. analysis to long-term macroeconomic time series for other countries, but many of them experienced massive contractions of real GDP during the world wars, driven by the destruction of capital stocks and institutions and large losses of life. It is also unclear whether other countries have the necessary underlying information to construct measures of average marginal income-tax rates—the key variable for our analysis of tax effects in the U.S. data.
The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.
Mr. Barro is a professor of economics at Harvard and a senior fellow at Stanford University's Hoover Institution. Mr. Redlick is a recent Harvard graduate. This op-ed is based on a working paper issued by the National Bureau of Economic Research in September.
Our new research shows no evidence of a Keynesian 'multiplier' effect. There is evidence that tax cuts boost growth
By ROBERT J. BARRO AND CHARLES J. REDLICK
The global recession and financial crisis have refocused attention on government stimulus packages. These packages typically emphasize spending, predicated on the view that the expenditure "multipliers" are greater than one—so that gross domestic product expands by more than government spending itself. Stimulus packages typically also feature tax reductions, designed partly to boost consumer demand (by raising disposable income) and partly to stimulate work effort, production and investment (by lowering rates).
The existing empirical evidence on the response of real gross domestic product to added government spending and tax changes is thin. In ongoing research, we use long-term U.S. macroeconomic data to contribute to the evidence. The results mostly favor tax rate reductions over increases in government spending as a means to increase GDP.
For defense spending, the principal long-run variations reflect the buildups and aftermaths of major wars—World War I, World War II, the Korean War and, to a much lesser extent, the Vietnam War. World War II tends to dominate, with the ratio of added defense spending to GDP reaching 26% in 1942 and 17% in 1943, and then falling to -26% in 1946.
Wartime spending is helpful for estimating spending multipliers for three key reasons. First, the variations in spending are large and include positive and negative values. Second, since the main changes in military spending are independent of economic developments, it is straightforward to isolate the direction of causation between government spending and GDP. Third, unlike many other countries during the world wars, the U.S. suffered only moderate loss of life and did not experience massive destruction of physical capital. In addition, because the unemployment rate in 1940 exceeded 9% but then fell to 1% in 1944, there is some information on how the multiplier depends on the strength of the economy.
For annual data that start in 1939 or earlier (and, thereby, include World War II), the defense-spending multiplier that applies at the average unemployment rate of 5.6% is in a range of 0.6-0.7. A multiplier less than one means that, overall, other components of GDP fell when defense spending rose. Empirically, our research shows that most of the fall was in private investment, with personal consumer expenditure changing little.
Our research also shows that greater weakness in the economy raises the estimated multiplier: It increases by around 0.1 for each two percentage points by which the unemployment rate exceeds its long-run median of 5.6%. Thus the estimated multiplier reaches 1.0 when the unemployment rate gets to about 12%.
To evaluate typical fiscal-stimulus packages, however, nondefense government spending multipliers are more important. Estimating these multipliers convincingly from U.S. time series is problematical, however, because the movements in nondefense government purchases (dominated since the 1960s by state and local outlays) are closely intertwined with the business cycle. Thus the explanation for much of the positive association between nondefense spending and GDP is that government spending increased in response to growing GDP, rather than the reverse.
The effects of tax rates on GDP growth can be analyzed from a time series we've constructed on average marginal income-tax rates from federal and state income taxes and the Social Security payroll tax. Since 1950, the largest declines in the average marginal rate from the federal individual income tax occurred under Ronald Reagan (to 21.8% in 1988 from 25.9% in 1986 and to 25.6% in 1983 from 29.4% in 1981), George W. Bush (to 21.1% in 2003 from 24.7% in 2000), and Kennedy-Johnson (to 21.2% in 1965 from 24.7% in 1963). Tax rates rose particularly during the Korean War, the 1970s and the 1990s. The average marginal tax rate from Social Security (including payments from employees, employers and the self-employed) expanded to 10.8% in 1991 from 2.2% in 1971 and then remained reasonably stable.
For data that start in 1950, we estimate that a one-percentage-point cut in the average marginal tax rate raises the following year's GDP growth rate by around 0.6% per year. However, this effect is harder to pin down over longer periods that include the world wars and the Great Depression.
It would be useful to apply our U.S. analysis to long-term macroeconomic time series for other countries, but many of them experienced massive contractions of real GDP during the world wars, driven by the destruction of capital stocks and institutions and large losses of life. It is also unclear whether other countries have the necessary underlying information to construct measures of average marginal income-tax rates—the key variable for our analysis of tax effects in the U.S. data.
The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.
Mr. Barro is a professor of economics at Harvard and a senior fellow at Stanford University's Hoover Institution. Mr. Redlick is a recent Harvard graduate. This op-ed is based on a working paper issued by the National Bureau of Economic Research in September.
RightField
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Bad news: Jobs market getting worse 10/2/09
More jobs were lost in September than expected and unemployment rate hits 26-year high of 9.8%.
NEW YORK (CNNMoney.com) -- Employers cut more jobs from their payrolls in September and the unemployment rate hit another 26-year high, as the long-battered U.S. labor market took an unexpected turn for the worse, according to a government report Friday.
The Labor Department said there was a net loss of 263,000 jobs in the month, up from a revised loss of 201,000 jobs in August. Economists surveyed by Briefing.com had forecast losses would fall to 175,000 jobs.
More jobs were lost in September than expected and unemployment rate hits 26-year high of 9.8%.
NEW YORK (CNNMoney.com) -- Employers cut more jobs from their payrolls in September and the unemployment rate hit another 26-year high, as the long-battered U.S. labor market took an unexpected turn for the worse, according to a government report Friday.
The Labor Department said there was a net loss of 263,000 jobs in the month, up from a revised loss of 201,000 jobs in August. Economists surveyed by Briefing.com had forecast losses would fall to 175,000 jobs.
RightField
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Obama’s not-so-secret plan to raise taxes
James Pethokoukis
Does President Obama have a secret plan to raise taxes on middle-class Americans — and,well, pretty much everybody else — with a European-style, value-added tax? Actually, it’s not such a big secret. Connect the dots:
1) The joint statement from the just-concluded G20 Summit in Pittsburgh called for balanced global growth — which means Americans must spend less and save more and reduce its budget deficit.
2) That same weekend, John Podesta, co-chairman of Obama’s presidential transition team and an outside White House adviser, tells a Bloomberg reporter that a value-added tax is “more plausible today” than ever, adding that “there’s going to have to be revenue in this budget.” A VAT is a kind of consumption tax.
3) Yesterday, the Center for American Progress, the liberal think tank with close White House ties, holds a conference on the rising national debt. While speaker after speaker — Paul Krugman, Roger Altman, CAP President Podesta (again), Laura Tyson — admits entitlement spending must be reduced, they also agree that taxes must be raised. Altman suggests $400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it. That’s $400 billion a year, by the way, not over ten years.
4) Also, yesterday was the first meeting of President Obama’s tax reform panel led by former Federal Reserve Chairman Paul Volcker. In a two-part interview with Charlie Rose airing yesterday and today, Volcker says that if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers. “Those are two big ones,” he says.
5) As they used to say in the Soviet Union, “It’s no coincidence.” This is also the conclusion of one Washington insider with ties to the White House economic team: “Does this all add up to a trial balloon? Of course, it’s a trial balloon. And I expect the administration will propose major tax reform, including a VAT.”
Obama’s campaign promise to not raise taxes on households making less than $250,000 a year was always considered a joke here inside the Beltway. It’s the economic “consensus” — and this was true even before the financial meltdown and recession — that rising entitlement costs would eventually mean a higher tax burden for the American people.
Maybe it was a joke inside the campaign, too. Since being elected, Obama has raised cigarette taxes and has advocated raising healthcare taxes, energy and small business taxes, in addition to corporate taxes. What’s more, economic advisers like Larry Summers seem eager to get rid of all the Bush tax cuts, not just those on so-called wealthy Americans.
James Pethokoukis
Does President Obama have a secret plan to raise taxes on middle-class Americans — and,well, pretty much everybody else — with a European-style, value-added tax? Actually, it’s not such a big secret. Connect the dots:
1) The joint statement from the just-concluded G20 Summit in Pittsburgh called for balanced global growth — which means Americans must spend less and save more and reduce its budget deficit.
2) That same weekend, John Podesta, co-chairman of Obama’s presidential transition team and an outside White House adviser, tells a Bloomberg reporter that a value-added tax is “more plausible today” than ever, adding that “there’s going to have to be revenue in this budget.” A VAT is a kind of consumption tax.
3) Yesterday, the Center for American Progress, the liberal think tank with close White House ties, holds a conference on the rising national debt. While speaker after speaker — Paul Krugman, Roger Altman, CAP President Podesta (again), Laura Tyson — admits entitlement spending must be reduced, they also agree that taxes must be raised. Altman suggests $400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it. That’s $400 billion a year, by the way, not over ten years.
4) Also, yesterday was the first meeting of President Obama’s tax reform panel led by former Federal Reserve Chairman Paul Volcker. In a two-part interview with Charlie Rose airing yesterday and today, Volcker says that if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers. “Those are two big ones,” he says.
5) As they used to say in the Soviet Union, “It’s no coincidence.” This is also the conclusion of one Washington insider with ties to the White House economic team: “Does this all add up to a trial balloon? Of course, it’s a trial balloon. And I expect the administration will propose major tax reform, including a VAT.”
Obama’s campaign promise to not raise taxes on households making less than $250,000 a year was always considered a joke here inside the Beltway. It’s the economic “consensus” — and this was true even before the financial meltdown and recession — that rising entitlement costs would eventually mean a higher tax burden for the American people.
Maybe it was a joke inside the campaign, too. Since being elected, Obama has raised cigarette taxes and has advocated raising healthcare taxes, energy and small business taxes, in addition to corporate taxes. What’s more, economic advisers like Larry Summers seem eager to get rid of all the Bush tax cuts, not just those on so-called wealthy Americans.
RightField
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Weak Data Signal Grim Prospects For Workers
Unemployment Rate Highest in 26 Years
The recession's toll on workers rose again in September, with the unemployment rate climbing to 9.8 percent, its highest level since 1983, as the count of the nation's jobless topped 15.1 million, according to a government report released Friday.
The report underscores fears that, even as some sectors of the economy have stabilized and stock markets have rallied, the prospects for workers remain bleak.
Economists have forecast that unemployment will rise through the end of the year, when layoffs tend to increase anyway, and some say that the surge of unemployment will extend well into 2010.
The job losses have continued for 21 months, the longest such stretch in 70 years of records, analysts say. Friday's report underscores persistent long-term joblessness, with more than one-third of the nation's unemployed out of work for more than six months.
"It's safe to assume that the recession is technically over, but when is it going to feel like it's over in the real economy?" said Heidi Shierholz, an economist at the Economic Policy Institute. "That's the question of the hour, and in no uncertain terms, this report shows we are a long way away from that."
In places like Macomb County, Mich., a suburb of Detroit, the unease among the long-term unemployed is palpable. The five employment offices in the area recently hired security officers to stand in the lobby.
"It's something we've never done before," said John Bierbusse, head of the workforce investment board in Macomb County, which seeks to retrain and assist people in finding jobs. "People are desperate. They're on edge when they come into our offices."
Continued weakness in the labor market could make it harder for a full recovery to take hold.
One of the more immediate concerns, particularly in states with high unemployment such as Michigan and Nevada, is how long the federal government will continue to extend unemployment benefits. The House has passed legislation to give an additional 13 weeks of benefits to residents of states with unemployment above 8.5 percent, but a similar measure awaits action in the Senate.
As it is, a few hundred people in Macomb County run out of their benefits every month, but if the program is not extended again soon, a few thousand will start losing their benefits monthly, Bierbusse said.
"It's not like there's a ton of jobs out there," he said.
There are now six unemployed people for every job opening across the United States, and the odds against job seekers are clearly taking a psychological toll.
Unemployment Rate Highest in 26 Years
The recession's toll on workers rose again in September, with the unemployment rate climbing to 9.8 percent, its highest level since 1983, as the count of the nation's jobless topped 15.1 million, according to a government report released Friday.
The report underscores fears that, even as some sectors of the economy have stabilized and stock markets have rallied, the prospects for workers remain bleak.
Economists have forecast that unemployment will rise through the end of the year, when layoffs tend to increase anyway, and some say that the surge of unemployment will extend well into 2010.
The job losses have continued for 21 months, the longest such stretch in 70 years of records, analysts say. Friday's report underscores persistent long-term joblessness, with more than one-third of the nation's unemployed out of work for more than six months.
"It's safe to assume that the recession is technically over, but when is it going to feel like it's over in the real economy?" said Heidi Shierholz, an economist at the Economic Policy Institute. "That's the question of the hour, and in no uncertain terms, this report shows we are a long way away from that."
In places like Macomb County, Mich., a suburb of Detroit, the unease among the long-term unemployed is palpable. The five employment offices in the area recently hired security officers to stand in the lobby.
"It's something we've never done before," said John Bierbusse, head of the workforce investment board in Macomb County, which seeks to retrain and assist people in finding jobs. "People are desperate. They're on edge when they come into our offices."
Continued weakness in the labor market could make it harder for a full recovery to take hold.
One of the more immediate concerns, particularly in states with high unemployment such as Michigan and Nevada, is how long the federal government will continue to extend unemployment benefits. The House has passed legislation to give an additional 13 weeks of benefits to residents of states with unemployment above 8.5 percent, but a similar measure awaits action in the Senate.
As it is, a few hundred people in Macomb County run out of their benefits every month, but if the program is not extended again soon, a few thousand will start losing their benefits monthly, Bierbusse said.
"It's not like there's a ton of jobs out there," he said.
There are now six unemployed people for every job opening across the United States, and the odds against job seekers are clearly taking a psychological toll.
RightField
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It's the Spending, Stupid
By John Stossel
"The government who robs Peter to pay Paul can always depend on the support of Paul," George Bernard Shaw once said.
For a socialist, Shaw demonstrated good sense with that quotation. Unfortunately, America has become a laboratory in which his hypothesis is being tested.
The theory of government I was taught says that government provides benefits, primarily security, to the entire population. In return we pay taxes. But lately the government has been a distributor of special privileges, taking money from some and giving it to others. America is now about evenly split between those who pay income taxes and those who consume them.
The Urban-Brookings Tax Policy Center recently disclosed that close to half of all households will pay no income tax this year. Some will pay less than zero -- that is, they'll get money from those of us who do pay taxes.
The Tax Policy Center adds that this year the average income-tax rate for the bottom 40 percent of earners will be negative and that their cash subsidy will equal 10 percent of the total amount the income tax brings in, thanks to the Earned Income Tax Credit and President Obama's "Making Work Pay" program.
The view from the top also shows the lopsidedness of the tax system. The top 20 percent of earners makes about 53 percent of the income in America but pays 91 percent of the income tax. The top 1 percent pays 36 percent. The IRS says the bottom half of earners pays less than 3 percent.
This presents a serious problem because government has such vast powers to dispense favors. As Shaw suggested, people who pay no tax will not hesitate to vote for politicians who promise big spending. Why not? They will get stuff without having to pay for it.
Yes, working people who pay no income tax still pay taxes: sales tax and payroll (Social Security and Medicare) taxes. But the income tax is big and visible, so it's a problem that a growing number of people don't pay, but get benefits from those who do.
Frederic Bastiat, the great 19th-century French economist, defined the state as "that great fiction by which everyone tries to live at the expense of everyone else." I don't know if he envisioned one half of the population living off the other half.
It's important not to confuse the interests of the taxpayers with the interests of the politicians and other tax consumers. Yet that is done all the time. When the government bought toxic assets (of zero market value) from the banks, it said taxpayers would profit when the economy recovered and the assets once again commanded a positive price in the market. Even if we make the dubious assumption that the government is savvy enough to buy low and sell high, it's not the taxpayers who would benefit from any profits. The politicians will spend every penny, rather than cutting taxes.
To put it bluntly, we are not the government.
The built-in unfairness of the tax system has prompted a range of tax-reform proposals, such as a flat tax and replacing the income tax with a sales tax. These alternatives are better, but they have their drawbacks, too. For that reason, there is something more urgent than tax reform: spending reform.
The true burden of government, the late Milton Friedman said, is not the tax level but the spending level. Taxation is just one way for the government to get money. The other ways -- borrowing and inflation -- are also burdens on the people. The best way to lighten the tax burden is to lessen the spending burden. If government spends less, it takes less. And if it takes less, the tax system will weigh less heavily on us all.
Once again, we find wisdom in Adam Smith: "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things."
By John Stossel
"The government who robs Peter to pay Paul can always depend on the support of Paul," George Bernard Shaw once said.
For a socialist, Shaw demonstrated good sense with that quotation. Unfortunately, America has become a laboratory in which his hypothesis is being tested.
The theory of government I was taught says that government provides benefits, primarily security, to the entire population. In return we pay taxes. But lately the government has been a distributor of special privileges, taking money from some and giving it to others. America is now about evenly split between those who pay income taxes and those who consume them.
The Urban-Brookings Tax Policy Center recently disclosed that close to half of all households will pay no income tax this year. Some will pay less than zero -- that is, they'll get money from those of us who do pay taxes.
The Tax Policy Center adds that this year the average income-tax rate for the bottom 40 percent of earners will be negative and that their cash subsidy will equal 10 percent of the total amount the income tax brings in, thanks to the Earned Income Tax Credit and President Obama's "Making Work Pay" program.
The view from the top also shows the lopsidedness of the tax system. The top 20 percent of earners makes about 53 percent of the income in America but pays 91 percent of the income tax. The top 1 percent pays 36 percent. The IRS says the bottom half of earners pays less than 3 percent.
This presents a serious problem because government has such vast powers to dispense favors. As Shaw suggested, people who pay no tax will not hesitate to vote for politicians who promise big spending. Why not? They will get stuff without having to pay for it.
Yes, working people who pay no income tax still pay taxes: sales tax and payroll (Social Security and Medicare) taxes. But the income tax is big and visible, so it's a problem that a growing number of people don't pay, but get benefits from those who do.
Frederic Bastiat, the great 19th-century French economist, defined the state as "that great fiction by which everyone tries to live at the expense of everyone else." I don't know if he envisioned one half of the population living off the other half.
It's important not to confuse the interests of the taxpayers with the interests of the politicians and other tax consumers. Yet that is done all the time. When the government bought toxic assets (of zero market value) from the banks, it said taxpayers would profit when the economy recovered and the assets once again commanded a positive price in the market. Even if we make the dubious assumption that the government is savvy enough to buy low and sell high, it's not the taxpayers who would benefit from any profits. The politicians will spend every penny, rather than cutting taxes.
To put it bluntly, we are not the government.
The built-in unfairness of the tax system has prompted a range of tax-reform proposals, such as a flat tax and replacing the income tax with a sales tax. These alternatives are better, but they have their drawbacks, too. For that reason, there is something more urgent than tax reform: spending reform.
The true burden of government, the late Milton Friedman said, is not the tax level but the spending level. Taxation is just one way for the government to get money. The other ways -- borrowing and inflation -- are also burdens on the people. The best way to lighten the tax burden is to lessen the spending burden. If government spends less, it takes less. And if it takes less, the tax system will weigh less heavily on us all.
Once again, we find wisdom in Adam Smith: "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things."
RightField
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CBO: Budget Deficit Hit Record $1.4T in 2009
CBO: Budget deficit hit record $1.4T in 2009 thanks to recession-fed drop in revenue, bailouts
By ANDREW TAYLOR
The federal budget deficit tripled to a record $1.4 trillion for the 2009 fiscal year that ended last week, congressional analysts said Wednesday.
The Congressional Budget Office estimate, while expected, is bad news for the White House and its allies in Congress as they press ahead with health care overhaul legislation that could cost $900 billion over the next decade.
The unprecedented flood of red ink flows from several factors, including a big drop in tax revenues due to the recession, $245 billion in emergency spending on the Wall Street bailout and the takeover of mortgage giants Fannie Mae and Freddie Mac. Then there is almost $200 billion in costs from President Barack Obama's economic stimulus bill, as well as increases in programs such as unemployment benefits and food stamps.
The previous record deficit was $459 billion and was set just last year.
CBO: Budget deficit hit record $1.4T in 2009 thanks to recession-fed drop in revenue, bailouts
By ANDREW TAYLOR
The federal budget deficit tripled to a record $1.4 trillion for the 2009 fiscal year that ended last week, congressional analysts said Wednesday.
The Congressional Budget Office estimate, while expected, is bad news for the White House and its allies in Congress as they press ahead with health care overhaul legislation that could cost $900 billion over the next decade.
The unprecedented flood of red ink flows from several factors, including a big drop in tax revenues due to the recession, $245 billion in emergency spending on the Wall Street bailout and the takeover of mortgage giants Fannie Mae and Freddie Mac. Then there is almost $200 billion in costs from President Barack Obama's economic stimulus bill, as well as increases in programs such as unemployment benefits and food stamps.
The previous record deficit was $459 billion and was set just last year.
RightField
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I can't believe the deficit is up to $1.4T
Frisco_Slug_Esq
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You shouldn't; they're excluding the cost of Afghanistan...
That's only about $4500 for every man, woman and child in the country.
Feeling stimulated yet?
Maybe it's time to bail out.
RightField
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Much more for me because I'm one of the few that actually have to pay the bills. I could have bought two new mercedes e series for what I paid in taxes last year. It makes me sad to see my money being so cavelierly spent on things like giving GM to the UAW and money to ACORN.
JohnnySavage
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RightField
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The Democrats' Vision Problem
By Jonah Goldberg 6/27/10
Head to the local big-box electronics store and buy yourself: a Panasonic home theater system ($500), an Insignia 50-inch plasma HDTV ($700), an Apple 8GB iPod Touch ($175), a Sony 3-D Blu-ray disc player ($219), a Sony 300-CD changer ($209), a Garmin portable GPS ($139), a Sony 14.1-megapixel digital camera ($200), a Dell Inspiron laptop computer ($450), and a TiVo high-definition digital video recorder ($300).
This is not an endorsement of any of these products. I don't own any of them (though if the manufacturers are keen to find out my opinion, they can send me some non-returnable demos). But you can fill your shopping cart with these items for less than $3,000. The average American worker needs to work 152 hours to earn that much money.
In 1964, however, the average American worker could buy one pricey stereo from Radio Shack after working 152 hours. My colleague at the American Enterprise Institute, Mark Perry, a University of Michigan economist, crunched the numbers.
What's the point? Well, there's a big one. We are constantly told that the American working man is so much worse off than he used to be. And if you measure income one way, you can make that case.
Indeed, the Democratic party in recent years has become obsessed in looking at the economy only in that one negative way to justify its avocation: giving more stuff to the poor and middle class because they are "falling behind."
The wealth of nations, according to Adam Smith, the founding father of the market economy, is not measured in GDP or cash reserves. Rather, it "consists in the cheapness of provision and all other necessaries and conveniences of life."
By that standard, American wealth in general, and the wealth of poor Americans, has skyrocketed in the last half-century, and the government had relatively little - though certainly not nothing - to do with it. And it's not just that consumer items are cheaper than ever; they're also better than ever. An iPhone today isn't just better than yesterday's phones, it's better than yesterday's cameras, calculators, portable stereos, and computers. Many of the standard features on a 2010 Honda Accord were considered luxury items ten years ago and almost unimaginable 20 years ago.
Now, you might argue that while, say, TiVo might be a great convenience, it's not a necessity. Given the divergent TV tastes in the Goldberg household, I might disagree. But fair enough: The real necessities are food, clothing, shelter, and medical care, according to most people.
Well, food has gotten steadily cheaper - for everybody - over the last century. For instance, Perry calculates that eggs cost about one-tenth as much as they did at the beginning of the century. Moreover, Americans, with their allegedly stingy government, pay about half as much for food as Europeans do.
So, what has gotten more expensive? According to St. Lawrence University economist Steven Horwitz, there are only four areas that have become more expensive over the last century as measured in their "labor price": housing, cars, higher education, and medical care. With the arguable exception of a college degree, all are marked with wildly improved quality. And the main reason for rising medical and college costs (and to a lesser degree housing costs) is that the government has distorted the market by "helping."
For example, Rep. Paul Ryan (R., Wis.) underwent Lasik eye surgery in 2000. He paid cash, and it cost $2,000 an eye. "Since then," he told the Washington Post, "it's been revolutionized three times and now costs $800 an eye. This sector isn't immune from free-market principles."
No, but it is protected from them.
Even so, the costs of housing, food, and clothing combined have dropped over the last century from about 75 percent of the average family's expenditures to around 35 percent, largely thanks to the ability of the market to democratize innovation and decrease the cost of necessities and conveniences.
None of this is to say that the middle class and the poor aren't facing tough times, or that our government policies are perfectly suited to their needs. But ever since the dawn of the Obama presidency, millennia ago, the air has been thick with claims that government needs to get much more deeply involved in the private sector. According to Obama and Co., only government can provide what the working people in America need, and "doing nothing" is the only unacceptable suggestion. "The one thing I don't want to hear," as Obama likes to say, is that more government isn't the answer.
Maybe he should get his hearing checked by the same guy who did Ryan's eyes.
By Jonah Goldberg 6/27/10
Head to the local big-box electronics store and buy yourself: a Panasonic home theater system ($500), an Insignia 50-inch plasma HDTV ($700), an Apple 8GB iPod Touch ($175), a Sony 3-D Blu-ray disc player ($219), a Sony 300-CD changer ($209), a Garmin portable GPS ($139), a Sony 14.1-megapixel digital camera ($200), a Dell Inspiron laptop computer ($450), and a TiVo high-definition digital video recorder ($300).
This is not an endorsement of any of these products. I don't own any of them (though if the manufacturers are keen to find out my opinion, they can send me some non-returnable demos). But you can fill your shopping cart with these items for less than $3,000. The average American worker needs to work 152 hours to earn that much money.
In 1964, however, the average American worker could buy one pricey stereo from Radio Shack after working 152 hours. My colleague at the American Enterprise Institute, Mark Perry, a University of Michigan economist, crunched the numbers.
What's the point? Well, there's a big one. We are constantly told that the American working man is so much worse off than he used to be. And if you measure income one way, you can make that case.
Indeed, the Democratic party in recent years has become obsessed in looking at the economy only in that one negative way to justify its avocation: giving more stuff to the poor and middle class because they are "falling behind."
The wealth of nations, according to Adam Smith, the founding father of the market economy, is not measured in GDP or cash reserves. Rather, it "consists in the cheapness of provision and all other necessaries and conveniences of life."
By that standard, American wealth in general, and the wealth of poor Americans, has skyrocketed in the last half-century, and the government had relatively little - though certainly not nothing - to do with it. And it's not just that consumer items are cheaper than ever; they're also better than ever. An iPhone today isn't just better than yesterday's phones, it's better than yesterday's cameras, calculators, portable stereos, and computers. Many of the standard features on a 2010 Honda Accord were considered luxury items ten years ago and almost unimaginable 20 years ago.
Now, you might argue that while, say, TiVo might be a great convenience, it's not a necessity. Given the divergent TV tastes in the Goldberg household, I might disagree. But fair enough: The real necessities are food, clothing, shelter, and medical care, according to most people.
Well, food has gotten steadily cheaper - for everybody - over the last century. For instance, Perry calculates that eggs cost about one-tenth as much as they did at the beginning of the century. Moreover, Americans, with their allegedly stingy government, pay about half as much for food as Europeans do.
So, what has gotten more expensive? According to St. Lawrence University economist Steven Horwitz, there are only four areas that have become more expensive over the last century as measured in their "labor price": housing, cars, higher education, and medical care. With the arguable exception of a college degree, all are marked with wildly improved quality. And the main reason for rising medical and college costs (and to a lesser degree housing costs) is that the government has distorted the market by "helping."
For example, Rep. Paul Ryan (R., Wis.) underwent Lasik eye surgery in 2000. He paid cash, and it cost $2,000 an eye. "Since then," he told the Washington Post, "it's been revolutionized three times and now costs $800 an eye. This sector isn't immune from free-market principles."
No, but it is protected from them.
Even so, the costs of housing, food, and clothing combined have dropped over the last century from about 75 percent of the average family's expenditures to around 35 percent, largely thanks to the ability of the market to democratize innovation and decrease the cost of necessities and conveniences.
None of this is to say that the middle class and the poor aren't facing tough times, or that our government policies are perfectly suited to their needs. But ever since the dawn of the Obama presidency, millennia ago, the air has been thick with claims that government needs to get much more deeply involved in the private sector. According to Obama and Co., only government can provide what the working people in America need, and "doing nothing" is the only unacceptable suggestion. "The one thing I don't want to hear," as Obama likes to say, is that more government isn't the answer.
Maybe he should get his hearing checked by the same guy who did Ryan's eyes.
koalabear
~Armed and Fuzzy~
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Frisco_Slug_Esq
On Strike!
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And the budget process has been abandoned.
Leave the tough choices to the Republican Party so you can then go out and sell the idea that they hate you and want to take away all your benefits...
Remember, letting tax cuts "expire" is not raising taxes...
This is easier than the Congressional Banking Scandals to figure out, even for the publicly educated.
__________________
--let me-- let me do the positive side of this. Okay? We've-- just been through eight years where people said-- many people said, ‘Deficits don't matter. We can-- we can pass huge tax cuts, pass huge new programs without paying for them.’ That debate has changed fundamentally. Now you don't hear people say anymore, ‘Deficits don't matter.’ You don't hear people saying that we can pass enormously—enormous expansion of government without paying for it. That's an important change. I think all Americans understand that our deficits are unsustainable. And I think that'll be helpful as we move to try to make the hard choices to bring them down again.”
TIMOTHY GEITHNER
Leave the tough choices to the Republican Party so you can then go out and sell the idea that they hate you and want to take away all your benefits...
Remember, letting tax cuts "expire" is not raising taxes...
This is easier than the Congressional Banking Scandals to figure out, even for the publicly educated.
__________________
--let me-- let me do the positive side of this. Okay? We've-- just been through eight years where people said-- many people said, ‘Deficits don't matter. We can-- we can pass huge tax cuts, pass huge new programs without paying for them.’ That debate has changed fundamentally. Now you don't hear people say anymore, ‘Deficits don't matter.’ You don't hear people saying that we can pass enormously—enormous expansion of government without paying for it. That's an important change. I think all Americans understand that our deficits are unsustainable. And I think that'll be helpful as we move to try to make the hard choices to bring them down again.”
TIMOTHY GEITHNER
U
unregistered
Guest
Frisco_Slug_Esq
On Strike!
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Until the second shift is cut, the economy is jake by him.
Unlike "us dummy Republicans" he didn't cash in his 401K and it still looks good to him!
The ghost of Keynes and massive debt will save our bacon...
__________________
"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
John Maynard Keynes
Unlike "us dummy Republicans" he didn't cash in his 401K and it still looks good to him!
The ghost of Keynes and massive debt will save our bacon...
__________________
"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
John Maynard Keynes
RightField
Literotica Guru
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- Jun 30, 2003
- Posts
- 9,361
It really is a great article isn't it?
RightField
Literotica Guru
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Why Obamanomics Has Failed
Uncertainty about future taxes and regulations is enemy No. 1 of economic growth.
By ALLAN H. MELTZER
The administration's stimulus program has failed. Growth is slow and unemployment remains high. The president, his friends and advisers talk endlessly about the circumstances they inherited as a way of avoiding responsibility for the 18 months for which they are responsible.
But they want new stimulus measures—which is convincing evidence that they too recognize that the earlier measures failed. And so the U.S. was odd-man out at the G-20 meeting over the weekend, continuing to call for more government spending in the face of European resistance.
The contrast with President Reagan's antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates.
Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.
Most of the earlier spending was a very short-term response to long-term problems. One piece financed temporary tax cuts. This was a mistake, and ignores the role of expectations in the economy. Economic theory predicts that temporary tax cuts have little effect on spending. Unless tax cuts are expected to last, consumers save the proceeds and pay down debt. Experience with past temporary tax reductions, as in the Carter and first Bush presidencies, confirms this outcome.
Another large part of the stimulus went to relieve state and local governments of their budget deficits. Transferring a deficit from the state to the federal government changes very little. Some teachers and police got an additional year of employment, but their gain is temporary. Any benefits to them must be balanced against the negative effect of the increased public debt and the temporary nature of the transfer.
The Obama economic team ignored past history. The two most successful fiscal stimulus programs since World War II—under Kennedy-Johnson and Reagan—took the form of permanent reductions in corporate and marginal tax rates. Economist Arthur Okun, who had a major role in developing the Kennedy-Johnson program, later analyzed the effect of individual items. He concluded that corporate tax reduction was most effective.
Another defect of Obamanomics was that part of the increased spending authorized by the 2009 stimulus bill was held back. Remember the oft-repeated claim that the spending would go for "shovel ready" projects? That didn't happen, though spending will flow more rapidly now in an effort to lower unemployment and claim economic success during the fall election campaign.
In his January 2010 State of the Union address, President Obama recognized that the United States must increase exports. He was right, but he has done little to help, either by encouraging investment to increase productivity, or by supporting trade agreements, despite his promise to the Koreans that he repeated in Toronto. Export earnings are the only way to service our massive foreign borrowing. This should be a high priority. Isn't anyone in the government thinking about the future?
Mr. Obama has denied the cost burden on business from his health-care program, but business is aware that it is likely to be large. How large? That's part of the uncertainty that employers face if they hire additional labor.
The president asks for cap and trade. That's more cost and more uncertainty. Who will be forced to pay? What will it do to costs here compared to foreign producers? We should not expect businesses to invest in new, export-led growth when uncertainty about future costs is so large.
Then there is Medicaid, the medical program for those with lower incomes. In the past, states paid about half of the cost, and they are responsible for 20% of the additional cost imposed by the program's expansion. But almost all the states must balance their budgets, and the new Medicaid spending mandated by ObamaCare comes at a time when states face large deficits and even larger unfunded liabilities for pensions. All this only adds to uncertainty about taxes and spending.
Other aspects of the Obama economic program are equally problematic. The auto bailouts ran roughshod over the rule of law. Chrysler bondholders were given short shrift in order to benefit the auto workers union. By weakening the rule of law, the president opened the way to great mischief and increased investors' and producers' uncertainty. That's not the way to get more investment and employment.
Almost daily, Mr. Obama uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities. No president since Franklin Roosevelt has taken that route. President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it's harmful now.
In 1980, I had the privilege of advising Prime Minister Margaret Thatcher to ignore the demands of 360 British economists who made the outrageous claim that Britain would never (yes, never) recover from her decision to reduce government spending during a severe recession. They wanted more spending. She responded with a speech promising to stay with her tight budget. She kept a sustained focus on long-term problems. Expectations about the economy's future improved, and the recovery soon began.
That's what the U.S. needs now. Not major cuts in current spending, but a credible plan showing that authorities will not wait for a fiscal crisis but begin to act prudently and continue until deficits disappear, and the debt is below 60% of GDP. Rep. Paul Ryan (R., Wisc.) offered a plan, but the administration and Congress ignored it.
The country does not need more of the same. Successful leaders give the public reason to believe that they have a long-term program to bring a better tomorrow. Let's plan our way out of our explosive deficits and our hesitant and jobless recovery by reducing uncertainty and encouraging growth.
Uncertainty about future taxes and regulations is enemy No. 1 of economic growth.
By ALLAN H. MELTZER
The administration's stimulus program has failed. Growth is slow and unemployment remains high. The president, his friends and advisers talk endlessly about the circumstances they inherited as a way of avoiding responsibility for the 18 months for which they are responsible.
But they want new stimulus measures—which is convincing evidence that they too recognize that the earlier measures failed. And so the U.S. was odd-man out at the G-20 meeting over the weekend, continuing to call for more government spending in the face of European resistance.
The contrast with President Reagan's antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates.
Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.
Most of the earlier spending was a very short-term response to long-term problems. One piece financed temporary tax cuts. This was a mistake, and ignores the role of expectations in the economy. Economic theory predicts that temporary tax cuts have little effect on spending. Unless tax cuts are expected to last, consumers save the proceeds and pay down debt. Experience with past temporary tax reductions, as in the Carter and first Bush presidencies, confirms this outcome.
Another large part of the stimulus went to relieve state and local governments of their budget deficits. Transferring a deficit from the state to the federal government changes very little. Some teachers and police got an additional year of employment, but their gain is temporary. Any benefits to them must be balanced against the negative effect of the increased public debt and the temporary nature of the transfer.
The Obama economic team ignored past history. The two most successful fiscal stimulus programs since World War II—under Kennedy-Johnson and Reagan—took the form of permanent reductions in corporate and marginal tax rates. Economist Arthur Okun, who had a major role in developing the Kennedy-Johnson program, later analyzed the effect of individual items. He concluded that corporate tax reduction was most effective.
Another defect of Obamanomics was that part of the increased spending authorized by the 2009 stimulus bill was held back. Remember the oft-repeated claim that the spending would go for "shovel ready" projects? That didn't happen, though spending will flow more rapidly now in an effort to lower unemployment and claim economic success during the fall election campaign.
In his January 2010 State of the Union address, President Obama recognized that the United States must increase exports. He was right, but he has done little to help, either by encouraging investment to increase productivity, or by supporting trade agreements, despite his promise to the Koreans that he repeated in Toronto. Export earnings are the only way to service our massive foreign borrowing. This should be a high priority. Isn't anyone in the government thinking about the future?
Mr. Obama has denied the cost burden on business from his health-care program, but business is aware that it is likely to be large. How large? That's part of the uncertainty that employers face if they hire additional labor.
The president asks for cap and trade. That's more cost and more uncertainty. Who will be forced to pay? What will it do to costs here compared to foreign producers? We should not expect businesses to invest in new, export-led growth when uncertainty about future costs is so large.
Then there is Medicaid, the medical program for those with lower incomes. In the past, states paid about half of the cost, and they are responsible for 20% of the additional cost imposed by the program's expansion. But almost all the states must balance their budgets, and the new Medicaid spending mandated by ObamaCare comes at a time when states face large deficits and even larger unfunded liabilities for pensions. All this only adds to uncertainty about taxes and spending.
Other aspects of the Obama economic program are equally problematic. The auto bailouts ran roughshod over the rule of law. Chrysler bondholders were given short shrift in order to benefit the auto workers union. By weakening the rule of law, the president opened the way to great mischief and increased investors' and producers' uncertainty. That's not the way to get more investment and employment.
Almost daily, Mr. Obama uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities. No president since Franklin Roosevelt has taken that route. President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it's harmful now.
In 1980, I had the privilege of advising Prime Minister Margaret Thatcher to ignore the demands of 360 British economists who made the outrageous claim that Britain would never (yes, never) recover from her decision to reduce government spending during a severe recession. They wanted more spending. She responded with a speech promising to stay with her tight budget. She kept a sustained focus on long-term problems. Expectations about the economy's future improved, and the recovery soon began.
That's what the U.S. needs now. Not major cuts in current spending, but a credible plan showing that authorities will not wait for a fiscal crisis but begin to act prudently and continue until deficits disappear, and the debt is below 60% of GDP. Rep. Paul Ryan (R., Wisc.) offered a plan, but the administration and Congress ignored it.
The country does not need more of the same. Successful leaders give the public reason to believe that they have a long-term program to bring a better tomorrow. Let's plan our way out of our explosive deficits and our hesitant and jobless recovery by reducing uncertainty and encouraging growth.
Frisco_Slug_Esq
On Strike!
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- May 4, 2009
- Posts
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You loot the private sector, strip every dollar of 40¢ for overhead, and then give the other 60¢ to your political base in order to revitalize the looted.
What's not to like about that plan?
A_J, the Stupid
What's not to like about that plan?
A_J, the Stupid
