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Waldmann Vs Waldman (finally)

I am generally very very impressed by Paul Waldman at the Plum line blog (for one thing I admire the lack of Ego he demonstrates by writing for a blog subtitled “Greg Sargent’s take from a liberal perspective). Waldman is reliably brilliant (so is Sargent).

Now finally I find something he wrote with which I disagree. In the generally excellent “President Trump Appoints Tax Fairy to Key Economic Post” Waldman wrote

The point isn’t that tax increases help the economy and tax cuts hurt it, but rather that tweaking the tax code has very little effect at all. You might get a modest economic bump from tax cuts, but it won’t ever create enough growth to pay for them, as Republicans always insist their next tax cut will do. Democratic economists know this, which is why they don’t think changing the tax code — even in a progressive direction — is a particularly urgent priority.

He is demonstrably wrong. I am a Democratic economist and I think that changing the tax code in a progressive direction is a particularly urgent priority.

I think this is just a case of sloppy writing (yeah I know, look who’s typing). By “economists” Waldman means “economists thinking about GDP growth”. This is unfair to economists. Very few of us are obsessed with GDP and, I think, almost none of us are sincerely indifferent to the distrubution of national income (I am guessing that people who claim they are do so because they know their view that the rich should be richer is unpopular).

Many economists who work in public finance are obsessed with the income distribution and, obviously consider changing the tax code their life’s work. There are excellent reasons to suspect that a more progressive tax code would cause dramatically higher welfare.

I have another objection (after the jump)

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It was actually quite amusing to see an article in my provincial newspaper a while back where two sides were arguing about a reduction in the work week, and you could play bingo with the excuses the anti-side used. There wasn’t an original idea in the whole article, as the pro-side was almost apologizing and got one paragraph of the six on offer. – “Salty,” comment at AngryBear.

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The Simpsons on Immigration

A post from 2006 on immigration by Kash Mansori seems timely…

The Simpsons on Immigration

Kash | March 28, 2006 1:31 pm

Simpsons aficionados among you already know that the Simpsons addressed the issue of immigration back in 1996, in the episode “Much Apu About Nothing”. Here’s a summary of the beginning of the episode, thanks to Wikipedia (Btw, I never would have guessed that Wikipedia contains entries on individual Simpsons episodes…)

On an ordinary day, a bear strolls onto Evergreen Terrace. It is quickly subdued by the police, not before accidentally shooting and capturing Barney Gumble. Homer rants about these “constant bear attacks”, even though this is the very first bear Ned has seen in his forty years of living on that street. Homer then leads an angry mob and demands that Mayor Quimby do something about this. Soon, the Bear Patrol is created, a useless organization which even makes use of a B-2 Spirit. Homer then gets just as shocked [as] when he saw the bear when he discovers that taxes have been raised five dollars to maintain the Bear Patrol.

After that, the angry mob returns to the mayor’s office, yelling “Down with taxes! Down with taxes!” The mayor has to do something…

Quimby: Are those morons getting dumber or just louder?

Assistant: [Takes a moment to check his clipboard] Dumber, sir.

Quimby: They want the bear patrol but they won’t pay taxes for it. This is a situation that calls for real leadership. [Opens the door to his office to confront the angry mob.]

People, your taxes are high because of illegal immigrants!

Moe Szyslak: Immigants! I knew it was them! Even when it was the bears, I knew it was them.

Let’s not confuse fiction with reality, though. I certainly can’t believe that politicians in real life would ever raise the issue of immigration to cover up for their failures in other areas of policy, such as taxes, government spending, income inequality, education, health care…

Kash

Postscript: I’ve written in the dialogue from memory, so forgive me if it’s slightly off.

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High Cost of Our Finance Sectors

Via Truthout

Published on Mar 23, 2017
In the March 2017 Taxcast: the high price we’re paying for our finance sectors – we look at staggering statistics showing how the US finance sector is a net drag on their economy.

Featuring:

John Christensen and Alex Cobham of the Tax Justice Network, and Professor of Economics Gerald Epstein of the University of Masachusetts Amhurst. Produced and presented by Naomi Fowler for the Tax Justice Network.

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The Boundless Thirst for Surplus-Labor

September 22, 1956

November 7, 1960

QUESTION. This is from Mr. White, Warren, Mich.

What is your stand on the 32-hour workweek?

Vice President NIXON: Well, the 32-hour workweek just isn’t a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can’t have it now. We can’t have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.

It’s inevitable… but we can’t have it.

Dick Nixon’s turnaround on the issue of the four-day workweek was epic. His original prediction of  a four-day week “in the not too distant future” came in a prepared speech, not in some unguarded moment of overheated campaign hyperbole. He even disclaimed that his “projections” were not “dreams or idle boasts” but were based on the continuation of President Eisenhower’s economic policies.

Following up on Nixon’s 1956 prediction, United Auto Workers president Walter Reuther responded with a telegram calling on the administration to outline a legislative program to achieve the shorter workweek. Nixon sent a telegram in reply and President Eisenhower endorsed Nixon’s reply in a press conference on September 28.

Nixon’s reply was that “mere artificial legislation” would not accomplish a four-day workweek. What was necessary was “dedicated joint efforts of labor, management, government and research.” For his part, Eisenhower “saw nothing wrong with” Nixon’s answer, which he thought also represented his own view that it would be “wonderful” to have more leisure time, but that “no man can say it is going to come about because I say so.” A month after his first comment, Nixon reaffirmed his expectation of a shorter workweek, based on partnership between government, business and labor.

The adamant wording of Nixon’s 1960 dismissal of the idea takes on added resonance in the context of Eisenhower’s earlier caveat that “no man can say it is going to come about because I say so.” Four years later, it “just isn’t a possibility… we can’t have it now. We can’t have it now… [because I say so].”

This wouldn’t be the first time that self-contradiction has appeared in the rhetoric of opposition to shorter work time. The Sandwichman has amassed the world’s largest collection of lame excuses offered by opponents. I assembled 21 of them and sorted them into eight categories having to do with productivity, new consumer wants, unsatisfied needs, labor costs, government policy, self-adjusting markets, history and inevitability, and the devious motives of proponents.

To be kind, the rationales are opportunistic. Mostly, they are jejune partial equilibrium statements invoked as if they were eternal verities. More bluntly, they are mendacious. Every single reason given for not shortening the hours of work is complemented by a contradictory reason for not shortening the hours of work. Damned if you do and damned if you don’t.

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To me the common assertion about health care reform reform and tax reform makes no sense

Various people have argued that Republicans decided to repeal and (very partially) replace Obamacare before moving on to tax reform, because Obamacare repeal (aka the American Health Care Act aka AHCA) would make it easier to permanently cut tax rates. To me this makes less than zero sense. The argument is that, since AHCA includes tax cuts, tax reform would start from a lower base, so it would be easier to write a tax reform bill which doesn’t add to the deficit after 10 years. It is, in fact, necessary that bills not add to the deficit after 10 years for them to be passed using the budget reconciliation process which makes them invulnerable to filibusters.

However, I don’t see how preceding tax cuts make new tax cuts budget neutral. No one has explained how the exact same tax reform bill could be passed using reconciliation if it followed passage of the AHCA but not if it preceded passage of the AHCA. I know of no one who has argued that the CBO score of the effects of tax reform would be markedly different, or even argued that the sign of the change in the score would be favorable.

Rather the argument seems to be that with the AHCA tax cuts and the tax reform tax cuts, rich people will pay lower taxes than with the tax reform tax cuts alone. This is obviously true and has nothing to do with the order in which the bills are signed into law.

Jonathan Chait has been a prominent proponent of the view which makes no sense to me at all.

The next source of money is repealing Obamacare. The connection between the two issues might seem obscure, but it matters technically. The Republican plan to repeal Obamacare would eliminate all the taxes that were raised to help pay for the benefits — about $1.2 trillion over the next decade. This would lower the baseline of tax revenue, meaning that Republicans would need to design a tax code that raises $1.2 trillion less in revenue in order to be “revenue-neutral.” That makes it crucial for them to repeal Obamacare before they cut taxes.

I can cut and paste his argument. I can read it. But I can find no sense in it at all. Yes if taxes have been cut by $1.2 trillion, then a revenue neutral tax reform needs to raise 1.2 trillion less. But nothing whatsoever justifies Chait’s use of the word “before”. I can’t refute his argument, because I can’t detect it.

This matters, because it now turns out that Donald Trump is one of the people who have been convinced (presumably by Paul Ryan not Jon Chait).

“We haven’t failed — we’re negotiating, and we continue to negotiate, and we will save perhaps $900 billion … we have to do health care first to pick up additional money so that we get great tax reform.”

This argument too makes no sense (very much less surprising in the case of Trump than of Chait). For the reconciliation process, money can’t be picked up with one bill and spent on another. Each bill taken alone must not increase the deficit after 10 years. Now reactionaries consider the AHCA to include great tax reform, since it includes reductions in taxes on high incomes. But this doesn’t make further reductions easier. The order in which the bills are passed doesn’t matter.

In fact, the AHCA makes tax reform more difficult. The reason is that the AHCA benefit cuts are even larger than the tax cuts. So the maximum allowed fiscal 2027 deficit would be smaller if the AHCA were law. A bill which combined health care reform reform and tax reform could include even larger tax cuts than simple repeal of the ACA tax increases and be passed using reconciliation.

I honestly don’t get it. I’m sure I’m missing something. I am also sure, 100% sure, that, even if passage of the AHCA were to make it easier for the GOP to pass a tax reform bill, this wouldn’t be because the AHCA includes tax cuts or deficit reduction.

update: minds think alike.

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Prime working age employment up, participation up (finally) – now how about wages?

by New Deal democrat

Prime working age employment up, participation up (finally) – now how about wages?

The March jobs report finishes the first quarter, which make it easier to update some labor participation trends, which, along with wages, has really lagged in this nearly 8 year old expansion.

In order to eliminate the issue of the huge Baby Boom generation retiring, and to a lesser extent college and graduate students, we have some good data on the prime age 25-54 demographic.

Historically, labor participation continues to decline after a recession ends, and picks up after the employment to population ratio does.  Put another way, people come off the sidelines and enter the workforces once the unemployment rate declines significantly.  Here’s the long term trend, comparing the YoY% change in each:

Now let’s zoom in on this expansion:

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Thank God it’s Boilerplate!: The Economist is lumping its labour

by Sandwichman

Thank God it’s Boilerplate!: It’s Thursday and The Economist is lumping its labour

The Economist and Jonathan Portes are at it again. “Lump of labor! Lump of labor!” The occasion? A proposal for a four-day workweek announced by the U.K. Green Party at their convention this week in Liverpool.

 The Economist pretended to find “two problems” with the Greens’ proposal:

The Greens’ proposals encounter two problems. First, the theory. They argue that the reduced hours worked by some could be redistributed to others in order to lower underemployment. They thus fall prey to the “lump of labour fallacy”, the notion that there is a fixed amount of work to be done which can be shared out in different ways to create fewer or more jobs. In fact, if people worked fewer hours, demand would drop, and so fewer working hours would be on offer.

Second, the cost. Increased productivity could cover some of the costs of paying a five-day wage for a four-day week, suggests Sarah Lyall of the New Economics Foundation, a think-tank. She points to a Glasgow marketing company that did just that, and experienced a 30% leap in productivity. But that is an astonishing increase to expect across the board.

First the theory: why does the idea of redistributing work require a “fixed amount of work to be done”? I can cut up a pie in many different ways. I can also cut two, three, many pies in different ways. In what sense does redistribution imply a constant amount? It doesn’t.

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When you hear ‘growing our economy’ to pay for services

Via Naked Capitalism is a post by Pavlina R. Tcherneva of Bard College at New Economic Perspectives. Worth reading the whole post…

by Pavlina R. Tcherneva   (originally published at New Economic Perspectives)

Inequality Update: Who Gains When Income Grows?

Growth in the US increasingly brings income inequality.  A striking deterioration in this trend has occurred since the 80s, when economic recoveries delivered the vast majority of income growth to the wealthiest US households.  This note updates my original inequality chart (reproduced below) with the latest data. For earlier discussions, see e.g., here, here, and here.

Figure 2inequality2: bottom 90% vs. top 10%, 1949-2012 expansions (incl. capital gains)   (Figure 2 is a more accurate graph than the previous ‘Figure 1 it replaces)

The chart illustrates that with every postwar expansion, as the economy grew, the bottom 90% of households received a smaller and smaller share of that growth. Even though their share was falling, the majority of families still captured the majority of the income growth until the 70s. Starting in the 80s, the trend reverses sharply: as the economy recovers from recessions, the lion’s share of income growth goes to the wealthiest 10% of families. Notably, the entire 2001-2007 recovery produced almost no income growth for the bottom 90% of households and, in the first years of recovery since the 2008 Great Financial Crisis, their incomes kept falling during the expansion, delivering all benefits from growth to the wealthiest 10%. A similar trend is observed when one considers the bottom 99% and top 1% percent of households (for details, as well as complete business cycle data, see here).

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The Overseas Cash Grab

NYT Dealbook points to a how the 2 trillion dollar overseas money can come “home” and how money is spent.  2005 comes to mind the last time repatriation of “overseas money” comes to mind.

Linda Beale Repatriation holiday lobbying – Money Speaks and More on repatriation.

Taxprof blog here and Senate report here.

The Overseas Cash Grab (from Dealbook)

Corporate chiefs in the United States have bemoaned for years the taxes that they would face if they brought home more than $2 trillion in cash kept overseas.

They may soon stop complaining. President Trump and the Republican-controlled Congress are widely believed to be open to lowering taxes on funds that companies bring back.

For lawmakers, the idea of a tide of funds coming home creates visions of infrastructure investment and job creation. But on Wall Street, it has set off hopes for another spending priority: mergers and acquisitions. And deals often lead to job losses.

The differing visions come amid a broader debate about whether cutting taxes spurs investment or leads to higher incomes and more jobs.

Among other things, there are questions about the ways people respond to lower taxes. If your tax is lowered, would you strive to be more productive at work? Or would you take advantage of a higher income that came at no extra effort?

Either way, the more pressing issue may be at whether a tax overhaul can happen at all.

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