Relevant and even prescient commentary on news, politics and the economy.

WORLD TRADE IS FALLING

The recent stock market fall appears to be in reaction

to weakness in foreign economies, not domestic developments

in the US.

 

WORLD TRADE

 

One measure to watch is world trade.

from December to May world trade volume fell -3.4%.

Interestingly, in the first five months of the 1971

decline trade fell -3.5%, essentially the same as this drop.

The year over year growth rate is 0.4%.  The year over year

change in world trade has only turned negative twice sine 1990,

as far back as this data series goes.  For what it is worth

those two declines also coincided with US recessions.

For now, the critical question is how much of the weak growth

abroad impact US growth. Almost certainly the impact is likely

to be significant.

 

 

 

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The basics of tax increment financing subsidies

Last week I made a presentation to the Colorado Assessors Association on tax increment financing (TIF) subsidies. With the organization’s permission, I am sharing the PowerPoint presentation for my talk, as well as adding this introduction.

The talk begins by putting TIF in the context of subsidies generally. As a subsidy, TIF is subject to the three main potential drawbacks of their use: Inefficiency, inequality, and environmental harm. These differing harms often call forth coalitions that prove the adage that “Politics makes strange bedfellows.” One example was a joint appearance by Ralph Nader, Rep. John Kasich, and Grover Norquist in 1997. I was in a similar coalition in 2003 fighting a TIF that would have leveled downtown O’Fallon, Missouri, then the fastest-growing city in the state. Our leadership included people from liberal Democrats to future Tea Party members. Similarly, the mayor and TIF-supporting council members were bipartisan. It’s easy to find single-party governments that abuse subsidies, too, whether it’s now-Governor Kasich offering $400 million to move Sears from Illinois, or Democratic stronghold Kansas City, MO, offering multiple multi-hundred million dollar TIFs.

I then go on to discuss the legal particularities of TIF, which gives it another level of controversy. Tax increment financing typically allows governments to capture the property tax revenue of other districts (something especially hard on school districts), and these revenue fights are matched by the intense hatred the use of eminent domain usually brings forth.

The very first state to adopt TIF (in 1952), California axed TIF in 2011 due to its budget crisis, caused in part because the state reimbursed property tax revenue that school districts lost to TIF. Last year, a new version of TIF was passed, but it completely removes the option to take money from school districts, and lets other taxing jurisdictions opt out as well (see below).

 

Also of note in TIF history is the constant pressure to expand the locations able to use it (i.e., progressively less economically deprived areas want it in their subsidy arsenal) and the gross overuse of TIF for retail projects. As I mention in the link, St. Louis-area municipalities gave $2 billion in retail TIF from 1990 to 2007, creating all of 5400 jobs, no more than we’d expect on the basis of the area’s income growth. That’s why the relevant slide says $2 billion = 0 jobs.

Thanks to Karen Miller of the CAA for inviting me and agreeing to let me post the PowerPoint.

Cross-posted from Middle Class Political Economist.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Serious Question, Janet Yellen Edition

In spite of a sustained lack of inflation, a large, sustained gap in the Civilian Employment/Population Ratio, an abiding lack of post-recession growth domestically, and significant underperformance (old, new, [PDF] and overall) internationally, the Fed appears prepared to raise interest rates this year. Which leaves me now wondering:

With the possible exception of Robert, is there any former colleague/roommate/coworker of whom Brad DeLong has spoken highly who is worth the trouble of paying attention to when they have a chance to do something in government?*

My top-of-the-head list is:

  1. LawrenceLarryH. Summers (the RoboQB of the Econ field, in more ways than one)
  2. Tim Bloody Effing Geithner (all links but one to Brad in his post-Chief Internet Geithner Apologist days)
  3. Andrei Shleifer
  4. Christina Romer (though I’ll be the second or third to stipulate that It Wasn’t Her Fault; see above), and, now,
  5. Janet Yellen

What good is alleging that you have sharp, respectable people who Know What to Do if they then Don’t Do It? When the perpetual answer you get when they screw up is a variation on “You said you regretted not doing more. What do you regret not doing?”

*Robert isn’t and hasn’t been, so far as I know, in a position to make policy. So whether he counts as an exception is left as an exercise.

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Do rising child care costs & stagnant wages explain the decline in the Labor Force Participation Rate ?

by New Deal democrat

Do rising child care costs & stagnant wages explain the decline in the Labor Force Participation Rate ?

What is driving the long term decline, shown in the graph below, in the labor force participation rate (LFPR) among prime working age adults, ages 25-54?

A couple of weeks ago I wrote that it wasn’t poor job prospects.  In that post I ran the following comparison.  First, I calculated the number of

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Greece’s Missing Drivers of Growth

by Joseph Joyce

Greece’s Missing Drivers of Growth

Analyses and discussions of Greece’s economic situation usually begin—and often end—with its fiscal policy. The policies mandated by the “troika” of the European Commission, the European Central Bank and the International Monetary Fund have undoubtedly resulted in a severe contraction that will continue for at least this year. But little has been said about the private sectors of the economy, and why they have not offset at least part of the fiscal “austerity.” Consumption spending is linked to income, so there is no relief there. But what about the other sources of spending, investment and net exports?

Investment expenditures provide no counterweight, as they have plunged in the years since the global financial crisis. The same phenomenon took place in other countries in the southern periphery of the European Union, but the change in Greece’s investment/GDP ratio between its pre-crisis 2007 level and that of 2014 was an extraordinary decline of 16 percentage points at a time when GDP itself was falling:

{graphs under the fold}

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Why is productivity so weak?

One of the major reasons I expects sluggish growth and weak earnings is the secular decline in the growth of real net fixed nonresidential investment. The dominant factor driving productivity growth is workers being provided additional capital equipment to assist them. It is the old simple story of getting a ditch dug. Would you rather have a dozen men with shovels or one guy with a back-hoe to do the job? It is important to look at net, not gross investment, because more and more business capital spending is on high technology equipment. But high tech has a much shorter life span than traditional capital goods. Consequently, more and more of gross investment is just to replace obsolete equipment. We are having to run faster and faster just to stay even. The growth of net nonresidential capital equipment averaged 3.3% from 1950 to 1980 and 2.5% from 1980 to 2008. Over the past five years its’ average growth was 1.1%, or 0.0% growth on a per employee basis. No wonder productivity growth is so weak and is most likely to remain so..cap stock

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Final subsidy accounting rules published!

On Friday, the Government Accounting Standards Board (GASB) published the final version of its new rules requiring governments to make reporting on subsidies a standard part of their financial reports (known as Comprehensive Annual Financial Reports, or CAFRs). Since GASB determines the content of “Generally Accepted Accounting Principles,” its new rules will have to be widely adopted.

Subsidy reformers such as Good Jobs First did not get everything they wanted in the new rules, but their publication represents a gigantic step forward in subsidy transparency. In particular, every government that gives tax-based subsidies will be required to report the amount they give each year. Moreover, every government that loses revenue to subsidies given by another government must report the amount as well. Most commonly, this will be school districts and other political units that lose property tax revenue to tax increment financing (TIF) or property tax abatements.

GASB continued its incomprehensible use of the term “tax abatement” as its catchall for all tax-based subsidies. As I pointed out in my own GASB comments, the term properly only refers to property tax abatements, a smallish proportion of local subsidies used in fewer states than TIF (see Greenbaum and Landers, “The TIFF over TIF,” 2014, no ungated version available). On the plus side, as Good Jobs First points out, the final rules make clear that subsidies such as tax increment financing are included in their definition of “tax abatement,” although a strict reading of the draft definition might well have excluded it and other subsidies. I considered this a worry in my GASB comments, because too much focus on legal fictions (TIF recipients are legally deemed to have paid their taxes, for instance) would obscure the fact that a subsidy exists. Happily, GASB opted to be inclusive in the definition, which will make it more difficult for governments to evade the new rules.

The real drawbacks of the new rules are that they don’t require that the recipients, even the largest ones, be identified (this is optional); they don’t require governments to say how many subsidies are in place (just the total cost of subsidies for that year); and they don’t require a listing of future subsidies already committed. In addition, as I pointed out in my comments, they do not require a cross-listing of non-tax subsidies such as grants and loans so that people reading a CAFR can determine how much a government is spending and committed to spend on total subsidies.

Still, the new rules represent a tremendous advance over the status quo. Every state and local government will now have to report the value of the subsidies it gives every year. CAFRs are audited reports, meaning that multiple sets of eyes will look at the documents even before the public sees the reports and can cross-reference them with everything else known about a government’s subsidies. Good Jobs First will be expanding its Subsidy Tracker database to include the new data in governments’ annual reports. I’m looking forward to all these developments, and you should be, too.

Cross-posted from Middle Class Political Economist.

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We Need To Be Kind To Be Cruel

By Noni Mausa

We Need To Be Kind To Be Cruel

Aug 15 2015

In press conferences and TV panels, we keep hearing important people discuss budgets, entitlements, deficits, and the big knobs and levers of the economy.  Those spokesmen or dignitaries who have positioned themselves as deciders, judging what everyone else deserves, never tire of telling us all about it.

They imply they can control economic and political ups and downs, in order to take credit for the ups and assign blame for the downs, and sometimes they are even correct.  But what they seldom do is look at how we we’re hollowing out the living world, burning here, poisoning there, concreting everywhere and trampling the rest with our billions.  They like control, but they never claim they any control over core social problems like overpopulation.  That would be social engineering!. That would be unnatural and cruel!.

The truth is, we’re heading for a literal world of hurt, and to reverse course, however cruelly and unnaturally, we first need really solid, reliable, almost lavish social supports.

It sounds nuts, eh?. Another of those lefties, laying out a buffet on somebody else’s dime? But believe me, the alternative is catastrophic.  A Royal Fork for the world is a picnic by comparison to the fork we have ahead of us.

We’re on the brink of disaster. There are too many of us.  We use too much stuff, we make too much mess, we’ve outgrown our resources.  We need social deflation– fewer people, less stuff, less waste, less war, more sharing.  We need to downsize.

So, who will agree to constrain themselves for the sake of a future they may not live to see?. Who goes first?

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Argument: more health insurance does not lower cost

This morning on Washington Journal was a discussion with Marogt Sanger-Katz of the NYT Upshot blog.    She wrote a post: No, Giving More People Health Insurance Doesn’t Save Money.  It’s a controversial title for sure, but there is some interesting points that I know are often mentioned on a few email lists I’m on for my profession.

Let me just say I’m am a bit cautious of her writing after listening to her answer regarding why the nation did not get a single payer system in her interview this morning.  She was correct there was not the political will, but she suggested that it was do to a lack of interest/drive on the part of the people.  She states most of the people do not want single payer.  My understanding is that is was more the politicians involved namely President Obama and the congressional dem leadership that flat shut down any talk of single payer and then the Medicare option.  Ms. Sanger-Katz did not mention this at all.   Here is the clip:

In her article however, she does mention the issue of “number to treat”.  This is a big issue in health care and has been ignored generally.  When the move was on to control costs, medicine began to promote prevention, only it was not prevention by means of better food, better life environment via a reduction in the risks of life (security of housing, income, aging).  If you think about it, to promote better food requires going up against our industrialized food system.  To promote a better life environment would mean going up against the entire economic model we have been deriving policy from that has lead to the life people are living today.

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