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

G and GDP update

(Dan here…lifted from Robert’s Stochastic Thoughts)

by Robert Waldmann

G and GDP update

I think it might be time for an update on the crudest of tiny sample reduced form analysis of fiscal policy and the current recovery. One reason for my continued interest is that there was a rather large tax cut enacted in 2017.  Trump critics tend to argue that it failed to encourage investment, but did affect aggregate demand. I wonder if the noticeable increase in GDP growth is due to the tax cut or the spending increase from the 2017 omnibus spending bill.

So I look at GDP and G (government consumption plus investment) again. Both are annual changes in billions of 2012 dollars (Not logs). I subtracted 400 billion from the change in quarterly GDP (multiplied by 4 to give an annual rate). Also I multiplied G by 1.5 which is a common estimate of the multiplier (say by Blanchard and Leigh Nakamura and Steinsson). Here an effect of the tax cut would appear as an anomaly — an increase in GDP not fit by the change in G times the multiplier (or the $ 400 Billion and year trend.

Comments (4) | |

Weekly Indicators for April 29 – May 3 at Seeking Alpha

by New Deal democrat

Weekly Indicators for April 29 – May 3 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The trend in the past couple of months across all timeframes has been very much to the positive. It is either a signal of a renewed boom, or else a countertrend bounce back from the December-January government shutdown + residual seasonality due to a late Easter. Because I do not think that the tail wags the dog, my vote is for the latter.

But I report, you decide!

Comments (0) | |

Weekly Indicators for April 22 – 26 at Seeking Alpha

by New Deal democrat

Weekly Indicators for April 22 – 26 at Seeking Alpha

My “Weekly Indicators” post is up at Seeking Alpha.

The data has been improving since the beginning of March, and continued to improve this week. Although at the moment the prevailing sentiment, based on new stock market highs, and yesterday’s surprise 3.2% Q1 GDP, seems to be “happy days are here again!”, my suspicion is that the intermediate and lagging data is going to fade.

One reason for my suspicion is that most of the long leading data (except for interest rates) continues to point down, as in the two leading components of yesterday’s GDP report, as to which my post is also up at Seeking Alpha, here.

As usual, clicking over and reading helps reward me with a $ or 2 for my efforts.

Comments (0) | |

Reposted from Jan. 2018: Social Security and conversation

(Dan here…Social Security is an issue that seems to generate a lot of firm beliefs and passion, as witness recent threads.  It is rare that people refer to actuary material.  On the other sides of the issue are people like Andrew Biggs, who is knowledgeable and smart in his arguments.  I am posting this as a reminder to readers that contributors do usually go the extra mile…in this case even recently, and since 2008 with Dale, Bruce Webb, and Arne Larson.   Below is a copy of a response to Dale from the Deputy Chief Actuary 2017)


Dear Mr. Coberly,

Representative DeFazio’s office forwarded your letter of August 5, 2017 to our office and asked that we respond to you. Your understanding of the financing of the Social Security Trust Funds is on target, including the implications for borrowing and debt. We appreciate your careful attention to the Trustees Report and the projections we develop for it in order to show policymakers the magnitude of any shortfall they will have to address.

We have looked at your thoughtful and detailed proposal for increasing the scheduled payroll tax rates for Social Security. As I’m sure you are aware, we have scored numerous comprehensive solvency proposals and other individual options for making changes to Social Security. These analyses are available on our website at and

Your proposal would increase the payroll tax rate gradually, by 0.2 percentage point per year beginning in 2018 (a 0.1-percent increase for employees and employers, each). Based on the tables you provided, it appears you would propose an “automatic adjustment” to the rate in the future, allowing the tax rate increases to stop and then resume, applying a 0.2 percentage point increase whenever the 10th year subsequent would otherwise have a trust fund ratio (TFR) less than 100 percent of annual cost. The intent appears to be that TFR would not fall below 100 percent. If we are understanding your proposal correctly, this type of adjustment would very likely maintain trust fund solvency for the foreseeable future, based on the Trustees’ intermediate assumptions.

Also, based on our rough estimates, a 0.2 percentage point increase in the payroll tax rate each year from 2018 to 2035, reaching an ultimate rate of 16.0 percent in 2035 and later, would eliminate the actuarial deficit and keep the TFR above 100 for each year thereafter. An increase to 15.8 percent in 2034 would fall just short of both goals. Note that these rough estimates do not include any additional “automatic adjustments” such as the one you propose.

We hope this information is helpful. Please let us know if you have further questions. We are also copying Rina Wulfing from Rep. DeFazio’s office on this email.

Karen P. Glenn
Deputy Chief Actuary
Office of the Chief Actuary
Social Security Administration

Comments (5) | |


by Dale Coberly


Ho Hum.  The 2019 Social Security Trustees Report was released yesterday.

The Committee for a Responsible Federal Budget published its usual half truths (also known as “lies”):. “We are all going to die!”

The Reporters and Columnists Who Cover Them ™ reported the half truths as the whole story:  “We are all going to die!”

The “Progressives”  demanded the “rich pay their fair share”  and “expand Social Security” to pay for everything

Angry Bear ignored the whole thing.


The whole truth would have pointed out that while there is a funding problem projected for sixteen years in the future,  it’s a small problem and the Trust  Fund is NOT the problem.

If the future arrives as expected, Social Security will not be collecting enough “taxes” to pay the “promised”  benefits at that time. (The payroll tax is not really a tax.  It’s an insurance contribution… a way for workers to save for their own retirement.  They get the money back with interest when they need it most.)

Social Security WILL be able to pay benefits that are about 80% of promised.  That will be more in real value than benefits are today.

Those benefits COULD be redistributed so they continued to provide enough help to the poorest retirees (and widows and orphans) at the expense of the richest.

But it would be better to just raise the payroll “tax” about 2% for each the worker and his employer and continue to pay the benefits as promised.

No one would miss the 2% out of his paycheck,  and he would get the money back in the form of a more comfortable retirement, which he will need and want MUCH more than whatever he would have spent that 2% on today.  The 2% is not lost to some government black hole:  the workers get their money back plus “interest” when they retire.

It would be still better to raise the “tax” gradually… about one tenth of one percent per year.
(This is about a dollar per week per year.) This would not only not be missed, it would not even be noticed.  And it would create a full Trust Fund which would provide enough interest to lower the needed “tax” by about one percent.  It would also avoid the government having to pay back the money it has borrowed FROM Social Security.  That money would become just a paper debt acting as a reserve to smooth over periods of recession.

The importance of this approach is that it would preserve Social Security as worker paid insurance for workers…  something Roosevelt insisted upon so that SS would not become “the dole” just another welfare program subject to the political manipulations of the rich and influential (“we have the will but not the wallet”).

Under Social Security as designed the rich do pay their fair share.  They pay exactly what the insurance is worth to them,  and their “excess” payments are what provide the money to supplement the benefits received by the poor. (“Excess” in the sense that if you don’t have a fire, your insurance payments were “excess.”)

The Trustees Report this year was actually “better” than it was last year if you take the date of the “death of the Trust Fund” seriously, which you shouldn’t. 

Sadly,  this is not a ho hum moment.  The opportunity to pay for the needed raise in the “tax” gradually will begin to expire next year.

And while it would still be possible to pay, say, an extra one percent now and the other one percent later,  or even to pay the whole two percent in about 15 years,  it would be much better to go for the gradual increase and avoid all the hysteria that will come when “Social Security is Broke!” ™

but you won’t.

Comments (13) | |

Sales rebound from government shutdown-induced “mini-recession;” March housing lays an egg

by New Deal democrat

Sales rebound from government shutdown-induced “mini-recession;” March housing lays an egg

While March retail sales rose strongly, total business sales for February – also released yesterday – which includes manufacturers’ and wholesalers’ sales in addition to retail sales, continued to languish. This adds to the evidence that there was a “mini-recession” for several months likely brought about by the lengthy government shutdown, and there has been a rebound since (including blockbuster new lows in jobless claims).

This post is  up at Seeking Alpha.

But I’ve been reluctant to conclude that the slowdown this year is off. This morning’s housing permits and starts for March were solid evidence in support of that position, showing that the recent decline in mortgage rates hasn’t filtered through to new housing construction yet. Housing may be bottoming, but it’s at near-recessionary levels.

I have a post in the queue at Seeking Alpha on that as well. Once it is posted, I’ll put up a link.

Comments (1) | |