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August 7, 2012

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Latest Posts from Economist's View


Posted: 27 Jun 2012 03:42 AM PDT
Via the IGM Forum:
Question B: A cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut.
Igm1
Igm2
Marianne Bertrand, Darrel Duffie, and Claudia Goldin are the disappointing "uncertain" votes out of the many responses to this question. They should listen to Ed Lazear:
This is the Laffer curve issue. There is little (if any) evidence that rates exceed revenue-maximizing levels. See Mankiw, Feldstein.
Or David Autor:
Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer.
Or Michael Greenstone:
All evidence that I'm aware of suggest that cutting tax rates "marginally" from their current levels would DECREASE revenues, even 5 yrs out
Or Kenneth Judd:
That did not happen in the past. No reason to think it would happen now.
Or Anil Kashyup:
May look plausible on a cocktail napkin (or at a cocktail party), but not true empirically in the US.
Or Pete Klenow:
Not enough time for capital to respond much (physical, human, technology), so it would require implausibly large labor supply elasticities.
Or Robert Hall
See previous question. In addition, few studies suggest we are already at the max of the Laffer curve, though we may be close.
Or Austan Goolsbee:
Moon landing was real. Evolution exists. Tax cuts lose revenue. The reasearch has shown this a thousand times. Enough already.
There are many people who have an interest in making you believe otherwise, but tax cuts are inconsistent with deficit reduction  -- they make the deficit problem worse.
Posted: 27 Jun 2012 02:07 AM PDT
Alan Blinder:
Alan Blinder: Stimulus Isn't a Dirty Word, by Alan Blinder, Commentary, NY Times: A debate now rages in Europe over whether fiscal austerity—that is, higher taxes and less spending—helps or hinders growth. ... Events in Europe seem to have dashed that idea. But a similar debate rages here in the U.S.—with the lone exception that our pro-austerity crowd abhors tax increases. ...
Many Democrats, including President Obama, want to help state and local governments maintain their spending, which has now dropped 6.4% since its 2008 peak—and is still falling. Most Republicans reject that idea, even when it saves the jobs of teachers, fire fighters and police officers.
Many Democrats also want to build and repair more roads, bridges, tunnels and the like—taking advantage of the rare combination of historically low government borrowing rates and historically high unemployment among construction workers. Most Republicans reject that idea, too, even though the argument for more public capital is the same as the argument for more private capital—each promotes growth.
Democrats also typically seek a growth strategy that boosts the incomes of the middle class, not just of the top 1%. Many Republicans counter that the most effective way to bolster middle-class incomes is via trickle-down from the rich—who start and grow businesses. ...
Republicans often focus on lowering the top income tax rate. ... But the evidence is against the GOP on this one. ...
Why in the world are we still arguing about this? ... If we are serious about an evidence-based program that spurs growth and improves the lots of average Americans, we should want a near-term jobs program, long-term deficit reduction, more spending on infrastructure, improvements in education, and a tax reform that clears out loopholes, returns to the 39.6% top rate, and protects the middle class.
Which candidate does that remind you of?
Too many members of the press aided and abetted the destructive push toward austerity without seeming to realize that the main driving force behind the austerity movement was ideological, not economics. -- a chance to move toward a reduction in the size of government. Never mind if it's critical services like education, fire, and police services. But the economists who led them to write these stories also deserve quite a bit of the blame (I'd assign all of the blame to the economists pushing for austerity and the harm that came with it, but journalists didn't have to listen to these voices, particularly since they have been largely wrong all along). Many of us were pushing for alternatives policies, aggressive jobs program, infrastructure spending, helping households to rebuild their balance sheets to name just a few (see the article for several more), but to no avail.
Watching all of this happen has been soooo frustrating, far beyond anything I ever would have predicted before the crisis hit. We could have done so much better.
Posted: 27 Jun 2012 01:17 AM PDT
During our visit to El Pajeta with the International Reporting Project, we visited a water collection cooperative. The co-op has 250 members, and they pool resources to purchase water collection kits for each household in the co-op. So far, 78 families have received a kit.
The water collection kits allow households to capture and store rainwater during the rainy season, treat it to keep it safe, and then use the water during the dry season. One of the main causes of child mortality here is water borne illnesses, and the use of water collection devices along with water treatment has cut infant mortality substantially (there were no deaths the last year, which is a welcome change from the past when such deaths were common).
We were being sold the idea the El Pajeta conservancy is doing wonders for the community by helping them purchase the water collection tanks -- the conservancy imposed many costs on these communities when it closed off land to preserve animals. The economics of this is a post in itself, I am not at all convinced that the communities are being anywhere near fully compensated for their losses, but setting that aside it was great to hear the mothers talk about how much the water co-op has done to change their lives (just little things like all the extra time they have to do other things instead of searching for water for hours each day). It also allows these communities to develop democratic instituitons. For example, which families in the co-op should get water first? And once the inswtitutions are in place, they can be used to address other important problems.
This is a bridge, not a long-term solution to the water problem. In the longer run, what's really needed is the infrastructure to deliver water to the local communities. But, at least from what I saw, it does seem to be a relatively effective interim solution.
This was our greeting when we arrived for our visit. I apologize for the video, part way through they made me dance (you can see them laughing at me) and the camera got a bit shaky.
Once we sat down, we heard testimonials from co-op members about how this project has improved their lives  (they stressed that although it is green now -- the rainy season just ended -- in a month or so it will be bone dry, so having water that lasts a month or two, as the tanks do, is extremely helpful).
Here is a small part of what we heard. I almost didn't post this, the wind interferes with the sound and the lighting wasn't great, but it will give you a pretty good idea of what we were told by the women in the co-op:
Posted: 27 Jun 2012 12:06 AM PDT

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