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September 22, 2012

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Posted: 18 Sep 2012 12:06 AM PDT

'The Stock Came from Mitt’s Father'

Posted: 17 Sep 2012 04:43 PM PDT

Mitt Romney's comments about moochers are getting lots of notice, but something else he said caught my attention. Does he really think people will believe this?:

I have inherited nothing. There is a perception, 'Oh, we were born with a silver spoon, he never had to earn anything and so forth.'

Here's Ann Romney discussing their student days:

They were not easy years… Neither one of us had a job, because Mitt had enough of an investment from stock that we could sell off a little at a time.

The stock came from Mitt's father. ...

That sounds pretty tough, doesn't it? One of them almost had to get a job! Thank god (or dad) for that stock. [Oh, and since we're on the topic of statements that are of questionable veracity, here's more on Ryan's tall tales.]

Nontaxpayers are Overwhelmingly the Eldery and Students

Posted: 17 Sep 2012 04:08 PM PDT

When Romney talks about the people who don't pay taxes and tries to make you believe that 47 percent of us are moochers living off the system, it's important to recognize that the people who don't pay federal income taxes are mostly the elderly and students. And notice how narrow the category is -- it's only federal income taxes -- but there are lots of other types of taxes. When all things are considered, "nearly 100 percent of Americans pay taxes in some way, shape or form":

Who Pays Taxes?, Hamilton Project: A popular myth swirling around Washington, DC, and throughout the media these days is that many Americans do not pay taxes, and are therefore free-riding off of our society without contributing themselves. ...  The origin of this misconception is the observation that only about 54 percent of American households paid federal income taxes during recession-affected 2011.  But that statistic is misleading because it provides an incomplete picture of the overall tax burden on American families, and because it incorporates individuals who naturally shouldn't be paying taxes because of their age or economic circumstances due to the Recession. A closer look reveals that nearly all Americans do, in fact, pay taxes. ...
In fact, many households with no tax liability are young or old, meaning that they are likely to be led by students who subsequently will pay taxes or retirees who paid taxes over their lifetimes. The figure below illustrates the relationship between age and the odds of paying payroll and income taxes. The graph makes clear that younger individuals—those in their late teens and early 20s—pay taxes at relatively low rates, but that is largely because they are in school and not working.  But as they get older and find jobs, the evidence suggests that they will pay taxes. Similarly, after age 60, when more and more Americans are retiring and leaving the labor force, the fraction paying taxes falls rapidly. These retirees have certainly contributed to America's revenue stream over their lifetimes. To this point, as the U.S. population ages into the future and a greater proportion of Americans reach the retirement age, it is inevitable that a growing percentage of the overall population will pay no income or payroll taxes.


But during middle age, almost all workers face a tax burden. When looking at those in middle-age, 84 percent faced a net payroll and income tax bill in 2007. This general theme also holds true for low-income households... On net, even these families face a positive tax bill over time (Dowd and Horowitz 2008).
Furthermore, rising unemployment during the Great Recession has meant that the proportion of American families paying no federal taxes is unusually large today. Unemployed workers without incomes naturally don't face tax liabilities. But as they find jobs and rejoin the labor force, they will once again contribute to the federal system. Indeed, some of the trends we see today are less illustrative of an unfair tax advantage for the poor; rather, the trends indicate the existence of a group of unfortunate families who have found themselves affected by hard times. And young people today have been particularly hard hit: many are unemployed or weathering the storm in graduate schools, meaning that they are, thus, not paying taxes. When looking more specifically at middle-aged workers with jobs, 96 percent paid federal income or payroll taxes.
Other Forms of Taxes Also Count
Finally, incorporating the additional—and significant—other forms of taxation into our calculation leads to the conclusion that nearly 100 percent of Americans pay taxes in some way, shape or form. All consumers bear the burden of state and local property, sales, and income taxes, as well as excise taxes on items like gasoline, alcohol, or cigarettes. These other taxes tend to be regressive, imposing more of a burden on low-income families than on high-income families—the state and local tax burden is over twice as large as the federal tax burden for the bottom fifth of households (Citizens for Tax Justice 2011). When you fill up your car with gasoline, you can't avoid paying the tax. The pump does not differentiate between the richest Americans and the poorest families. ...

Fed Watch: Getting Off the Zero Bound

Posted: 17 Sep 2012 01:19 PM PDT

One more from Tim Duy:

Getting Off the Zero Bound, by Tim Duy: Weighing on my mind is the possibility that we do not lift off the zero bound - in other words, we don't normalize the economic environment - before the next recession hits. When I say normalize the environment, I am thinking in the terms David Beckworth describes here. Begin with the premise that interest rates are abnormally low. I can't see how anyone cannot come to that conclusion with ten year TIPS in negative territory:


Rather than seeing the Federal Reserve's action as the cause of the low interest rate environment, I tend to think it was the Federal Reserve's inaction. If monetary policy was gaining traction, interest rates should rise, forcing the Fed to follow rates up. Instead, Fed policy continues to follow interest rates down.
Looking at the Fed's extended guidance, they do not see the need to raise short term interest rates until mid-2015. June 2015 would mark 90 months since the peak of the last business cycle in December 2007. The average peak-to-peak cycle of the last three recessions 96 months, the average since 1945 is 66 months. Now, I don't think you can say that the probability of recession in the next month depends upon the time that has passed since the last recession. But you can say that given past business cycle timing, it is perfectly reasonable to believe that the next recession will hit before we lift off the zero bound. Moreover, it would be relatively uncommon for the peak-to-peak cycle to last more than 90 months. Only 4 of the last 11 cycles have exceeded this length of time.
So I am getting a little nervous that we will not lift off from the zero bound before the next recession hits. Or maybe the attempt to lift the economy off the zero bound is the trigger of that recession. In either case, I am thinking it would be very bad to be still at the zero bound when that recession hits. So I am wondering what is the equilibrium path that returns the US economy to a normal interest rate environment. Furthermore, can the Fed push the economy to such a path by itself, or is fiscal cooperation required? I don't have answers to these questions, but my suspicion is that the job would be easier with coordinated fiscal and monetary policies.

'What Poverty Means: Beyond the Antiseptic Numbers'

Posted: 17 Sep 2012 12:57 PM PDT

Tim Taylor quotes Ralph Smith, senior vice-president of the Annie E. Casey Foundation commenting on recent data on poverty:

... There's an antiseptic quality about the charts and graphs and the PowerPoint that feels to me as if it misses the issue and misses the reality of the lives of the people and the families about whom we speak. ...  I just can't get to the point where I'm so captured by the data that I miss what these numbers mean for the lives and futures of the families about whom we speak, about the material conditions in which they live, about the aspirations they could hold onto for their kids and for the next generation.

And I will confess a discomfort as I think about the one million children who despite these not-quite-so-bad numbers will be born into poverty next year. One million new entrants into poverty, and what we can predict now. And what we can certify on the day they are born is that more than 50 percent of them will spend half their childhoods in poverty. Twenty-nine percent of them will live in high poverty communities. Ten percent of them will be born low birth weight, a key indicator of cognitive delays and problems in school. Only 60 percent of them will have access to health care that meets the criteria for having a medical home. By age three, fewer than 75 percent of them will be in good or excellent health, and they'll be three times more likely than their more affluent peers to have elevated blood lead levels.

More than 50 percent of them will not be enrolled in pre-school programs and by the time they enter kindergarten, most of them will test 12 to 14 months below the national norms in language and pre-reading skills. Nearly 50 percent of them will start first grade already two years behind their peers. During the early grades, these children are more likely to miss more than 20 days of school every year starting with kindergarten, and that record of chronic absence will be three times that of their peers. When tested in fourth grade, 80 percent of these children will score below proficient in reading and math. We know now that 22 percent of them will not graduate from high school, and that number rises to 32 percent for those who spend more half of their childhood in poverty. And to no one's surprise, these sad statistics and deplorable data get even worse for children of color and children who live in communities of concentrated poverty. ...

... it has been remarkable to me during the last few years of sustained high unemployment and families under stress, how much our national political discussion has focused on the merits of different tax levels for those with high incomes, and how little our national political discussion has focused in any concrete way on how to assist the poor, and in particular on how to alter the trajectory of life for children living in poverty.

Well, there has been some discussion -- the poor have been called moochers, implicitly or explicitly, by Republicans. And there has been even more dog-whistling about how Romney and Ryan, if elected, will stop transferring income from the good and wonderful people who earned it to those lousy no-good poor who sit around all day trying to figure out how to get their hands on more of the worthy people's money. I mean really, these people should just borrow money from their families, or better have it given to them as a way to avoid taxes, and use it to go to college or open up a business of some sort -- private equity perhaps.

Thomas Edsall with more of what poverty is like "beyond the antiseptic numbers," and the political environment that works against finding ways to help:

Is Poverty a Kind of Robbery?, by Thomas Edsall, Commentary, NY Times: In her presentation on Sept. 7 at a symposium on inequality at Yale, Alice Goffman, an assistant professor of sociology at the University of Wisconsin, talked about the winter of 2011-2012, which she spent living in Detroit among the very poor. Goffman described some of the effects of extreme poverty by quoting the words of a Detroit resident to whom she gave the pseudonym "Marqueta":

Your fingers get slow, you know, your whole body slows down. You can't really do much, you try to put a good face on for the kids, but when they leave you just keep still, keep the covers around you. Almost like you kind of fold into the floor. Like you're just waiting it out. You don't really think about too much.… November your stomach is crying at you but by December you know, you start to just shut down…. Around 3 you get up for the kids. Put the space heaters, so they come home and it's warm in here.

... Underneath the statistics, hidden behind the desolation of the poor in the poorest big city in the United States, lies one of most intractable political dilemmas of our era: Can the Democratic party, the party of the left, address issues of poverty and want in today's political environment? For example, can they talk about hunger? ...

Can Democrats at least stop the cutbacks, i.e. stop Republicans from cutting social services even further in order to fund tax cuts for the wealthy?:

Looked at through the calculus of contemporary partisan politics, the U.S.D.A. data demonstrates that in 2011 low food security was a problem for just under one in eight whites — a matter of concern but for many white voters, a virtually invisible issue. Very low food security affects the lives of only one in 24 whites.
For African Americans, low food security is a problem affecting one in four, and one in ten experience very low food security. The percentage of Hispanics who experience low food security is higher than the percentage of blacks, although the percentage of Hispanics suffering very low food security is slightly lower.


Democrats have concluded that getting enough votes on Nov. 6 precludes taking policy positions that alienate middle-class whites. In practice this means that on the campaign trail there is an absence of explicit references to the poor — and we didn't hear much about them at the Democratic National Convention either.
Republicans, in turn, see taking a decisive majority of white votes as their best chance of winning the presidency. The 2012 electorate is likely to be 72% white, according to a number of analyses. In this scenario, Republicans need to get at least 62 percent of the white vote to win, and Democrats need to get 38 percent or more of the white vote.

Update: Via Brad DeLong, Romney explains why he sees no reason to worry about people who rely upon government services (i.e. the people he sees as "moochers"):

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them. And they will vote for this president no matter what…. These are people who pay no income tax…. [M]y job is is not to worry about those people ...

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