Real GDP’s still growing at ~2% on trend

September 30th, 2017 at 2:01 pm

Here are the facts behind my tweet from earlier, on a point to which Dean Baker and I both objected. In an NYT oped from this AM, columnist Bret Stephens stated, “…the economy is finally growing above the 3 percent mark.”

Nope (though, otherwise, I thought Stephens made a good point about contemporary R’s prowess in ginning up anger and winning elections, only to reveal deep incompetence and non-representativeness re governance). 

Stephens was misled by the 3.1% real GDP growth rate in the last quarter (2017q2). But that’s an annualized, quarterly growth rate. Such measures are noisy and volatile. In q1 by that metric, GDP went up only 1.2%, but if conservative pundits raised an eyebrow over that number, I missed it.

For a clearer signal of the underlying trend, it’s better to use the year-over-year numbers (see figure below). For the last three quarters, those values have been 1.8, 2.0, and 2.2 percent. So, perhaps a bit of acceleration, but nothing that alters this conclusion: real GDP is flitting about the 2% trend in the figure. I don’t expect the punditry to have Ph.D.s in statistics, but everyone who writes in this area should know not to declare victory (or defeat) over one period’s noisy measure.

Source: BEA

Tax roundup: Lies, lies, and more lies

September 29th, 2017 at 8:03 am

First, here’s a rough typology of the lies upon which the sales job for the Republicans’ wasteful, regressive tax cut is based.

  1. The tax cut won’t help the rich. 1a. It won’t help Trump.
  2. The tax cut will generate enough growth to pay for itself. 2a. Sec’y Mnuchin’s now going beyond this, claiming that it will raise more revenue than it loses. (Here’s what I think’s going on there.)
  3. Most of the benefits of the tax cut will go to the middle class.

Lies, lies, lies. And while it’s early days, and much could change, My impression is that a lot of people outside of DC Republicans aren’t buying them. The media and the Twitterverse is especially lit up with lies #1 and #2. In fact, here’s the NYT doing some calculations on lie 1b (“Trump could save more than $1 billion under his new tax plan”; that’s mostly due to eliminating the estate tax).

Also, on #1, see the Tax Policy Center’s take on the benefits to the wealthy:

  • The top 1 percent of households (those with incomes above $730,000) would get about 53 percent of the framework’s net tax cuts, or roughly $130,000 a year on average.
  • The top 0.1 percent of households (those with incomes above $3.4 million) would get roughly 30 percent of the framework’s net tax cuts, or about $720,000 a year, on average.

This analysis also applies to the reduction in the tax rate (from about 40 to 25 percent) for business pass-through income, which the R’s are trying to sell as helping small businesses. In fact, 86 percent of pass-throughs are already taxed at 25 percent or less. Chuck Marr reports that “79 percent of the benefit of this tax cut would flow to filers with incomes above $1 million.  The 400 households with the highest incomes would receive an average tax cut of $5.5 million from this provision alone.”

Re #3, since most of the cuts go to the top, there’s not much left to trickle down to the middle class, but the tax cutters are making a big deal out of how their plan to double the standard deduction (or, to increase the zero tax bracket) will help lower income families. And, no question, some will benefit from that.

But what they don’t talk about is their plan to get rid of personal exemptions, which also lower the tax burden for families, especially those whose deductions currently lead them to itemize (and thus forego the current standard deduction) and numerous members. To determine whether middle-class families get a cut or an increase under the new plan, you must see if the higher standard deduction (plus the proposed expansion in the child tax credit, about which details have yet to be released) is greater than the loss of personal exemptions.

Thankfully, Josh Barro carefully, with caveats for what’s known and what’s not, does the number crunching. His conclusion: “While there are still a lot of details to be filled in, the information we have available suggests the new Republican tax proposal would raise income taxes on many families who make just a bit more than the national average.”

Finally, once you’ve gone through all this muck and taken the requisite shower to clean all that BS out of your pores, here’s yours truly on what actual tax reform might look like. Simply put, the goal is to raise the ample revenue we need to meet the challenges we face, while pushing back on market-driven inequalities.

[I updated some numbers based on TPC’s new estimates; link above.]

Links: Be ready, Ds. What happened to OT? Do R’s care about deficits?

September 26th, 2017 at 8:40 am

–First, from yesterday’s WaPo, when the pendulum swings back, assuming the nation’s still standing, D’s need to “be ready to launch thoughtful, vetted, well-understood and well-articulated plans in key policy areas.” I offer nudges in the areas of taxes, health care, poverty/inequality, and jobs.

–The salary threshold for overtime pay should have been raised long ago, but team Trump isn’t going there. They’ve said they’ll consider raising the salary threshold but to a lower level than Obama proposed. The DoL asked for comments on the threshold, and here’s a link to mine.  See also EPI’s Heidi Shierholz’s comment; she fought really hard for this as DoL’s chief economist back in the day and she takes a really trenchant dive into the issue.

–Do Republicans really give even half-a-crap about budget deficits? Actually, they kinda do, but only as a tactic to argue for spending cuts. In today’s NYT.

 

 

This unique, terrible, phony, fraught-with-lies moment in American politics

September 21st, 2017 at 9:13 am

This will be brief, because a note about how the political debate is misleading isn’t exactly breaking news or even, admittedly, that interesting. So, I’d consider it a personal favor if you’ll allow me to vent for a moment.

It’s just that the extent to which we’re being lied to right now seems, to me at least, uniquely over the top. The transparency of the BS is just so obvious, especially on Cassidy-Graham, the just-as-bad-as-all-the-others repeal and replace bill that may get a vote in the Senate next week.

Same with the tax “plan.” Even though there is no real plan yet, what we’ve seen so far is mostly tax cuts for wealthy businesses and corporations, the cost of which will get loaded onto the deficit. Yet its proponents are selling it as a pro-growth package that lifts the working class.

My CBPP colleagues have been hammering on how C-G is just as much a wolf as past R repeal bills, despite its sheep’s clothing. It cuts health care spending on ACA functions by over $200 billion, 2020-26, and much more in later years (a new study by the health analysis firm Avalere comes up with similar numbers; see their table below) and that doesn’t count cuts to the traditional Medicaid program, which under C-G is no longer guaranteed to expand to meet the health needs of low-income recipients. Under C-G: “Faced with a recession…states would have to either dramatically increase their own spending on health care or, as is far more likely, deny help to people losing their jobs and their health insurance.”

Avalere’s estimates of cuts to states under C-G:

Years Billions
2020-26 -$215
2020-27 -$489
2020-36 -$4,150
Source: Avalere

But, because there’s no CBO score, supporters of the bill claim that these reductions in resources won’t lead to less coverage. How? For that, you need to read this jaw-dropping set of interviews from the Onion Vox. The enterprising Jeff Stein asked 9 R senators why C-G made sense in policy terms, and remarkably, they (sort of) responded. But oy, what responses! Just a rotting bag of wilted word salad.

If there was a theme to their incoherence, it was the magic of devolution to the states, as they’ll handily figure out how to do more with less (notably, the states that get dinged the most are the ones that expanded Medicaid under the ACA).

But this makes no sense at all. States must balance their budgets, so, as the CBPP quote above points out, they can’t be counted upon to meet expanded need. What C-G’s defenders call “flexibility” is actually the ability of states to reduce health care provision to low- and moderate-income people. CBPP:

…States would likely do one or more of the following: cap enrollment; offer very limited benefits; charge unaffordable premiums, deductibles, or copayments; redirect federal funding from providing coverage to other purposes, like reimbursing hospitals for uncompensated care; and limit assistance to fixed dollar amounts that put coverage out of reach for most low- and moderate-income people. As a result, many millions of people would lose coverage.

The ability to avoid such cuts is precisely why, in a federalist system like ours, you want the provision of publicly-supported health care to be nationally financed.

Unless, of course, that’s the last thing you want, which is of course what’s going on here. The majority of today’s R’s want to shrink government and give the proceeds to the rich. Their hostility to Obamacare is thus partly a function of its name, but it’s more driven by the realization that their fundamental goal is completely incompatible with a significant government footprint in health care. That’s despite the fact that every other advanced economy has long since figured this one out, and thus spends about half of what we do, per capita, while achieving universal coverage.

OK–rant over. And, trust me, I’ve been hanging around at the corner of Dysfunction Junction here in DC for a long while, so none of this is new. But especially on health care–do check out that Vox piece–the extent of the lying is worse than usual, and is a symptom of the alternative reality within which team Trump exists and which is increasingly infecting our politics.

And that can’t end well.

A few links: Cassidy-Graham just-as-bad-as-the-rest health care bill, and more re last week’s Census data

September 19th, 2017 at 10:09 am

My CBPP colleagues have been churning out scads of analysis of the Cassidy-Graham last-ditch attempt to repeal and replace the ACA. Here’s CBPP’s main bullet points with color commentary from yours truly.

Second, while I justly touted last week’s good news from the Census of median incomes, poverty, and health coverage, it’s very important to put the last few years within their historical context. I do so here.