Sunday, September 18, 2011
The President's New Tax Reform Proposal
You can read about it here.
Disappointing, in my humble opinion, for reasons I discussed in this Times column. But not to worry: There is no chance it will become law in this congress. The proposal is about politics, not policy.
If the president were serious about tax reform, he would give his full-throated endorsement to the kind of tax reform ideas advanced by the Bowles-Simpson commission that he appointed, as I discussed in this column.
Disappointing, in my humble opinion, for reasons I discussed in this Times column. But not to worry: There is no chance it will become law in this congress. The proposal is about politics, not policy.
If the president were serious about tax reform, he would give his full-throated endorsement to the kind of tax reform ideas advanced by the Bowles-Simpson commission that he appointed, as I discussed in this column.
Friday, September 16, 2011
Thursday, September 15, 2011
Wednesday, September 14, 2011
Monday, September 12, 2011
Krugman on Barro
Paul's comment on Robert's latest column confuses me. Paul shows a graph establishing that the investment share of GDP is procyclical, as if that refutes Robert's viewpoint about what ails the economy. But that fact is hardly a surprise. As I put it recently, "the most volatile component of G.D.P. over the business cycle is spending on investment goods." Moreover, I know Robert well enough, having been his colleague for about a quarter century, to know that he knows the macroeconomic time series as well as anyone.
The problem that Paul glosses over is that correlation does not imply causation. Paul appears to jump to the conclusion that this correlation establishes that the the business cycle is the driving force behind investment spending. But it could just as easily be the opposite (or a third factor driving both). I am completely confused as to why Paul thinks this graph establishes much of anything at all.
I should note, as an aside, that Robert is the second most cited living economist. That fact does not imply that everything he says is correct. (And indeed Robert and I disagree often in Harvard seminars.) But it does suggest that one should not be so glib in summarily rejecting his point of view.
The problem that Paul glosses over is that correlation does not imply causation. Paul appears to jump to the conclusion that this correlation establishes that the the business cycle is the driving force behind investment spending. But it could just as easily be the opposite (or a third factor driving both). I am completely confused as to why Paul thinks this graph establishes much of anything at all.
I should note, as an aside, that Robert is the second most cited living economist. That fact does not imply that everything he says is correct. (And indeed Robert and I disagree often in Harvard seminars.) But it does suggest that one should not be so glib in summarily rejecting his point of view.
Sunday, September 11, 2011
Saturday, September 10, 2011
Fixing Our Sick Economy
Update: My Harvard colleague Robert Barro has a related piece in the paper as well.
A Plan for Zero Unemployment
From economist Steve Allen:
There were 14m unemployed workers in August. The $447b stimulus package could be used to generate a check of almost $32,000 to each and every one of them. As a condition of receiving that check, they would be asked to work at some organization, for profit or nonprofit, for one year. These jobs would last just as long as the stimulus package and some of them would no doubt turn into real jobs. Isn't this a plan everyone could support?
Paul Samuelson on Social Security
A friend calls to my attention this quotation from Paul Samuelson. It is from a Newsweek column written in 1967, but it has some modern relevance. Of course, at the time, Samuelson was not focused on the large unfunded liabilities we now face.
The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)!
How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population.
More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.
Social Security is squarely based on what has been called the eighth wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived.
Thursday, September 8, 2011
Warren Buffett's Taxes, again
I was disappointed to hear the President tonight raise the canard about Warren Buffett's allegedly low tax rate. The story is, at the very least, deeply misleading. I addressed the issue several years ago in this column.
Wednesday, September 7, 2011
Economics Teaching Conference
I have mentioned this event before, but organizers tell me there are still a few open slots for this conference at the end of October. I am among the keynote speakers.
Sunday, September 4, 2011
Something for Nothing
Reflections of a Former Student
Ed Balls is a prominent British politician. He is now the shadow chancellor, which means he is the chief economics spokesman for the opposition Labour Party. Long ago, however, he was a student of mine, as he notes in this essay on the current global economy.
Thursday, September 1, 2011
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