Weathering the Economy

The slow recovery gets a little slower.

The Hill:

The nation's economy added 115,00 jobs in April while the unemployment rate dropped one-tenth of a point to 8.1 percent.

The figures are lower than a month ago and were also below what many analysts had expected.

They will add to the sense that the labor market is cooling down after months of stronger growth, and come as unwelcome news for President Obama, who is formally launching his reelection campaign on Friday with rallies in Virginia and Ohio.

But is it actually slower -- or are we experiencing a correction after a period of unnaturally faster than normal growth? It turns out that we can probably blame the weather -- of all things -- for our current bumpy ride.

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A GOP Economic Myth Bites the Dust

It's one of the most enduring myths in American politics; that if you increase taxes for the wealthy (or, in the right's favorite BS term, "job creators"), the rate of employment will take a nosedive. Nothing about this makes any sense at all, but with a media environment that values a false "balance" above truthtelling, it's much easier to gloss over that fact. What the right is saying when they make this argument is that it would be too expensive to make profit -- a ridiculous claim that ignores simple math, not to mention logic.

So, in our current political and media environment, even obviously bogus claims need to be debunked. And two top economists -- Nobel Prize winner Peter Diamond and John Bates Clark award winner Emmanuel Saez -- probably felt more than up to the task when they took it upon themselves to bust this rightwing myth. In a Wall Street Journal op-ed, Diamond and Saez set the record straight.

The share of pre-tax income accruing to the top 1% of earners in the U.S. has more than doubled to about 20% in 2010 from less than 10% in the 1970s. At the same time, the average federal income tax rate on top earners has declined significantly. Given the large current and projected deficits, should the top 1% be taxed more? Because U.S. income concentration is now so high, the potential tax revenue at stake is large.

[...]

According to our analysis of current tax rates and their elasticity, the revenue-maximizing top federal marginal income tax rate would be in or near the range of 50%-70% (taking into account that individuals face additional taxes from Medicare and state and local taxes). Thus we conclude that raising the top tax rate is very likely to result in revenue increases at least until we reach the 50% rate that held during the first Reagan administration, and possibly until the 70% rate of the 1970s. To reduce tax avoidance opportunities, tax rates on capital gains and dividends should increase along with the basic rate. Closing loopholes and stepping up enforcement would further limit tax avoidance and evasion.

But will raising top tax rates significantly lower economic growth? But will raising top tax rates significantly lower economic growth? In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower. Indeed, according to the U.S. Department of Commerce's Bureau of Economic Analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.

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Reducing the Price of Gas, the Republican Way

Say what you like about George W. Bush, but his policies -- with the aid of Republicans and feckless Democrats who followed him blindly -- managed to bring gas prices down to $1.81 a gallon. We could do it again if you want. Here's how: you just blow a great big smoking hole in the global economy. It's that simple. It probably wouldn't surprise you to learn that I don't recommend going this route.

The price of gas, like all things retail, is the product of supply and demand. When demand is high -- i.e., a good or recovering economy -- the price is high. But when demand is low -- i.e., a Bush-style global economic meltdown -- the price of gas is low. It's not just consumers at the pump that drive the demand for oil, but consumers everywhere in the retail chain. Those Fritos don't climb up on the shelf all on their own, you know. When you start buying more of pretty much anything, you're increasing demand for oil. Goods travel.

It's hard to argue that rising gas prices are a good thing, but they are a good sign. And that's a difficult argument to make. Which probably explains why President Obama didn't make it when he was speaking about energy yesterday.

But the truth is that, even if we could somehow sustain a static, unchanging economy where the needle on the demand meter never so much as quivered, the price of gas would never go down. Ever. It would only rise. Again, it's supply and demand. Supply is shrinking. If you doubt that, consider the XL pipeline and the Canadian tar sands. We're now so desperate for oil that we'll literally squeeze it out of rocks. This isn't the sort of thing you do when there's plenty of the stuff lying around. The Oil Age is winding down, whether we want it to or not

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Mitt's Poverty Level Tax Rate

Nothing on Earth invites speculation from the punditry more than ignorance. Pundits get paid to do two things; to make predictions and to know things you don't. "I don't know" is probably written on some stone tablet of Forbidden Phrases somewhere. As a result, people take blind stabs at issues they couldn't possibly know anything about. One of those issues has been Mitt Romney's tax returns. Why was he reluctant to release them?

One of the blind stabs was that maybe Mittens didn't pay the required 10% tithe to the Church of Latter Day Saints. Score one for blind stabs -- he probably hasn't. "Mr. Romney reported $21.7 million in income [for 2010]," Wall Street Journal reports. "He paid $3 million in federal taxes, slightly more than the $2.98 million he made in charitable donations. At least $1.5 million of his charitable donations went to the Mormon Church." $21.7 million, $1.5 million tithe. You do the math. Mitt's shorting his church a bit.

But while that figure might get the attention of a certain Tabernacle in a certain Utah city, it's not what's drawing everyone else's. Our attention is drawn to the fact that Romney's tax bill adds up to somewhat less than even the absurdly low 15% estimate Romney gave in South Carolina. Specifically, 13.9%. You could argue that a little more than one percent difference amounts to splitting hairs, but when it's a percentage of a number like $21.7 million, we're talking about some pretty big and split-worthy hairs. It's the difference between the $3,016,300 Romney assumedly paid and $3,255,000 15% would've had him paying. You could feed and house a family on his rounding error.

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Republicans vs. Reality

A lot is being made of a Wall Street Journal editorial out today that points out the obvious: House Republicans have completely screwed up the payroll tax cut extension. While it's nice to see the WSJ momentarily dip their toes in reality, they can't seem to bring themselves to go for full immersion. The editorial is crawling with half-truths and unfounded assumptions. In other words, it was obviously written by the Wall Street Journal editorial board. Still, when a rightwing propaganda outlet attacks the right wing, it's at least interesting to watch.

But has it set the GOP back on the right course? Not exactly. And by "not exactly," I mean "exactly not."

In a report on the whole fiasco, The Hill shares this tidbit:

House Republicans... think it is Democrats who will be blamed for not working with the GOP on a deal to extend the break for a year. In their talking points Tuesday, they emphasized that a conference committee was the normal process for resolving differences between the two chambers.

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The Church of the 'Free Market'

Jeb Bush has released a religious tract. It's disguised as an op-ed on economics in the Wall Street Journal, but it's a religious tract.

Congressman Paul Ryan recently coined a smart phrase to describe the core concept of economic freedom: "The right to rise."

Think about it. We talk about the right to free speech, the right to bear arms, the right to assembly. The right to rise doesn't seem like something we should have to protect.

But we do. We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

In what way is this a religious tract? Because the argument is backed up only by the strength of Bush's belief. It's a nearly fact-free piece -- the only number he brings up is the population of the United States. He proves nothing, his conclusions are apparently drawn from thin air, his arguments are tired.

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Right Getting More and More Desperate

This morning, I woke up to a headline in the Wall Street Journal that read, "Democrats to End Union Standoff." I was a little disappointed -- until I read the article. Turns out there was nothing in there that justified the headline. The whole thing seems to have stemmed from this sentence:

In a letter sent Monday, Mr. Miller asked Messrs. Walker and Fitzgerald for an in-person meeting somewhere near the Wisconsin-Illinois border.

That'd be state senate minority leader Mark Miller, Governor Walker, and senate majority leader Scott Fitzgerald. That Democrats would look at current polling and think that they ought to strike while the iron is hot is hardly surprising. And the fact that Miller wants to meet near the border suggests that -- contrary to the sensationalist headline -- Miller doesn't plan on leaving Illinois.

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